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-INTERVIEW-Orbital impatient with progress on new US satellite plan

Orbital Sciences Corporation's Antares rocket rolls out to the launch pad at NASA?s Wallops Flight Facility on Wallops Island, Virginia Octo
Orbital Sciences Corporation's Antares rocket rolls out to the launch pad at NASA?s Wallops Flight Facility on Wallops Island, Virginia Octo

WASHINGTON (Reuters) - Orbital Sciences Corp worries that budget pressures and "old habits" may limit funding for the U.S. government's move toward smaller, less complex satellites aimed at avoiding cost overruns and delays that have often plagued space programs.

Orbital on Thursday reported record revenues and operating income for 2012, but said revenues in its advanced space segment dropped by 19 percent due to "decreased activity on national security satellite contracts.

Michael Hamel, a retired general who heads business development for the company, said he worries that tight budgets will limit even modest investments in a shift towards less complex satellites. Orbital thinks a move to a so-called "disaggregated" approach could ultimately save the government money and make its space hardware less vulnerable.

"We're caught in this vicious cycle," he told Reuters this month. "We're going to build up an inventory of these very expensive systems and that means there won't be dollars to reinvest in more resilient architectures and solutions."

Orbital, which builds both satellites and the rockets that launch them, contends that the government could save money and time by building simpler satellites that could be launched on smaller rockets.

It says that it could provide five basic satellites and rockets for the price of one big U.S. military satellite.

Many of the problems facing satellite programs date back to the 1990s, during the last downturn in defense spending, when the Air Force tried to save money by squeezing several missions onto a single big satellite. Nearly every program structured that way ran into technological challenges, massive cost overruns and long launch delays, Hamel said.

The programs also required far more expensive launchers and intensive government oversight, given their cost and importance to U.S. national security, he added, noting that some of those practices were "old habits" that were difficult to change.

Air Force officials insist that many of the older satellites programs, including the Space Based Infrared System missile warning satellites built by Lockheed Martin Corp, are in better shape now, and the government is trying to save money by buying several at a time through so-called "block buys."

Hamel argues that spending more on these big satellites means there will be less funding for newer smaller technologies, which can also be launched on smaller, commercial-style rockets that are a third less expensive to produce.

He admitted to a "certain impatience" with the pace of the government's progress toward newer programs.

"It's essential for the government to invest in new architectures and systems with new buying practices that really do leverage what we're providing the commercial marketplace and to make dollars available for that," Hamel said.

INITIAL HOSTED PAYLOAD PILOT STARTED IN 2008

Orbital in 2008 kicked off a successful pilot program called Commercial Hosted Infrared Payload, or CHIRP, in which the company integrated a missile warning sensor developed by SAIC onto a commercial satellite it was building for satellite operator SES.

The program's success sparked interest in further government use of such "hosted payloads," which would get sensors into space for far less money than separate government satellites.

Air Force General William Shelton last month said the service hoped to award a hosted payloads contract later this year, but industry executives warn that even modest new programs will be vulnerable to cuts given the current U.S. budget crisis, especially if officials try to safeguard bigger programs.

Hamel said hosted payloads could help the government increase its ability to monitor debris space by putting cameras onto satellites already due to be launched into geostationary orbit, at a cost of $20 million per satellite.

That compares to the typical cost of $1 billion to $2 billion for more sophisticated, dedicated government satellites.

Hamel said a disaggregated approach to military and intelligence satellites would also leave the U.S. government less vulnerable to cyber attacks because replacement satellites could be launched more quickly and inexpensively if needed.

A classified U.S. intelligence assessment completed last year analyzed China's increasing activities in space and cyberspace, and mapped out the growing vulnerability of the most sensitive U.S. satellites.

Hamel said space executives were increasingly concerned about cyber attacks by China and others, noting that satellite systems were particularly vulnerable because they relied on computer networks for their operations and transmissions. (Reporting By Andrea Shalal-Esa; editing by Andrew Hay)

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