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Space programs need new approach, Air Force leader says

By Andrea Shalal-Esa

COLORADO SPRINGS, Colorado (Reuters) - The military needs a new approach to developing and buying the satellites that are critical to every military operation, a top Air Force general said on Tuesday, citing growing threats in space and increasing budget pressures closer to earth.

"This time that we're in today absolutely begs for change," General William Shelton, who heads Air Force Space Command, told hundreds of industry executives at the annual National Space Symposium in Colorado Springs, Colorado. "There are storm clouds that are on the horizon."

Shelton said the United States faced a fundamentally altered environment in space, including the threat of a growing amount of space junk and possible hostile acts by enemy nations, coupled with funding problems that could derail key programs.

Military space programs have stabilized after years of massive cost overruns and schedule delays triggered by technical challenges, but tighter budgets and evolving threats are putting a bigger emphasis on affordability for future programs.

Air Force officials are promoting an approach called disaggregation, which would shift the focus to smaller, less complex satellites, at least for some missions, given problems with larger, more complex satellites built in recent years.

They are also studying other options, including buying services from commercial providers and putting government sensors aboard other satellites. Such options are being considered for a new weather satellite.

Northrop Grumman Corp, Boeing Co, Lockheed Martin Corp, and smaller players such as Harris Corp, Moog Inc, ITT Exelis Corp and Orbital Sciences Corp are trying to position themselves to benefit from any change in the Air Force's acquisition approach.

"We see a very steep declining budget," Shelton told reporters after his speech at the conference. "It just speaks very loudly that we need to consider disaggregation."

Mandatory budget cuts that took effect on March 1 have already forced the Air Force to shut down two of six radar receivers that provide data about satellites and debris in space, and cut 100 contractors who worked at the command's headquarters, halving the staff there, officials said.

Shelton told reporters that Air Force Space Command had to cut its fiscal 2013 budget by $508 million under sequestration, and further cuts were likely in coming years.

He declined to give details of the fiscal 2014 budget to be released on Wednesday, but said funding reductions in fiscal year 2015 and beyond would entail some "very tough choices."

For example, Shelton suggested that a new ground-based radar space fence program for which Lockheed Martin Corp and Raytheon Co have been competing might not be funded. The system tracks satellites and space debris.

Shelton said a contract award had been expected in the next month or two, but the program could be vulnerable to cuts in fiscal 2015 and beyond because it was not yet under contract.

He said he favored continuing work on the new space fence, but there were competing priorities within the Air Force budget - including the F-35 fighter built by Lockheed, a new Boeing refueling tanker and development of a new long-range bomber.

"Some serious decisions need to be made in terms of priority," he said. "If you decided you weren't going to continue and award that contract, those investment dollars could be available for investment in other things."

Michael Hamel, a former senior Air Force official and senior vice president at Orbital Sciences, welcomed the Air Force's increasing openness to alternate approaches, but said industry needed tangible evidence sooner than fiscal 2015.

"For a company like ours, two years can be an eternity," Hamel told Reuters at the conference, urging the Air Force to award initial contracts that showed its intent. "There has to be a sense of urgency. Let's take a few steps down this path."

But Rick Ambrose, who heads Lockheed's space division, urged caution, noting that past shifts in Air Force space acquisition had resulted in problems because they curtailed funding for existing programs. Lockheed builds the Air Force's missile warning, secure communications and global positioning satellites, but is also exploring alternative options.

"We're not against disaggregation. We want to make sure we don't quickly rush to a paper-based idea. We want to think it through," Ambrose told Reuters.

(Reporting by Andrea Shalal-Esa; Editing by Lisa Shumaker)

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