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Satellite Contract Changed

Times Staff Writer

National Intelligence Director John D. Negroponte has signed off on a plan to strip Boeing Co. of a major portion of a multibillion-dollar contract to build the nation’s next generation of spy satellites, Pentagon and congressional sources said Thursday.

The decision is a blow to Boeing’s space operations in Southern California, and work on the precision optical satellites will be transferred to its archrival, Lockheed Martin Corp., said Pentagon and aerospace industry sources who spoke on condition of anonymity.

However, Boeing will remain the prime contractor and be responsible for integrating various elements of the system, and it would be allowed to keep developing less complex satellites that use radar, the sources said.

But Boeing will lose the largest portion of the spy satellite contract, which analysts estimate carries a potential value of $25 billion because of significant cost overruns and delays.

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A spokesman for the Pentagon’s National Reconnaissance Office, which develops and operates spy satellites, confirmed that the satellite program, known as Future Imagery Architecture, had been modified.

Negroponte’s staff began informing lawmakers Thursday of the decision to restructure the program, Pentagon and congressional sources said.

The Pentagon awarded the contract to Boeing in 1999 but has not disclosed the program’s costs, the kinds of satellites being developed or how many people are working on it. Aerospace industry analysts estimate that the government has spent more than $10 billion on the program, including about $4 billion in cost overruns.

Shares of Chicago-based Boeing shares rose a dime Thursday to $62.51.

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