SAN FRANCISCO — Darryl Davis, president of Boeing Phantom Works, said it is a widely held misconception that his organization is engaged primarily in classified projects. “I don’t know why people think everything we do is under cloak of darkness,” Davis said. “We do things we can’t talk about, but we do an awful lot of really fun stuff we can and do talk about.”

For example, Phantom Works executives can discuss efforts underway to build miniature satellites for the U.S. National Reconnaissance Office (NRO) and reusable boosters for the U.S. Air Force Research Laboratory (AFRL). As for the X-37B Orbital Test Vehicle, a suborbital spaceplane scheduled for launch Oct. 30 on a United Launch Alliance Atlas 5 booster from NASA’s Kennedy Space Center in Florida, Davis has no comment except to say the program began at Phantom Works before being handed off to Boeing’s Experimental Systems Group in Seal Beach, Calif.

Boeing Phantom Works at a Glance

Location: St. Louis

Top Official: Darryl Davis, President

Employees: Approximately 3,000

Parent Organization: The Boeing Co.

Established: 1997, when Boeing acquired McDonnell Douglas Corp., including its New Aircraft Products Division, popularly know as Phantom Works.

Mission: To create and transition high-value opportunities that enhance Boeing Defense, Space & Security’s core businesses and extend Boeing’s market presence into new frontiers.

That is the normal maturation process for technology conceived by engineers in Phantom Works’ four business elements: Advanced Boeing Military Aircraft, Advanced Network & Space Systems, Advanced Services, and Strategic Development & Experimentation. Typically, employees within each business element look for ways to “leapfrog” current technology with products and services to meet future requirements, Davis said. Once the technology is mature enough to move into large-scale production programs, Phantom Works transfers it to one of Boeing Defense Space & Security’s major business units.

In March, Boeing Space and Intelligence Systems of El Segundo, Calif., announced plans to build four 702SP satellites for Asia Broadcast Satellite of Bermuda and Hong Kong, and Satmex of Mexico. Many of the technologies underpinning the spacecraft’s all-electric propulsion system originated at Phantom Works, Davis said.

If a program remains a technology demonstration with no large-scale production on the horizon, Phantom Works is likely to retain responsibility. NRO’s Colony 2 was one such program. In 2010, NRO awarded Boeing a contract to build 10 Colony 2 triple cubesats, the miniature satellites that measure 10 centimeters on a side. The contract included options for 40 additional spacecraft at a cost of $250,000 per bus. To date, NRO has ordered 20 Colony 2 cubesats. Boeing delivered the first 10 satellites in 2011 and company officials plan to complete delivery of the remaining cubesats by the end of the year, Davis said.

Although NRO’s order will soon be complete, Phantom Works will continue to explore nanosatellite technology. “We will continue to use internal research and development [funding] to come up with new products based on lessons we learned,” Davis said. “We will ask ourselves, ‘Are there other opportunities? Are there other customers that might be interested in procuring some of the same buses?’” Even if the company identifies customers who would be eager to purchase small spacecraft, executives will need to determine whether those customers have money to pay for them. “There is always the need to advance the technology,” Davis said. “The question is whether you are advancing it at the right time and investing the right amount of money at the right time to put yourself in a position to win competitions.”

In December, Boeing Phantom Works was one of three firms selected by AFRL to design prototype reusable launch vehicles featuring an autonomous, rocket-propelled first stage and an expendable upper stage. The other firms that won $2 million Reusable Booster System contracts were Lockheed Martin Space Systems of Denver and Andrews Space of Seattle. In March 2011, the Air Force announced plans on the Federal Business Opportunities website to spend as much as $250 million over seven years to develop the Reusable Booster System. However, the Air Force now says it does not intend to continue the program, next year. A National Research Council report issued Oct. 15 said the Air Force should proceed with research and development of reusable booster technologies but cautioned that significant questions remain concerning costs associated with the launch vehicles.

The likelihood of constrained federal spending also makes it difficult to predict future sales of Boeing’s unmanned aircraft. Phantom Works is well known for developing large, complex unmanned aerial vehicles, including the high-altitude, long-endurance Phantom Eye and Phantom Ray, a stealthy combat aircraft. “Over the next couple of years, federal spending is going to decline and unmanned aerial vehicles, while a high priority, will not be exempt,” said Philip Finnegan, director of corporate analysis for the Teal Group, a market research firm based in Fairfax, Va.

Nevertheless, Boeing continues to develop and test experimental aircraft including the X-51A WaveRider, an unmanned vehicle designed to travel five times the speed of sound. Boeing built four X-51A WaveRiders for the U.S. Air Force. Although the first test vehicle set a world record for sustained hypersonic flight after its launch from a B-52 bomber in June 2010, the aircraft’s supersonic combustion ramjet engine failed to ignite during the second flight in June 2011. In August, the third X-51A test vehicle veered off course and crashed into the ocean due to a faulty control fin, according to an Air Force announcement. The cause of that crash still is under investigation, Davis said.

Boeing does not reveal the annual budget for Phantom Works. The organization derives resources from Boeing’s internal research and development budget as well as contracted work for customers, including the U.S. Defense Advanced Research Projects Agency, NASA, the U.S. Army, Navy and Air Force. Phantom Works has approximately 3,000 employees. While the majority of those workers are based in St. Louis, Phantom Works employees also work at Boeing facilities in Seattle, Seal Beach, Mesa, Ariz., Philadelphia and Washington, spokesman Walt Rice said.

Debra Werner is a correspondent for SpaceNews based in San Francisco. Debra earned a bachelor’s degree in communications from the University of California, Berkeley, and a master’s degree in Journalism from Northwestern University. She is...