With mostly flat spending planned under a new six-year defense budget, France is renegotiating a number of large weapons contracts to reflect reduced spending power in the coming years, even as it funds a slate of new and ongoing development programs while sustaining research and development.

French defense procurement agency DGA spent €10.8 billion ($14.8 billion) on military equipment and weapons last year, compared with almost €11 billion in 2012. At the end of 2013, it had less than half a euro remaining in its coffers, according to DGA chief Laurent Collet-Billon.

“This shows that our management performance was good, but it was not very easy, because at the same time we have had to renegotiate all the big contracts to take into account the orientation of the new [military program law],” Collet-Billon said Feb. 18 in an annual media address, referring to France's new €190 billion spending plan for 2014-19. “You do what you can when you have to adapt.”

For the French air force, that will mean later deliveries of fewer A400M tactical transport aircraft than expected. France, which accepted its first A400M from Airbus Defense and Space last August, is paring back a planned order of 35 aircraft under the new military program law to just 15, a change that has triggered contract renegotiations with procurement authority Occar and the seven European nations that bought into the €26 billion multinational program 10 years ago.

Britain has been eager to get its hands on the A400M early, partly because of its shortage of tactical airlifters. The Royal Air Force has been relying solely on its 24 Lockheed C-130J Hercules since the C-130K fleet was retired late last year. The first British A400M was due to be MSN16, but the production slot swap with France means the U.K. will receive MSN15 as well as MSN16 in September. And it will take delivery of another A400M in April 2015 through a second slot swap. In exchange, France will receive A400Ms originally designated for the U.K. in March 2018 and September 2021.

Swapping a third French A400M with Britain in 2015 is also being discussed, a DGA official says. In the meantime, France expects a tentative agreement on A400M contract amendments by March, with the hope of signing an updated contract this summer.

France also expects to initiate procurement of a total of 12 Multirole Tanker Transport (MRTT) aircraft this year, with delivery of two of the modified Airbus A330 planes anticipated in 2018 and 2019, respectively. However, under schedule and budget pressure, Collet-Billon says DGA will forgo plans to purchase the transport version of the aircraft, at least in the near-term.

“We want to have MRTT as quickly as possible, to limit the development costs for this aircraft from the beginning,” he said. “In the first phase, we'll probably have to forget the cargo door because this would require a very important technical modification that would probably take a long time.”

The DGA official says prime contractor Airbus Defense and Space may be able to produce these early aircraft to facilitate addition of a cargo door later.

In the meantime, Collet-Billon said DGA is now reviewing a partial Airbus proposal for the MRTT development. MRTT will replace France's fleet of aging KC-135 tankers, which support its airborne nuclear component, as well as A310s and A340s used for strategic transport.

Other investments in strategic forces this year include starting work on the new M51.3 submarine-launched ballistic missile, to be fielded in 2024, and the mid-life upgrade of the ASMP-A air-to-ground missile, which Collet-Billon said would be ready in 2023-24.

DGA is also discussing joint purchases with Britain of the Thales Watchkeeper tactical unmanned aerial vehicle and the French army's Vehicule Blinde Combat d'Infanterie (VBCI). And the two countries are cooperating in the area of military satcom. The French have long considered adopting Britain's approach to beyond-line-of-sight communications under a long-term outsourcing agreement to Airbus Defense and Space, formerly EADS-Astrium Services, which financed the U.K.'s four Skynet 5 satellites in orbit under a contract that expires in late 2022.

However, DGA has determined that the cost of the Skynet contract is high relative to other options it is considering for a follow-on to the French military's Syracuse 3 system, according to a second DGA official, and the two nations are looking at other ways to share costs, including joint production of spare satellites. “For such military assets, the technology, and the military requirements oblige us to own our own satellites,” the DGA official says. “It's only in case of emergency that the ability to share satellites is being considered by the two nations, and it was the main way to reduce the global cost for the two countries.”

The official says France remains open to ideas. But unlike Britain, which has several years to settle on a follow-on to Skynet 5, France is under pressure to replace its aging Syracuse 3 satellites with a next-generation Comsat-NG system that would be available in 2018. DGA plans to settle on a contracting mechanism for procuring the new system by year-end, followed by a contract award in 2015, the official says.

France is also talking to Italy about proposing a European milsatcom system as a follow-on to the Franco-Italian Athena-Fidus military broadband satellite launched earlier this month, which will be followed by launch of the Sicral 2 UHF and X-band satellite later this year. For both spacecraft, each government is maintaining its own payload, to be operated independently. But by sharing a Thales Alenia Space platform and pooling launch costs, they are saving money compared to what it would cost to pursue independent broadband and protected military telecommunications systems on their own.

“For the time being, we have focused our industrial team on delivering the capability, but we're working with Italy in a bilateral way to see if there are opportunities to continue after this effort in the area of satellite communications,” the DGA official says, adding that DGA expects to make a proposal to Italy on shared government satcom this year or next, which could pave the way for broader European effort.

“We are also considering the kind of satcom that is not at the highest military level—at what we call the governmental level—with the possibility that this could answer what the European Council has asked for, which is to have some effort being made on the governmental level for satcom in Europe.”

With France's Syracuse 3 system coming up for retirement earlier than Italy's two existing Sicral satellites, the French may be forced to decide within the year if they are to achieve their target of having Comsat-NG in service by 2018-19. However, the DGA official says there may be some flexibility in the schedule.

In Germany, with a new government in place, DGA is renewing defense ties in the areas of optical Earth-observation satellites, A400M crew training and development of medium-altitude, long-endurance surveillance drones. The DGA official says Paris and Berlin are looking at an industry proposal for such collaboration that was pitched last year by Airbus Group in Germany, Dassault Aviation of France and Italy's Finmeccanica.

DGA is also discussing future defense cooperation with Poland on helicopters and missiles. “Poland is a real chance for us,” Collet-Billon said. “Poland wants to have industrial partners to develop the know-how of their industry, and we are in a position to expand their expertise in missiles.”