* Pentagon approved conversion of Boeing contract to
* Bids from alternate providers due June 8
* Raytheon plans to bid
(Adds comment from Boeing and Raytheon, byline)
By Andrea Shalal-Esa
WASHINGTON, May 11 The U.S. Air Force said on
Friday it is still in talks with Boeing Co about
revamping a multibillion-dollar program for next-generation
satellite communications terminals, but has now formally invited
other companies to submit alternate bids.
The move is part of a drive by Air Force officials to crack
down on cost increases that have plagued satellite programs for
over a decade. It puts additional pressure on Boeing to finish
development of the program or risk losing it to another bidder.
The Pentagon's acting chief weapons buyer, Frank Kendall,
last month signed a memorandum that authorized the Air Force to
convert its current contract with Boeing for the Family of
Advanced Beyond-line-of-sight Terminal (FAB-T) program to
fixed-price terms, and invite bids from other companies.
"It is the Air Force's intent to find the best possible cost
solution in the FAB-T program, either through a new contract or
by converting the current FAB-T contract from a cost-plus to a
fixed price structure," said Air Force spokeswoman Major Tracy
Bunko. "Negotiations with Boeing on the current contract are
ongoing while we continue to look at other provider options."
The Air Force on April 25 released a final request for
proposals seeking an alternate source for development of the
satellite terminals, which are needed to handle the most
important and sensitive communications, including those
transmitted by the new Advanced Extremely High Frequency
satellites built by Lockheed Martin Corp.
Bids are due by June 8, with the Air Force expected to award
a contract in September.
Boeing said it was working with the Air Force to transition
the FAB-T contract to a firm, fixed-price structure.
"We are continuing to execute on the FAB-T program of record
and look forward to completing the development of the FAB-T
system," said spokesman Matthew Billingsley. Boeing shares
closed 0.3 percent lower at $73.56 on Friday.
RAYTHEON PLANS BID FOR ALTERNATE PROGRAM
Raytheon Co, which unsuccessfully bid for the FAB-T
contract won by Boeing, said it supported the Air Force's
decision to move forward with an alternate source for the
satellite terminals and looking forward to submitting a bid.
Raytheon has produced and tested other terminals that can
operate with the AEHF satellites.
"We are the only provider of AEHF terminals that are in
production for the Army, Navy and Air Force, and look forward to
the opportunity to bid on the FAB-T alternate program," said to
Scott Whatmough, Raytheon vice president.
The Air Force nearly terminated Boeing's FAB-T program in
January, but decided to hold off after the company proposed
fixed-price terms with a "not-to-exceed" ceiling.
Boeing won a $235 million deal to develop the new terminals
in September 2002, but the program's cost has ballooned to $1.6
billion, not including production, according to recent Air Force
The Air Force's fiscal 2013 budget proposal asked for $107.5
million to continue work on the FAB-T program, less than half
the 2012 sum of $231.2 million.
In February, Major General John Hyten told reporters that
the Air Force would proceed with the alternate source program
regardless of how the talks with Boeing turned out.
A March report by the Government Accountability Office, a
congressional watchdog, cited ongoing problems with the FAB-T
program, noting that Pentagon officials now believed it would
not be completed until 2017, three years after military plans to
start using the AEHF satellites the new terminals are being
The Air Force is examining overhead costs at its suppliers,
and revamping acquisition plans for many of its major programs
as the Pentagon begins implementing $487 billion in cuts to
proposed defense spending over the next decade.
(Reporting By Andrea Shalal-Esa; Editing by Matthew Lewis, Gary