WASHINGTON — Raytheon’s $34 million contract modification to continue developing a secure strategic-communications satellite terminal for the U.S. Air Force comes as the hotly contested program enters its final competitive phase.

McKinney, Texas-based Raytheon Network Centric Systems is locked in a two-way battle with Boeing for a lucrative contract to produce the Family of Beyond Line of Sight-Terminals (FAB-T), which will enable the president to communicate via satellite with national command authorities during a nuclear war. The Air Force plans to award final development-phase contracts this summer, to be followed by a production award to a single company before the end of the year.

Raytheon’s contract modification, announced by the Pentagon July 1, brings the total value of the company’s FAB-T work to $105 million, a small amount compared to the estimated $4.5 billion total cost of the program. It also represents less than half the $273 million value of Boeing’s original six-year prime contract, awarded in 2002, to develop the FAB-T terminals, which are designed to operate with the service’s Advanced Extremely High Frequency (AEHF) constellation of highly secure, jam-proof communications satellites.

Boeing’s effort encountered major delays and huge cost overruns, however, leading the Air Force last year to restructure the company’s contract from a cost-plus to a fixed-price arrangement, meaning Boeing is now responsible for any cost growth. At about the same time, the Air Force awarded Raytheon a $70 million contract to develop a competing version.

The downselect, expected in December, is not the only major decision facing the Air Force: The service also must decide the scope of the program. At issue is whether the Air Force will deploy the terminals at ground and airborne command centers only, or include them aboard its strategic bomber and certain electronic-surveillance aircraft as well.

Indications are that the service is leaning toward the lower-priced option. In a report delivered to Congress last year, the Air Force said it would defer indefinitely its plan to deploy FAB-T aboard its B-2 and B-52 bombers in favor of a less expensive alternative based on very-low-frequency communications technology. In June, the Senate Armed Services Committee, in the report accompanying its version of the defense authorization bill, said it is the committee’s understanding that the Air Force now plans to field the only ground and airborne-command-post versions of the terminal. 

“If a version of the terminal is proven feasible for the B-2 and B-52 aircraft, the committee directs the Air Force in coordination with U.S. Strategic Command (USSTRATCOM) to provide an assessment of whether the requirement for integrating these terminals into the airframes is still valid and if the Air Force intends to provide a follow-on FAB-T capability for these aircraft and by what timeframe,” the committee said.  

Raytheon’s initial work focused on the ground and airborne command post-only option, but according to a U.S. Government Accountability Office report issued in March, both Raytheon and Boeing are prepared to support whichever alternative the Air Force ultimately chooses.

Boeing is concerned that if the cash-strapped Air Force opts for the lower-cost option, much of the development work the company has performed on the FAB-T program will go to waste.  “We don’t recommend that at all,” said Paul Geery FAB-T program manager at Boeing Network and Space Systems of Arlington, Va.

Geery, who took over the FAB-T program two years ago, said Boeing has been “trudging through the hard work” and now believes it has the cost under control.

Raytheon is also stressing that its version can save the Air Force money.

“In less than a year, Raytheon has demonstrated an extensive suite of Advanced Extremely High Frequency capabilities, including Presidential and National Voice Conferencing,” Scott Whatmough, vice president of Raytheon’s Integrated Communication Systems division, said in a statement. “As the only provider of AEHF terminals for all branches of the military, we’re able to offer the Air Force a FAB-T solution that includes mature software running on a modern terminal at low cost.”

Despite being put on the FAB-T program only last year, Raytheon builds AEHF terminals for other Defense Department programs. 

In the meantime, Boeing is preparing for formal demonstrations to the Air Force and is expected to complete functional qualified testing in July.

The Air Force has made clear it must have a terminal available in September 2015. 

The Air Force has requested $140 million for the FAB-T program in 2014 and anticipates it will need $56 million in 2015. According to Air Force budget documents, the service will award “production planning” contracts to Raytheon and Boeing sometime during the next three months, to be followed by a single production contract during the final quarter of the calendar year.

“The FAB-T program remains consistent with the FY14 President’s Budget submission,” Capt. Nick Plante, an Air Force spokesman, wrote in a response to questions.

Mike Gruss is a senior staff writer for SpaceNews. He joined the publication in January 2013 to cover military space. Previously, he worked as a reporter and columnist for The Virginian-Pilot in Norfolk, Va. and The Journal Gazette in Fort Wayne, Ind. He...