[Satellite News 01-10-11] There’s a common misconception in the public sector that U.S. Defense Secretary Robert Gates’ plan to cut military spending by $553 billion in 2012 is a decrease in the Pentagon’s budget. Instead, the U.S. Department of Defense will see an increase of less than 1 percent.
    While this is the smallest increase the Pentagon has received over the last 15 years, the plan calls for smaller increases to its rate of growth in 2013 and 2014 and then no growth whatsoever in 2015 and 2016.
    But government space and satellite specialists need not fear. According to Lexington Institute Vice President Daniel Goure, Russian and Chinese investments in advanced military capabilities, anti-satellite systems and cyber warfare capabilities remain a top concern for Gates, and many of the industry’s military providers may see a ramp up in activity well into the future. “Past defense spending downturns have always come in response to the end of conflict and public declarations that peace has broken out. That is not the case this time. Secretary Gates strongly emphasized this point in last week’s press conference, and we will continue to see a Pentagon effort to keep our space and satellite infrastructure up to date,” Goure told Satellite News.
    Gates plan does specifically mention that expensive military program cuts will divert about $70 billion back into new technology purchases in the next five years. The Air Force said it would buy more Reaper drones made by General Atomics Aeronautical Systems and increase purchase orders for Boeing and Lockheed Martin’s Evolved Expendable Launch Vehicle. The Navy also said it would begin development of a seaborne unmanned strike and surveillance plane and invest in a new generation of electronic radar jammers.
    New space-related contracts already are being announced. Lockheed Martin received a $424.7 million contract from the U.S. Air Force Jan. 10 to produce the GEO-4 satellite as a part of the Space Based Infrared System Program, designed to provide early warning of missile launches. Lockheed Martin had been working on this project for some time, as the company received its $1.5 billion order for GEO-3 in June 2009.
    A Lockheed Martin official, who asked not to be named for this story, said the biggest effect that the military spending cuts will have is on the language of future space contracts. “New military contract bids will now have to include some form of operational cost-cutting benefit to the Pentagon. I think you will see manufacturers start including this language in future offerings and developments,” the official said. 
    That language just recently appeared in Lockheed Martin’s announcement that it commenced operations of its MMSOC satellite command and control system following the launch of the multi-payload experimental Space Test Program  STP-S26 mission for the U.S. Air Force. “The development of a ground architecture capable of flying a variety of satellites is critical to driving down operational costs,” U.S. SMC/SD Director Col. Michael Moran said in the statement. “MMSOC eliminates the single-satellite, single-ground station paradigm and enables the Air Force to fly multiple constellations of spacecraft with various missions from the single ground station.”
   But not all analysts are positive that the spending cuts will drive offsetting growth. Zacks Analyst Sherzn Mian told Satellite News that despite regular contract wins scheduled and expected through 2013, military and government satellite providers and manufacturers should prepare for some impact on revenues. “We believe that the cost savings initiatives of the U.S. Department of Defense, through reduction of defense budget by $178 billion over the next five years, will impact all major defense operators, including Lockheed, and I maintain my neutral rating on most of those stocks until I see more specific benefits outlined in Gates’ plan,” he said.