The Space Force will change current contracts to fixed-price agreements or break them into more manageable pieces if they see programs heading for major cost overruns, an official said Tuesday.
“We’re going to look hard at figuring out how to get out of that, and that’s going to be painful on all sides. We’re going to have discussions like, ‘Hey, how do we convert this to fixed price? How do we start breaking this apart?’ So I want to give a fair warning to industry out there, because we’ve already given it to our program managers, and have already started diving [into] a couple of key programs that are in that shape,” said Maj. Gen. Stephen Purdy, the Air Force’s acting assistant secretary for space acquisition and integration.
The Space Force has started targeting programs with “nearly unbounded risk exposure” in their current form—“future Nunn McCurdys” waiting to happen, Purdy said Tuesday at the National Security Space Association’s 2025 Defense and Intelligence Space Conference. He was referring to programs that blow so far past initial estimates that they breach thresholds outlined in the Nunn-McCurdy Act. If the overruns are significant enough, the programs will be canceled if not certified by the defense secretary.
Changing these programs to fixed-price contracts would make contractors responsible for paying for unexpected cost overruns. Defense contractors have been burned in the past by fixed-price development contracts, and some have signaled they will be more cautious before agreeing to such terms.
But Purdy added that the government will be “adults about it,” and won’t make unreasonable demands from industry in the fixed-price construct.
About half of the Space Force’s current contracts are fixed-price, which Purdy sees as a “good start, but I want to keep moving us down that fixed-price path.”
To address the issue from the government side, the service will need to scale back some of their “harsh requirements” on certain programs that are hampering development, Purdy said.
The Air Force and Space Force are still awaiting the appointment of new civilian leaders, including one to fill the role of Air Force space acquisition chief. In the interim, Purdy said the department will continue using former space acquisition chief Frank Calvelli’s acquisition “tenets,” which push for shorter development timelines and emphasize holding industry accountable.
As of May 2022, Purdy said the department has canceled or restructured 14 major acquisition programs, both unclassified and classified, due to poor contractor performance or skyrocketing costs.
“Unlike the Space Force acquisition of old, we stopped just piling money into that. And so we’ve stopped these contracts and recompeted for the most part across the board,” he said.
Purdy also said they’re also “taking action” against poorly performing government program managers, and if they don’t improve after help, “then we’ll look at removals.”
Additionally, Purdy reported positive progress on two of the Space Force’s “problem children” programs: a space command-and-control system, called ATLAS for Advanced Tracking and Launch Analysis System, and new ground stations to control the Pentagon’s constellation of GPS satellites, called GPS Next Generation Operational Control Segment, or OCX. Both of those programs have been working out thorny development problems and are on track to transition to operators this fall, he said.
