nuclear-news

Tax-payer to take bigger financial risks under new payment plan for nuclear command satellites

Under cost-plus or cost-reimbursement contracts, the government pays contractors for allowed expenses, plus an agreed upon profit margin. In fixed-price agreements, the contractor is paid a negotiated amount regardless of expenses incurred. 

the development will move forward with the government absorbing the inherent risks.

Space Force bucks fixed-price trend for nuclear command satellites 

Acquisition executive Frank Calvelli said the Space Force will award cost-plus contracts for the upcoming Evolved Strategic Satellite Communications System

Space News Sandra Erwin, February 26, 2024

WASHINGTON — In a departure from recent guidance, the Space Force will use cost-plus contracts for its high-priority strategic communications satellite program. 

Space Force acquisition executive Frank Calvelli said Feb. 23 that the service has decided to not use fixed-price contracts for the Evolved Strategic Satellite Communications System (ESS), a critical component of the U.S. military’s nuclear command, control, and communications (NC3) network that provides nuclear-survivable communications.

Calvelli has previously indicated a preference for fixed-price contracts as a means to control costs and incentivize efficiency in satellite procurements. However, he said that an exception will be made for the ESS program.

Boeing and Northrop Grumman were selected in 2020 to build ESS satellite prototypes but Calvelli suggested that these designs are not mature enough to transition to fixed-price production. 

“It’s not as far along as I would like for us to probably use fixed price,” Calvelli said at an event hosted by the Center for Strategic and International Studies. 

The ESS program is estimated to be worth $8 billion. These new satellites are intended to augment and eventually replace the Advanced Extremely High Frequency (AEHF) network of nuclear-hardened satellites made by Lockheed Martin.

Draft solicitation in the works

Calvelli said the Space Systems Command is still working on a draft solicitation for ESS proposals, expected to be released this year. 

He said he had expected the ESS payload designs to be more mature by now and nearing the prototyping stage. ESS was one of the programs selected for rapid-prototyping under a Pentagon initiative known as “middle tier acquisition” 

“But it seems like we spent a lot of time in MTA just doing tech risk reduction or technology maturity,” said Calvelli. “Had we built a real payload or actually built the prototype, then maybe we could actually go off and do something fixed-price.”

Under cost-plus or cost-reimbursement contracts, the government pays contractors for allowed expenses, plus an agreed upon profit margin. In fixed-price agreements, the contractor is paid a negotiated amount regardless of expenses incurred. 

Cost-plus contracts are used in higher risk projects where technical requirements are uncertain or unknown and the work involves “non-recurring engineering.” These are upfront costs associated with the design and development of a new product.

“Given the amount of NRE that still has to go into the ESS program, and feedback I’ve gotten from industry, we are probably looking more towards the traditional cost-plus model for something like that,” Calvelli said. 

The use of cost-plus versus fixed-price contracts has been a contentious issue recently, with some defense companies experiencing significant losses on fixed-price contracts. Executives from major defense contractors, including Boeing, Northrop Grumman and Lockheed Martin, have warned that they would be reluctant to bid on some fixed-price programs due to the financial risk.

Calvelli has said the preference is to use fixed-price vehicles once new systems are proven but ESS does not meet that threshold so the development will move forward with the government absorbing the inherent risks.

No excuses for late deliveries

Calvelli during his talk at CSIS also said he plans to crack down on program delays, especially those blamed on supply chain woes or pandemic impacts. ……………………………….. https://spacenews.com/space-force-bucks-fixed-price-trend-for-nuclear-command-satellites/

February 28, 2024 - Posted by Christina Macpherson | business and costs, politics, technology, weapons and war