Bloomberg News December 16, 2002
Funding Woes Put Boeing Spy Satellite Plan in Danger of Being Cut
BY TONY CAPACCIO
WASHINGTON -- Boeing Co.'s spy satellite system has "major technical and funding problems" that may lead the government to kill the program, Senate and House intelligence committees said Monday.
The satellites are part of the U.S. military's plan for a space-based network to track moving targets and deliver intelligence to commanders in the field.
The Pentagon may have to make "untenable" choices between continuing development or relying on existing systems that have fewer satellites and survey less ground, the panels said in their fiscal 2003 budget report. The report did not offer any specifics about the program, which is classified.
"It's going to be real hard to kill that program because we absolutely need a new constellation of those satellites up there," David Baker, a defense analyst for Charles Schwab's Washington Research Group, said. "Clearly this introduces more risk to the program and to Boeing's revenue."
"They would have to restructure [the program] in some form if it is indeed way over cost," said Christopher Mecray, analyst for Deutsche Bank Securities Inc. in New York. The contract for Boeing -- which operates an aircraft spare parts plant in Salt Lake City -- "is a fairly major portion of their space business." Mecray has a "hold" recommendation on Boeing's stock, which he said he does not own.
An independent review of the program in April estimated it is two years late on its target date of 2006 for launching the satellites because they are still too heavy and there is no assurance they will be able to communicate with ground stations.
The cost to build the satellite network and ground equipment to process and distribute the images may rise to $17 billion from $9 billion by 2010, said Loren Thompson, a military analyst with the Lexington Institute, a Washington research institute that follows space programs. The ground portion is handled by the National Imagery and Mapping Agency.
Congress in 1999 limited development costs, and lawmakers then worried that the project could become the most expensive "white elephant" in U.S. intelligence history, producing a glut of images that could not be processed.
The weight of each satellite is estimated by industry officials to increase to 22,000 pounds from 10,000 pounds, Thompson said.
"These problems seem almost too bad to be true," said John Pike, a military space analyst for Globalsecurity.org, a research organization. "I almost have a hard time taking them at face value, particularly weight growth, because that would suggest either some major engineering foul-up or some major restructuring of the requirements."
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