Lockheed Martin 2007 Annual Report Download - page 43

The Administration’s budget proposal for fiscal year 2009 seeks to limit overall growth in the civil agency budgets to
one percent per year or less. Despite this limitation on total non-defense discretionary spending in the President’s proposal,
our key programs are well supported in the budgets of the various agencies with which we do business.
The fiscal year 2009 budget submission for NASA is $17.6 billion, $500 million higher than the fiscal year 2008 level,
and our key programs are well supported in the request. The next-generation human space flight crew transportation system,
known as the Crew Expeditionary Vehicle (CEV) or Orion, is a key element of NASA’s Vision for Space Exploration and
will succeed the Space Shuttle in transporting a new generation of human explorers to and from space. Orion is supported at
a level of $1.1 billion in the budget proposal for NASA.
Though we have continued to receive new orders from the U.S. military in 2007 for satellites to support missile defense,
battlefield communications and other defense initiatives, the environment for our commercial satellites business continues to
be very competitive due mainly to low demand for new satellites as a result of excess capacity in the telecommunications
industry. We are managing our commercial satellite business with an expectation of receiving fewer orders due to market
constraints.
The Department of Homeland Security fiscal year 2009 budget request of $37.6 billion is an increase of 7.7% over fiscal
year 2008 enacted level. Within the budget, the Coast Guard Deepwater system is funded at $990.4 million. Despite overall
decreases in the total budgets for the Departments of Transportation and Justice, the Transportation Workers Identity Card
(TWIC) program, the Federal Aviation Administration’s Automated Flight Services Station Network, and the Federal Bureau
of Investigation’s Sentinel program are well supported in their respective agency budgets. Other key programs are well
supported in the civil agency budgets.
We have continued to expand our capabilities in critical intelligence, knowledge management and e-Government
solutions for our customers, including the Social Security Administration and the EPA, as well for the DoD. We also provide
program management, business strategy and consulting, complex systems development and maintenance, complete life-cycle
software support, information assurance and enterprise solutions. The expected growth in business process outsourcing has
been enabled by rule changes for public/private competitions. In addition, recent trends continue to indicate an increase in
demand by federal and civil government agencies for upgrading and investing in new information technology systems and
solutions. As a result, we continue to focus our resources in support of infrastructure modernization that allows for
interoperability and communication across agencies.
In addition, the continuing strong emphasis on homeland security may increase demand for our capabilities in areas
such as air traffic management, ports, waterways and cargo security, biohazard detection systems for postal equipment,
employee identification and credential verification systems, information systems security, and other global security systems
solutions. In addition, we may see an increase in demand from the Department of State and the United Nations for mission
services, global security and stability operations, and facility services.
Similar to the risks inherent in our defense business, funding for our civil agency business is contingent on approval in
annual appropriations acts for each of the agencies with which we have business. Major programs may be funded over
several annual government budget cycles, with the risk of future reductions or elimination in the Administration’s budget
review or in the annual Congressional appropriations process.
In the civil government business, some risks are unique to particular programs. For example, although indemnification
by the U.S. Government to cover potential claims or liabilities resulting from a failure of technologies developed and
deployed may be available in some instances for our defense businesses, U.S. Government indemnification may not be
available for homeland security purposes. In addition, there are some instances where the U.S. Government could provide
indemnification under applicable law, but elects not to do so. While we maintain insurance for some business risks, it is not
possible to obtain coverage to protect against all operational risks and liabilities. We generally seek, and in certain cases have
obtained, limitation of such potential liabilities related to the sale and use of our homeland security products and services
through qualification by the Department of Homeland Security under the SAFETY Act provisions of the Homeland Security
Act of 2002. SAFETY Act qualification is less useful in mitigating potential liability for international applications of our
homeland security products and services. Where we are unable to secure indemnification or qualification under the SAFETY
Act or choose not to do so, we may nevertheless elect to provide the product or service when we think the related risks are
manageable or when emergency conditions relative to national security make qualification impracticable.
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