WASHINGTON — In its winning bid to build a new generation of imaging satellites for the U.S. National Reconnaissance Office (NRO), Boeing Co. offered a price that was well below the level of funding available for the project, a practice that is typical of contractors seeking to break into a new line of business, according to the top U.S. intelligence acquisition official.

The price turned out to be unrealistically low, contributing to a multibillion-dollar disaster that left a gaping hole in the U.S. intelligence budget, caused Congress to lose faith in the NRO’s ability to execute programs and sent the United States scrambling to figure out how to keep its existing but aging overhead reconnaissance constellation alive, said Alden Munson, U.S. deputy director of national intelligence for acquisition. The Future Imagery Architecture (FIA) stands out as an example of how not to run complex intelligence programs and offers lessons that should not be forgotten, Munson said Oct. 30 at the Geoint 2008 Symposium in

The generous defense and intelligence budgets that strengthened the
space industrial base during the Cold War began to contract in the 1990s. Without unlimited funding, the spy satellite acquisition model had to change, Munson said. On FIA, for example, much of the government’s systems engineering and program management responsibility was handed over to the prime contractor.

“We decided to let the rabbits mind the carrot patch,” Munson said.

The FIA competition pitted heavily favored Lockheed Martin Space Systems of Denver, the NRO’s longtime provider of optical and radar reconnaissance satellites, against Boeing Space and Intelligence Systems of Seal Beach, Calif. Boeing’s team successfully executed the time-tested strategy of breaking into new markets, submitting a bid price that was less than the amount of funding available for the program, Munson said.

In 2005, six years after awarding the FIA prime contract to Boeing, the NRO canceled the optical portion of the program amid severe technical problems that had led to lengthy delays and cost growth in the billions of dollars; Lockheed Martin was awarded a contract to build another of the previous-generation satellites to minimize a potential gap in coverage.

Boeing also struggled on the radar portion of FIA but still is expected to deliver on that part of its contract.

Munson did not put all of the blame on Boeing, saying the acquisition systems also share culpability.

“I’m not sure how our community got forced into a competition when there really weren’t two fully qualified competitors, and how we could possibly have accepted a cost estimate that was by various estimates three or four times too small to do the job,” Munson said. “So the FIA experience has been a useful one, but we need to be careful about the lessons we learn from it.”

Munson’s first lesson from FIA is not to hold competitions in domains where there is no competitive marketplace. If a competition must take place in that type of environment, the government must create that marketplace. Munson said the U.S. Air Force is effectively creating such a marketplace in the competition it is holding to build the Transformational Satellite communications system, and took a similar approach on the now-defunct Space Radar program.

Two other lessons are not to start programs that are unaffordable, and to fund programs in accordance with independent cost estimates, Munson said.

Another downfall for many programs is so-called requirements creep, Munson said. Satellite programs take years to develop and build, and during that time, technology improves and program requirements often change. These factors put pressure on the government and contractors to improve system capabilities in the middle of development, sometimes with disastrous results. While freezing requirements is simply not practical in the intelligence business, programs must strive for requirements stability, Munson said.

The intelligence community has heeded these lessons and changed the way it operates to avoid these pitfalls in the future, Munson said.

United States
does not yet have firm plans for a follow-on program to FIA, and it could be a decade before a new generation of satellites begins launching. NRO Director Scott Large said in a recent Space News interview he would like to begin defining the next constellation about a year from now and begin procurement in three or four years.

Two bright spots today are the improvement of products from current space and airborne intelligence systems and the success of commercial satellite imagery firms, Munson said. The National Geospatial-Intelligence Agency is having great success in improving the tasking of current systems and analyzing and distributing the data they collect to an ever-expanding customer base, he said.

Meanwhile, two
companies, GeoEye of Dulles,
, and DigitalGlobe of Longmont, Colo., have sophisticated imaging satellites on orbit, and the government plans to continue its strong relationship with those companies, he said.