First the good news: Major rocket and satellite programs got a boost. And additional funding for space programs — including maintenance, research and development — means big money for aerospace companies such as ITT, Boeing and Lockheed Martin.
The budget totals $553 billion, and despite cuts in some areas, the administration wants to boost spending for expensive space projects. In fact, Colorado-based United Launch Alliance, a joint program with Boeing and Lockheed, could really benefit from the budget. The Pentagon is requesting $1.7 billion in launch services in fiscal year 2012 and almost $8 billion between 2013 and 2016.
With the extra boost in spending comes a different purchasing mindset from the Pentagon. In the past, the military bought spacecraft and boosters one at a time, creating higher costs for the products. But Defense Secretary Robert Gates wants to buy in bulk over several years, hoping that buying more will result in savings in the long run.
The move will end the “boom-and-bust” cycles most large defense companies face — ramping up to produce a satellite, and then closing down once the contract is finished. Proponents of the new approach say it will avoid disrupting production lines. It could also cut as much as 20 percent from the costs of individual satellites, which could cost as much as $1.5 billion for a single product.
The increase would include the Air Force’s most power rockets: Delta IVs and Atlas 5s, supplied by a joint venture of Boeing and Lockheed Martin. The programs would get nearly $1.8 billion in the 2012 fiscal plan.
Lockheed will also get Air Force commitments to buy several additional communications and surveillance satellites. The Air Force is also ramping up efforts to develop families of smaller, less-expensive satellite that can be built and launched much faster.
The recently released White House space strategy emphasizes using commercial-style contracts to reduce costs and create more innovation.
It’s good news for the nation’s aerospace companies, but there are still worries. Marion Blakey, president and CEO of the Aerospace Industries Association, said she is concerned about the “long-term robustness of procurement and research.”
“This year, for the first time since the beginning of flight, there is no new manned civil or military aircraft program in design and there is a huge requirement to reset and replace equipment used in Iraq and Afghanistan,” she said. “It is critical that this portion of the defense budget continue an upward trend.”
More good news: smaller, niche defense companies could be winners. While Obama’s proposed budget reduces overall military spending by 5 percent, much of that will affect procurement, research and development at the biggest players. Smaller companies will fare better in this environment, according to analysts at Morgan Keegan & Co.
Smaller companies serving niche markets would fare better in an environment of declining spending, the analysts said.
Now for the bad news: NASA is a big loser in the proposed budget, which could affect some projects in Colorado. The Orion project is being designed in Denver and NASA has signaled the project should end.
Other than the Orion project, funding for the space agency will be cut $750 million from the current authorized level, and indicates a drop of $6.2 billion from the fiscal year 2011 request. NASA’s proposed budget is $18.7 billion.
In Colorado, more than 163,000 people are employed in space-related jobs, with 24,740 in private space companies. There are more than 400 companies and suppliers in the state, with about 100 of those in the Springs. The industry grew at a rate of 6.5 percent from 2005 to 2010.
The Colorado Springs-based Space Foundation is concerned about the budget cuts, and about NASA’s long term projects.
“Right now, we’re concerned because there’s a gap in America’s ability to put a man in space,” said spokeswoman Janet Stevens. “We know the president’s budget reflects the concern with the deficit, and he’s trying to balance unemployment and other issues as we transition from the shuttle.”
But the cuts could mean that it takes longer for commercial companies to come up with a viable alternative to the space shuttle, she said.
“There’s some uncertainty there,” she said. “The budget process is short-term, but the space industry has to look long-term. We’re concerned about how long it’s going to take to get some projects off the ground.”
More bad news: The budget axes major programs such as Raytheon’s surface-to-air missile program or General Dynamics’ Marine expeditionary vehicle. Even though these are large, international companies, this could mean cuts in the Springs as the companies seek to rescue their bottom lines in the face of more austere defense budgets.
Amy Gillentine can be reached at 719-329-5205 or firstname.lastname@example.org