A BILLION HERE, A BILLION THERE

The third time is anything but a charm for the Air Force, which has notified Congress--again--it needs more money for its next-generation missile early-warning system.

Originally expected to cost about $4 billion, the Space-Based Infrared System (SBIRS) High is now expected to total well beyond $10 billion. But needing more cash is not the only problem: Officials don't know just how much they need. The final amount is expected to be at least $1.5 billion, although officials say it could exceed $2.5 billion.

Acting Air Force Secretary Peter Teets had the awkward duty of notifying an already skeptical Congress of the overrun in a Mar. 10 letter. "I do not have the degree of confidence I want in the accuracy of the cost estimates and the associated technical baseline of this high-priority space program," he tells lawmakers. SBIRS' first major cost overrun occurred in December 2001, not long after he assumed his duties as undersecretary of the Air Force. He took over as acting secretary after James Roche resigned in January.

The letter was sent to comply with the Nunn-McCurdy law, which established an oversight process for programs exceeding their budget by at least 15%. A 25% overrun triggers a process whereby the Defense Dept. must certify to Congress a program is critical to national security, a cheaper alternative is unavailable and existing program management has been brought in line.

The Pentagon certified SBIRS High to Congress in May 2002, after the December 2001 cost overrun exceeding 25%. The Defense Dept. has notified Congress of two more overruns since then.

SBIRS High will replace the Defense Support Program satellites, and it will consist of two payloads hosted on classified satellites in highly elliptical orbit (HEO) and five geosynchronous satellites (including one spare).

The most recent overrun reflects a per-unit cost increase for geosynchronous satellites 3-5, which are being procured with production funds. One Pentagon official suggested the price increase is simply a result of the earlier technical snags in research and development affecting the production runs. Officials encountered significant challenges with electromagnetic interference on the HEO-1 payload (which is riding on a classified host satellite, likely a signals intelligence spacecraft). Those problems stretched for months, requiring billions to remedy and fund the Lockheed Martin-Northrop Grumman standing army on the program. HEO-1 was finally delivered, more than 18 months late, to its host last summer. HEO-2 was slated for delivery last month, but officials now say they will turn it over by June and work through some software glitches in the meantime.

A program official said the Air Force changed its acquisition strategy for buying satellites 3-5. USAF originally pitched a bulk buy, but officials are now planning to procure each satellite under a separate contract. The impact of this strategy is swelling cost because of reduced stability for the satellite production line, though it allows the Air Force to avoid shelling out a huge sum up front to pay for the satellites.

Service officials are left guessing total program cost. After the June 2004 cost overrun, they settled on a $9.9-billion total program cost. An independent program assessment team will review the technical and cost baselines of SBIRS High and "establish a clear and unambiguous program baseline and associated cost estimate," Teets says. Alternate acquisition strategies are also on the table as the cost estimators examine the program.

Some observers question how program officials managing SBIRS High, which has been under such rigorous cost scrutiny since the first budget breach in 2001, lack insight on the financial hurdles ahead.

Teets implemented a new space acquisition management strategy emphasizing more accuracy in cost estimating. SBIRS' problems could diminish confidence in that new management strategy.

DURING A HEARING this month, Rep. Silvestre Reyes (D-Tex.), a member of the House Armed Services Committee, questioned Teets about ongoing problems handling space program cost. "I don't think space programs can or should be exempt from looming fiscal restraints," Reyes said.

The impact of this latest overrun, however, cannot be understated. In 2001, Teets became the first undersecretary triple-hatted as National Reconnaissance Office director and Pentagon executive agent for space, too. However, ongoing problems with SBIRS High and the Advanced Extremely High Frequency satellite program, among others, has led Congress to become increasingly skeptical of the Air Force's acquisition programs.

Teets acknowledged during that hearing that cost problems on SBIRS High and the Future Imagery Architecture (FIA), a National Reconnaissance Office-led constellation also struggling with overruns, are not over. "We can expect to see continuing problems on both FIA and SBIRS High," Teets said. "Those programs were not structured properly at the outset, and we can't expect anyone to snap their fingers and have them fixed instantly." One government official suggested the only recourse for ongoing discord in those efforts is to rein in plans for future programs like Space Radar (a satellite constellation capable of picking up moving ground targets) and the Transformational Satellite Communications system.