The New York Times December 4, 2003
Boeing Lags In Building Spy Satellites
By Douglas Jehl
The Boeing Company is running more than a year behind schedule and billions of dollars over cost on a highly classified program to build the next generation of reconnaissance satellites, forcing the government to shift an estimated $4 billion from other spy programs, senior government officials said on Wednesday.
The Boeing project was initially set at about $6 billion, but the National Reconnaissance Office had to add substantially to that figure to address what auditors have described as large problems with the program, the officials said. Even so, the officials said, the reconnaissance office has had to scale back its expectations for the satellites' initial performance to well below what Boeing had promised.
Boeing is now under scrutiny for improprieties related to other Pentagon deals, including a $20 billion contract to provide aerial refueling tankers to the Air Force. The problems with the satellite program are not related to that deal, but Boeing's involvement in the spy satellite business is part of a broader effort by the company to increase its share of federal contracts, and the delays and cost overruns have become a further source of deep strain between the company and the government.
The fact that the satellite program is behind schedule and over budget has been well known within the intelligence community and the military industry, but the decision to shift large sums from other programs had not been reported. Still, the classified nature of the program has given Boeing a low profile in the matter; a report issued in September by the Pentagon's Defense Science Board portrayed the program as "significantly underfunded and technically flawed" but did not even mention Boeing by name.
But in interviews, senior government officials and private experts with detailed knowledge of the program said Boeing's poor performance on the contract had caused deep concern within the intelligence community about prospects for meeting a crucial need to put the new generation of spy satellites in place before the current group begins to deteriorate.
A spokesman for Boeing, Joseph Tedino, declined on Wednesday to comment in any detail on the company's involvement with the spy satellite project, citing its classified nature. "This program is not something we publicly comment on," Mr. Tedino said.
The reconnaissance office's decision in 1999 to grant the satellite contract to Boeing was itself a radical departure, in that Boeing's major competitor, now called Lockheed Martin, had always been the government's principal provider of reconnaissance satellites. The concept behind the planned new generation of satellites is also a departure, in that it is to rely on smaller, more numerous and cheaper satellites than the current group of about half a dozen large expensive satellites whose ability to cover the world is limited by their number.
Last July, Boeing was denied more than $1 billion in Pentagon orders after it was found in possession of proprietary documents from Lockheed Martin, but those documents were related to a 1998 competition to develop a rocket for military satellites rather than to the next-generation satellite program itself.
An audit of the Future Imagery Architecture project that was completed this summer by the Senate Intelligence Committee blamed both Boeing and the reconnaissance office for the project's problems, a Congressional official said. The official said that the flaws included "mismanagement and poor planning, along with a company entering an area they're not used to participating in, at a level of complexity they haven't been accustomed to."
In rare public remarks in September, when the report by the Defense Science Board, an independent advisory panel, was released, Peter B. Teets, the reconnaissance office's director, acknowledged that the spy satellite program, with Boeing as the principal contractor, had been "underfunded" and "underscoped." Still, Mr. Teets said, according to a transcript provided by the office on Wednesday, "This was a difficult situation, so it took some time, but we were able to bring to bear additional resources that I think have the F.I.A. program back on reasonable track now."
But other senior government officials, who spoke on condition of anonymity, said they thought there was still no more than a 50-50 chance that Boeing would meet its new scaled-back goal for launching the first of the new generation of satellites in 2006.
A similar view was voiced by several private experts on military technology, including John Pike of Globalsecurity.org in Alexandria, Va. "Boeing won the contract by proposing a price that was way below what the project will actually cost," Mr. Pike said. "I believe that more money has been added, but there is still some unease as to whether the true cost had been discerned."
A statement on Boeing's Web site describes the 1999 contract for the satellite program as representing "a key element of the N.R.O. space-based architecture" that "will provide the customer with a significant enhancement to America's critical intelligence capability over the next decade."
But by the time the Defense Science Board began its review in 2002, said A. Thomas Young, the panel's chairman, the panel identified "deficiencies which were quite extensive," recommended "massive" corrections and went so far as to question whether the program should be terminated. Ultimately, Mr. Young said in September, the program was judged too important to national security to be scrapped.
"Should the program continue or not?" Mr. Young said, addressing an issue that he said the panel had "wrestled a lot with." He spoke at a reporters' roundtable with Mr. Teets, according to the National Reconnaissance Office transcript. "Our belief was that it was critically important to the country, the program should be continued, could be corrected," he said. "The corrections would be massive, and we identified some of the things that we thought should be done in that regard."
The panel's report was drafted last May but not released until September, apparently to give the reconnaissance office time to respond to the criticism.
Lt. Gen. James Clapper, who heads the National Geospatial-Intelligence Agency, acknowledged at a breakfast with reporters in September that the government has had to lower its expectations for the next-generation satellite program.
© Copyright 2003, The New York Times Company