NPOESS Is Saved From Cancellation By Pentagon Action

The multi-billion-dollar National Polar-orbiting Operational Environmental Satellite System (NPOESS) was saved, at least for now, from potential cancellation when Pentagon leaders provided a series of certifications for the troubled effort.

While this action means that prime contractor Northrop Grumman Corp. [NOC] can continue working on the NPOESS contract, barring further huge cost increases, the decision also means that The Boeing Co. [BA] will lose some sensor work in the program.

Led by Northrop, with input by Raytheon Co. [RTN], NPOESS costs have soared, meaning the program has breached cost overrun limits set in the Nunn- McCurdy Act.

Air Force Secretary Michael Wynne notified Congress and Kenneth Krieg, under secretary of defense for acquisition, technology and logistics, of the Nunn-McCurdy breach.

But Krieg; Vice Adm. Conrad Lautenbacher, under secretary of commerce for oceans and atmosphere; and Shana Dale, NASA deputy administrator, certified that a “restructured” NPOESS program can proceed despite the Nunn-McCurdy breach, because the program meets four criteria set forth in the Nunn-McCurdy Act:

• Such an acquisition program is essential to national security.
• There are no alternatives that provide equal or greater military capability at less cost.
• New estimates of the program costs are reasonable.
• Management structure for the program is adequate to manage and control costs.

For now, at least, that signals that the NPOESS program is saved, and Northrop Grumman can continue working to fulfill the contract.

But the certification applies to the cost overruns as they now are estimated, and won’t absolve the company if there are further cost overruns.

The program was saved in part by the finding that NPOESS is needed. It would, for example, be able to spot and track hurricanes, a crucial requirement in the wake of Hurricane Katrina, a monster storm that caused catastrophic damage in Gulf Coast states.

As the Air Force put it, “The NPOESS program is essential to our nation. The restructured program provides for continuity of existing programs, [satellite] constellation management flexibility, and the most capability for the least cost, while maintaining growth potential to achieve the original capability envisioned for NPOESS. This is a change to the NPOESS program, but it reaffirms the importance of this system and the need we continue to have for polar-orbiting weather satellites.”

Just how much NPOESS costs will exceed estimates varies, depending on who is performing the calculations. But clearly, Nunn-McCurdy guidelines were breached.

For example, the nonpartisan watchdog agency, the Government Accountability Office, estimated that the price tag on NPOESS grew from $5.9 billion in August 2002 to nearly $8 billion in September 2005. That’s a 35.6 percent jump, in a department where Nunn-McCurdy provisions require reporting 15 percent cost overruns, and provide that a 25 percent overrun can, possibly, lead to program cancellation.

A Commerce Department inspector general report sees an even more spectacular jump, from an earlier $4.5 billion contract award in 2002 to TRW Inc. (now part of Northrop Grumman), to an eventual $9.7 billion. That would work out to a 115.6 percent increase.

It was the Commerce Department IG report, and testimony by IG Johnnie Frazier, that drew blistering comments from lawmakers on the House Science Committee.

What upset them even more than the NPOESS cost overrun and the delay of 17 months behind schedule in the program was the fact that the contractor has received $123 million in incentive payments, or about 84 percent of the maximum possible payments under the program.

NPOESS will survive as a downsized platform, with cost increases offset somewhat by cost savings that involve scrapping some planned sensors that would have been included in the first couple of satellites in the constellation, and by using data from a European constellation of satellites.

On the sensor change, NPOESS now will terminate the Conical Scanning Microwave Imager/Sounder (CMIS) while competition for a new Microwave Imager/Sounder, starting with the second Engineering and Manufacturing Development (EMD) satellite, will be initiated.

The Boeing Co. [BA], which was working on CMIS as part of the Northrop team, expressed disappointment and bafflement at the termination.

“Boeing is disappointed by the decision to terminate the Conical Microwave Imager/Sounder (CMIS) program,” said a Boeing statement. While the overall NPOESS costs may have risen, “The cost and schedule of CMIS have been stable for a year, and the program continues to execute to plan.”

“Initially awarded to Hughes Space and Communications in 1997, and continuing under Boeing, the contract called for two microwave imager/sounders for use in a U.S. defense- civilian meteorological satellite program,” and Boeing said it was working well toward that goal.

At the same time, however, Boeing announced it intends to compete for the new microwave imager/sounder contract.

“Boeing will work to understand the new program requirements and ultimately hopes to develop and build the redefined CMIS sensor for NPOESS,” Boeing stated.

As far as using European data, the Air Force stated:

“The new design [plan for NOPESS] will be a two-orbit rather than three-orbit program that uses data from the European Meteorological Operational (METOP) satellites for the mid-morning orbit, while providing flexibility to deploy Defense Meteorological Satellite Program (DMSP) satellites depending on the health of the constellation in either the early-morning or mid-morning orbits.”

The restructured NPOESS program that the officials certified includes the two EMD satellites, with the option, in the fiscal year ending Sept. 30, 2010, of exercising a re- negotiated procurement option for two additional NPOESS satellites using the existing contract, according to the Air Force.