CIA creates its exclussive Satellite Intelligence

U.S. News and World Report Cover Story 8/11/03
Lack of Intelligence
By Douglas Pasternak

America's secret spy satellites are costing you billions, but they can't even get off the launch pad. The United States has invested $200 billion over the past four decades developing and operating its supersecret spy satellite programs. In this new age of terrorism, and as the nation faces bellicose regimes like North Korea and Iran, these programs are more important than ever. But there's a problem. The agency that builds and operates the satellites, a little-known outfit called the National Reconnaissance Office, is in crisis. Despite its $7 billion annual budget, its satellites don't always work as promised. Its projects run billions in the red and years behind schedule. Some national security experts say the place just doesn't work.

The NRO, for these and other reasons, is being shoved to the sidelines in President Bush's war on terrorism. Last year, U.S. News has learned, Defense Secretary Donald Rumsfeld and CIA Director George Tenet created a new top-secret office to develop cutting-edge spy satellite technologies. The office is an arm of the CIA's Directorate of Science and Technology. The new office maintains bogus commercial "cover" facilities outside the agency's headquarters in Langley, Va., and CIA officials are talking to defense contractors about developing new satellites. "Tenet formed the office," says a former senior Pentagon official, "because he wanted exquisite intelligence collection capabilities." According to several former Pentagon and CIA officials with close ties to U.S. intelligence, the office was created, in part, because of the NRO's declining performance. The CIA denies this but won't discuss the new satellite operation.

The NRO, created in 1961 as part of the Defense Department, develops and operates satellites for the CIA, the National Security Agency, and others in the intelligence community. In its heyday, the satellite agency was revered for tackling remarkably difficult technical challenges, a feat that allowed the United States to watch and eavesdrop on adversaries half a world away during the Cold War. That technological edge is still critical. During the war in Iraq, the NRO's satellites provided the U.S. military with detailed photographs of Iraqi armed forces. Earlier this year, the agency's eavesdropping satellites furnished the NSA with intercepted telephone conversations leading to the arrest of Khalid Shaikh Mohammed, a key al Qaeda figure involved in the 9/11 terrorist attacks.

Spy blunders. But intelligence and national security experts warn that the NRO is now so beset by problems that there is no guarantee America will be able to maintain its huge advantage in space. Failed management, bungled technical assessments, and repeated engineering and testing failures have plagued the NRO for years. The agency's missteps are costing taxpayers billions of dollars and jeopardizing national security, say intelligence and defense officials. Non-NRO national security space programs are facing similar problems (Page 40). But NRO satellites are unique because they can provide kernels of intelligence that may help prevent a new terrorist attack or locate hidden weapons of mass destruction. When eavesdropping and imaging satellites fail or programs run way behind schedule, U.S. intelligence agencies can't know what was missed. "We probably won't go blind," says Jeffrey Richelson, author of several books on U.S. spy satellites and the intelligence community, "but it means we could have much less coverage on any given day."

In a four-month examination of the NRO's performance, U.S. News interviewed three dozen current and former officials at the NRO, the CIA, and the Defense Department. The magazine also interviewed contractors and congressional investigators, and reviewed dozens of government and industry reports on the NRO's programs. Most of the sources declined to be identified. The principal findings:

Two top-secret NRO satellites launched in the fall of 2001 have experienced major technical problems that have hindered their ability to gather intelligence. The satellites are used, in part, to monitor the operations of terrorists and unfriendly countries.

The NRO hasn't launched a satellite since October 2001. The agency postponed its two planned launches last year to avoid the problems that plagued the 2001 missions. "They aren't ready to be launched because they are broken," says a former CIA official. The NRO faces a critical test later this month, when it is scheduled to launch an eavesdropping satellite from Cape Canaveral Air Force Station in Florida.

Massive cost overruns on the NRO's troubled $25 billion Future Imagery Architecture program--its next-generation satellite system--have forced the agency to cut funding from other spy satellite programs. A classified audit, prepared by the Senate Select Committee on Intelligence in June, found that the FIA program was deeply flawed and relied on unrealistic cost estimates. Alarmed at the scope of funding and technical problems, Congress has directed the inspectors general of the Pentagon and the CIA to investigate the program.

The man who now directs the NRO, Peter Teets, was forced to resign as president of Lockheed Martin Corp. in 1999 because of management failures in its Titan rocket program, according to government and industry sources. The NRO and the military lost three satellites during Teets's run as Lockheed Martin's top boss. In one case, a rocket blew up on launch; in the two other cases, the satellites were launched into useless orbits. Teets declined to discuss his removal.

"We'll let our 40-plus years of success stand on its own," says Richard Oborn, an NRO spokesman. He says dealing in "cutting-edge technology" inevitably leads to higher costs. In an interview, Teets acknowledges that he is struggling to identify and fix the problems at the NRO. "We need to make sure," he says, "we can deliver what we have promised we are going to deliver."

That won't be easy. The history of the Future Imagery Architecture program is a perfect illustration why. The original objective of the FIA system, when it was proposed in 1997, was to build advanced imaging satellites that would be lighter and cheaper and outperform NRO's aging fleet, which proved inadequate during the Persian Gulf War in 1991. The new breed of spacecraft would provide photographs with much finer resolution, have a longer "dwell time" over specific targets, track moving targets, and be able to revisit targets more quickly.

Cutting corners. That was the plan, anyway. Current and former government officials say that the program was doomed from the start. "If everything goes better than perfect, it will work fine," one former government official recalls thinking at the time. Adds Ken Colucci, chief of staff of a congressional commission that studied the NRO in 2000: "FIA, as it was structured, was an unexecutable program from the start."

Problems came early and often. First, only two companies bid on the contract. Drastic consolidation in the defense industry--it shrank from 75 companies to five in two decades--meant that only Lockheed Martin and Boeing Corp. competed. In September 1999, Boeing won the right to build the sensors and satellites for the system. To keep costs down, industry sources say, Boeing curtailed testing until electronic and other components had been assembled into larger systems. This cost-cutting measure had the perverse effect of making the project more expensive: Technical glitches forced the company to redesign and remanufacture key FIA subsystems. "If you cut corners early on, you end up paying for it later," says Phil Coyle, director of the Pentagon's Operational Test and Evaluation office from 1994 to 2001. "This is rocket science," adds a former NRO contractor, and testing is critical. Boeing declined to comment. There is another problem. The FIA project and other NRO programs are so secretive that officials say they can't even talk about them. "Any time you have secrecy," says Loren Thompson of the Lexington Institute, a defense think tank, "performance and accountability suffer."

The FIA program is now several years behind schedule and $4 billion over budget. The NRO is scrambling as a result. Last summer, the Air Force colonel managing the FIA effort was reassigned. NRO Director Teets has established a team to study "best practices" for satellite acquisition and testing protocols. He also wants Congress to give the NRO the right to maintain a reserve fund to help him better manage any future financial problems with the program. Many national security experts support the creation of such a fund.

The idea of a reserve fund isn't new. The NRO once maintained such a kitty to guard against unanticipated problems that arose during development of spy satellites. But Congress eliminated the fund in 1996 after learning that NRO officials had amassed a $4 billion reserve and, separately, had spent $310 million on a lavish new headquarters building in Chantilly, Va. The scandal lead to the removal of the NRO director and his deputy. Some experts say the episodes also focused attention on Congress's lax oversight of the NRO, a problem that persists to this day (Page 36).

The bloated FIA program is eating up limited resources and endangering other vital intelligence programs. The House Intelligence Committee predicted last November that FIA's "technical and funding problems" could "force untenable trades between critical future capabilities and legacy systems." That prediction was right on the money. Last December, Rumsfeld met with Teets and Tenet in his Pentagon office and told them, sources say, that he was not going to keep paying for cost overruns on FIA.

Teets has been forced to reallocate money from at least four top-secret satellite programs. "Currently, we pull money from a stable program to solve problems in an unstable program," Teets told the Senate Armed Services Committee last March. "In other words, we will break one program just to fix another." A Lockheed Martin eavesdropping satellite, known as Intruder and described by sources as "critical" to the war on terrorism, is one of the systems that has been scaled back. Deployment of other satellites may be delayed several years.

Colucci of the NRO study commission sums up the NRO trade-offs this way: "We are mortgaging the future. We are limiting the future capabilities available to support our fighting forces and intelligence operations," he says. Concedes Teets: "It has been an agonizing activity."

Secret project. Teets remains committed to FIA, he says, but the intelligence community is exploring other avenues. In March, the Pentagon's National Imagery and Mapping Agency began discussions with contractors about a new secret project called NextView. NIMA wants commercial companies to build a new generation of sophisticated imagery satellites that can be used by U.S. military and intelligence agencies, as well as by commercial ventures. The mapping agency could award the NextView contract next month. Space Imaging, a joint venture of Lockheed Martin and Raytheon, will bid on the project.

There is other evidence of a power shift away from the NRO. In April, President Bush signed National Security Presidential Directive 27, titled U.S. Commercial Remote Sensing Space Policy. The directive places NIMA in charge of acquiring all commercial imagery for the U.S. national security community. It also instructs the Pentagon, the CIA, and other agencies to rely on "commercial remote sensing space capabilities" to the "maximum practical extent"--an indication that commercial imagery is now considered reliable enough to satisfy many national security missions. In Iraq, the Pentagon used Space Imaging's Ikonos satellite to identify security requirements at airfields and to locate positions for heavy artillery and other equipment. National security experts see the president's order and the NextView contract as blunt votes of no confidence. "I think this shows the further erosion of the NRO," says a former CIA official who was intimately involved with the spy satellite agency. Others see the moves as an insurance policy to guarantee that America doesn't lose its lead in space surveillance capabilities, should FIA fail.

The FIA project is certainly the biggest of the NRO's troubled programs, but it's not the only one. "There are probably more problems than we know about," says Richelson, the national security expert. "Very frequently a satellite is launched and goes into its proper orbit, and that is all we know. We don't know if it worked or not." Despite the NRO's vaunted secrecy, some failures are revealed. A case in point: a multibillion-dollar Lockheed Martin-built NRO satellite--launched two years behind schedule and more than $1 billion over budget. Not long after launch on Sept. 8, 2001, the satellite initially failed to operate once in orbit. "We had a problem shortly after launch," a company spokesman told U.S. News. The background: At 8:25 a.m. on launch day at California's Vandenberg Air Force Base, a classified Navy ocean surveillance satellite--dubbed the Advanced Parcae--was sent hurtling into space. The satellite was placed in orbit hundreds of miles above Earth on a flight path that took it over the Indian Ocean. Earlier generations of Parcae satellites tracked Soviet warships by homing in on their radio and radar transmissions. Today, the satellites are used, among other things, to monitor cargo ships controlled by Osama bin Laden's al Qaeda network.

After the launch, the NRO gave no hint of anything wrong. "Once again, the superb NRO government-contractor team has succeeded in doing its part to sustain our country's national security efforts," its press release stated. In fact, an electronic circuit on the satellite had failed to work. Says a Lockheed Martin spokesman: "We fixed the problem. There was no impact to mission ops." Still, he acknowledges, "It didn't work perfectly."

Three current and former government officials tell U.S. News that the satellite is still not up to par. Soon after it failed, Lockheed Martin engineers were able to save the satellite by tinkering with its software. The officials say Lockheed Martin was able to recover about 80 percent of the satellite's capability. But the satellite's crippled performance has resulted in many boardings of cargo ships that Navy officials mistakenly believed were controlled by suspected al Qaeda terrorists, says one of the sources.

Problems plagued a second billion-dollar bird: an advanced imaging satellite--code-named Improved Crystal--that was also built by Lockheed Martin. Both satellites, launched a month apart, experienced problems with their electronic subsystems. The details of what went wrong with these satellites remain classified. The flawed parts came from a Lockheed Martin subcontractor. But those familiar with the failures say a reduction in testing procedures--part of a cost-cutting push adopted by the NRO and inspired by a mantra of "faster, better, cheaper"--was a major factor. The result: more parts defects, less testing, reduced oversight of contractors.

The loss or delay of a single satellite can hinder the U.S. intelligence community's ability to collect key information. The number of photographs the Improved Crystal satellite can take each day, for instance, has been reduced, according to the three current and former government officials. That is a critical flaw because national security officials line up to request photos of everything from enemy military formations to hints of nuclear smuggling to evidence of illicit drug cultivation.

But there are only so many satellites available. Though the number and types of active NRO satellites are classified, Richelson estimates that there are only six to seven imaging satellites and nine to 11 eavesdropping satellites now operating in orbit. Most have an average life span of about seven years, but one Lacrosse radar-imaging satellite that provided coverage over Iraq during the recent war was launched more than a decade ago. "We are getting by now," says Sen. Wayne Allard, a Colorado Republican and a member of the commission that examined the NRO in 2000. "But we need a more robust system."

America's satellites can't be everywhere at once. During the war in Iraq, eavesdropping satellites were redeployed to cover the Pentagon's theater of operations, but satellite coverage of other trouble spots, in the words of one intelligence official, was "substantially decremented" as a result. Even without the extraordinary requirements of wartime, satellite coverage of major hot spots has been so thin that key developments have been missed. Such was the case in May 1998. American intelligence authorities were caught flatfooted when India conducted a nuclear weapons test; there was no U.S. satellite coverage of the subcontinent at the time.

No fault. Some national security experts worry that no one is being held accountable for the NRO's failures. They cite the case of Dennis Fitzgerald, an agency official. Fitzgerald was responsible for the Advanced Parcae satellite--the spacecraft used to track terrorist shipping--and was promoted to the position of NRO deputy director a few weeks before the launch of the flawed satellite. He remains in that position today. Fitzgerald declined to be interviewed.

There is also the problem of apparent conflicts of interest. A case in point: Jimmie D. Hill, the former NRO deputy director, now serves two masters, as a consultant for the NRO and Lockheed Martin. Last month, he signed a new contract with the company. Despite appearances, he sees no conflict. "I don't consult with them on the same thing," Hill explains. Meanwhile, Jeffrey Harris, who was NRO's director, now is president of Lockheed Martin's Missiles & Space Operations division. Harris also says his conduct has been above reproach. Both Harris and Hill were forced out of the NRO in 1996 in the scandal over excessive reserve funds. Today, the NRO's new conference center is named after Hill.

NRO Director Teets has his own issues. In August 1993, a Martin Marietta Titan rocket carrying a $800 million Parcae satellite blew up seconds after liftoff. Teets was president of Martin Marietta's Space Group at the time. During 1998 and 1999, while he was president of Lockheed Martin, mishaps on Titan rockets caused the loss of three national security satellites worth an estimated $3 billion. In one case, a defense-communications satellite didn't reach its proper orbit because someone entered the wrong decimal point in the rocket's software. The error was detected in prelaunch operations but not corrected before launch. An investigation by the Air Force--as well as an internal company review--concluded that the program had suffered from a lack of oversight and deficient systems engineering and testing procedures. "Perhaps we have cut corners where we shouldn't have," Teets told the San Francisco Chronicle at the time, adding that the company should have put "mission success before cost performance or schedule performance."

Teets was forced out of Lockheed Martin in October 1999. Two years later, he was nominated to head the NRO, but Congress showed no interest in his Lockheed Martin troubles. During his confirmation hearings, a Senate committee did not ask a single question about the Titan rocket problems.

Although Teets inherited a troubled agency, some NRO insiders still believe he is ill-suited for the job. To complicate matters, he divides his time between the NRO and the Pentagon because he also serves as under secretary of the Air Force, overseeing all U.S. national security space programs. He spends most of his time at the Pentagon and only about one day a week at the NRO headquarters in suburban Virginia. "You've got a big organization with lots of contractors and a part-time boss," says a former CIA official who has worked closely with the NRO. "You wouldn't manage a company this size with a part-time CEO," he says.

The coming months will be pivotal for the NRO. The agency hasn't put up a satellite in 22 months, and planned launches have been repeatedly delayed. But if all goes well, the NRO will launch two satellites before the end of the year, the first scheduled for August 18. The spacecraft is said to be an updated version of the Mercury eavesdropping satellite lost in August 1998 during one of the Titan rocket failures at Lockheed Martin.

Despite the NRO's best efforts, many believe it will continue to malfunction. Such a view was outlined in a scathing article published last summer in the CIA's internal journal, Studies in Intelligence. In the article, "The Decline of the National Reconnaissance Office," Robert Kohler, who was honored by the NRO as a reconnaissance "pioneer" just three years ago, describes the long demise of the office. "Unfortunately, the NRO today is a shadow of its former self," Kohler wrote. "Its once outstanding expertise in system engineering has drastically eroded. NRO managers adopted the principle that anybody could run anything, regardless of skill, background, or experience." The NRO is "on a downward slide toward mediocrity that the country cannot afford," he added.

Kohler is a former director of the CIA's Office of Development and Engineering within its Directorate of Science & Technology. He has played a leading role in establishing the secret CIA satellite office, sources say, though he refused to confirm its existence. Kohler's views are anathema to NRO officials. "I read the article," says Teets, "and I don't agree with him. I think the NRO has a brilliant future."