The multi-billion-dollar National Polar-orbiting Operational Environmental Satellite System (NPOESS) was saved, at least for now, from potential cancellation when U.S. Department of Defense leaders restructured the troubled program by reducing the number of satellites and sensors, as reported first in our sister publication Defense Daily.

Led by Northrop Grumman Corp., with input by Raytheon Co., NPOESS costs have soared, meaning the program has breached cost overrun limits set in the Nunn-McCurdy Act. The program, which will combine weather satellite programs operated by the U.S. Departments of Commerce and Defense, is $7 billion over budget and launch of the first spacecraft is three years behind schedule.

U.S. 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, Conrad Lautenbacher, under secretary of commerce for oceans and atmosphere for the Department of Commerce’s National Oceanic and Atmospheric Administration (NOAA), and Shana Dale, NASA deputy administrator, certified a "restructured" NPOESS program can proceed despite the Nunn-McCurdy breach, because the program meets 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; and new estimates of the program costs are reasonable.

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.

Under the restructuring, prime contractor Northrop Grumman can continue working on the NPOESS contract, barring further huge cost increases, but the decision also means Boeing Co. will lose some sensor work in the program. But the certification applies to the cost overruns as they now are estimated and will not absolve Northrop Grumman if there are further cost overruns.

The restructured program will involve European contributions, the Air Force said. "The new [plan for NPOESS] 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 the officials certified includes the two EMD satellites, with the option, in the fiscal year ending Sept. 30, 2010, of exercising a renegotiated procurement option for two additional NPOESS satellites using the existing contract, according to the U.S. Air Force.

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 satellite, will be initiated.

Boeing, which was working on CMIS as part of the Northrop Grumman team, expressed disappointment at the termination.

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," Boeing said in a statement. 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," the company said.

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. "The NPOESS program is essential to our nation," the Air Force said in a statement. "The restructured program provides for continuity of existing programs, 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 U.S. Government Accountability Office estimated 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 Department of Commerce inspector general report sees an even more spectacular jump, from an earlier $4.5 billion contract award in 2002 to TRW‘s defense unit — now part of Northrop Grumman — to an eventual $9.7 billion. That would work out to a 115.6 percent increase. That report, along with testimony by Inspector General Johnnie Frazier, 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 the contractor has received $123 million in incentive payments, or about 84 percent of the maximum possible payments under the program.

"The Nunn-McCurdy review is complete, but there is still much to do before this plan is solidified and implemented," Science Committee Ranking Member Rep. Bart Gordon (D-Tenn) said in a statement released in conjunction with a June 8 hearing on the program restructuring. "I want to be clear about what I need to have confidence in this plan — I need more information than we’ve received today."

In May, Gordon and Rep. David Wu (D-Ore.) called for the President to replace Lautenbacher and Gen. John Kelly, NOAA’s deputy undersecretary.

Wu also continued to express concern over the restructuring. "Until I am provided sufficient information, I can’t trust that the budget and leadership problems of the past will go away," he said.

–Dave Ahearn and Jason Bates