Big Overruns Plague Spy Satellite Program

A new generation of spy satellites being developed by Boeing Co. is under intense scrutiny from Congress, which has raised concerns that the supersecret program faces significant cost overruns and delays, Capitol Hill sources said Monday.

The potential problems with the nation’s largest intelligence project, most of it under development at Boeing facilities in Seal Beach and El Segundo, could lead Congress to call for a major restructuring of the effort, a source familiar with the discussions said. The satellite project has been estimated to cost more than $25 billion over the next two decades.

Still, the overruns, which could hit $600 million to $900 million in 2003 alone, are unlikely to force Congress to cancel the program or to seek another contractor to handle the work, a congressional source said.

“We’re extremely concerned about where it is going, particularly from a cost perspective,” the source said. “But it’s not a showstopper. It’s too late for that.”

In 1999, Boeing beat out Lockheed Martin Co. to develop the spy satellites, primarily because it promised to deliver the satellites with a radical new design. The contract represented a stunning blow to Lockheed, which had been building spy satellites for 40 years.

The project, known as Future Imagery Architecture, calls for creating a constellation of satellites equipped with powerful telescopes and radar to gather clear and frequent images of enemy troops in darkness or through cloud cover.

Boeing’s work is being overseen by the Pentagon’s National Reconnaissance Office, which operates satellites that take pictures of military compounds around the world.

Much of the work is centered at half a dozen facilities in Southern California. Boeing’s partners include Raytheon Co., Harris Corp. and Eastman Kodak Co.

Because of the project’s top-secret status, it’s unknown how many people are working on the program, although analysts believe that it involves more than 5,000 engineers and possibly an additional 5,000 local support personnel.

Virtually everything about the spy program -- its dollar amount, the number of satellites to be built and the capabilities of the craft -- is secret. Even the duration of the contract is classified.

Pentagon officials and industry analysts say in general terms that the program has been plagued by technical troubles, mainly because of the sheer complexity of developing the system and because the Pentagon asked for additional capabilities after last year’s terrorist attacks.

“It appears that there are two main problems,” said Loren Thompson, an analyst with the Lexington Institute, a military think tank. “Boeing bid quite aggressively on the satellite contract and is having difficulty with execution, and the government underestimated the complexity of its own requirements.”

He estimated that the satellites may not be ready for deployment until 2008, or two years behind schedule, and the total cost of the system could nearly double to $17 billion by 2010 from an initial projection of $9 billion.

Nonetheless, said Thompson, “the Pentagon is over a barrel. It doesn’t have the time to start over because existing satellites are getting old.”

Marco A. Caceres, a senior space analyst for Teal Group, an aerospace research firm, said the Pentagon has been looking to launch new satellites that not only would be a fraction of cost and size of the current generation but also have more capabilities.

“You’re not only trying to develop new stuff but trying to put it in a smaller spacecraft,” he said.

The half-dozen U.S. spy satellites orbiting the Earth cost $1 billion to $1.5 billion each, according to Caceres.

Officials at Boeing and the Pentagon would not talk about the satellite program, citing its classified nature.

But James Albaugh, president of Boeing’s Integrated Defense Systems unit, which is overseeing development of the satellite network, said in April that the program was on schedule and within budget.

The program passed a preliminary design review this year.

Boeing’s shares rose 52 cents to $31.92 on the New York Stock Exchange.