WASHINGTON — The U.S. Air Force expects the cost of GPS 3 satellites now in development to rise by 5 percent as a result of a decision the service made in December to slow the annual production rate of the next-generation timing and navigation satellites.

The Air Force Space and Missile Systems Center in 2008 awarded Lockheed Martin Space Systems of Denver a $1.5 billion contract to design and build the first two GPS 3A spacecraft. The company expected to produce as many as 12 satellites in the first block at a rate of four per year. The Air Force has since set an eight-satellite limit on the first block buy and instructed Lockheed to slow the production rate to a less-efficient two satellites per year.

After passing a critical design review in August, the program in December received so-called Milestone C approval to enter the production phase, at which time the production pace was slowed to two a year, according to Air Force spokesman Hien Vu. The total program cost estimate was updated at that time.

“This [total program cost] update was the first since prior to source selection and contract award in 2008,” Vu said in an emailed response to questions. “The 5 percent increase is largely due to a reduction in the number of satellites being purchased per year and the subsequent inefficiencies.”

GPS 3A satellites will operate in medium Earth orbit and are designed to produce more accurate signals than previous GPS satellites thanks to improved on-board atomic clocks. The spacecraft will feature a more powerful signal for military users known as M-code, and the L1 civil signal that will be interoperable with Europe’s planned Galileo navigation constellation.

Lockheed Martin in March successfully tested an early version of the GPS 3 flight control software at its Newtown, Penn., facilities. The initial software build for the first time demonstrated communications between a flight-like on-board processor, navigation payload and communications payload, according to a March 15 Lockheed Martin press release. The software must now be fully qualified before it is uploaded to a full-scale engineering model known as the GPS Non-Flight Satellite Testbed.

While the GPS 3A satellites remain on track to begin launching in 2014, the Air Force is planning for the second block of spacecraft — dubbed GPS 3B — to include new search-and-rescue payloads that will be provided by the Canadian government.

After buying eight GPS 3A satellites, the Air Force plans to place its first orders in 2015 for the more advanced GPS 3B satellite, Vu said. These satellites are planned to feature Distress Alerting Satellite System (DASS) payloads provided by Canada, according to March 30 written testimony submitted to the Senate Appropriations Committee by Air Force Secretary Michael Donley and Air Force Chief of Staff Gen. Norton Schwartz.

The DASS payloads will operate in concert with the international Cospas-Sarsat satellite-based search-and-rescue system, Vu said. Cospas-Sarsat is a network of sensors hosted on low Earth orbiting and geosynchronous spacecraft that receive distress alerts from individuals carrying specialized beacons. The system has assisted in rescuing more than 28,000 people since 1982, according to the International Cospas-Sarsat program’s website.

“DASS will greatly reduce the time to locate a beacon, which will result in more lives saved and fewer national resources expended,” Vu said.