Boeing Co. is close to finalizing an agreement to refund as much as $32 million to NASA after the first of three next-generation satellites the defense giant built malfunctioned after being launched into orbit.
A source close to the negotiations said the nation's No. 2 defense contractor will have to repay the money because the main antenna on the Tracking and Data Rely Satellite performed well below specifications.
NASA awarded the $481.6 million contract in February 1995 to Hughes Space and Communications Co., which had been making satellites since 1963. Boeing bought the El Segundo operation last October for $3.8 billion.
The satellites are designed to serve as a "switchboard in the sky," linking astronauts to earth and other orbiting satellites to ground stations.
The failure of the multiple access antenna on the first satellite, the TDRS-H, was discovered two months after its June 2000 launch to an orbit 22,300 miles above the equator.
"Obviously this is not what the agency had planned," said Robert Jenkins, project manager for NASA. "Our primary objective now is to make sure the (TDRS) I and J fully meet their specification performance."
The settlement is expected to be reached by the end of the month, the source said.
Citing company policy against releasing proprietary information, Boeing officials only said that the problem was caused by a construction material that has since been eliminated in the TDRS-I and TDRS-J models.
"This antenna did pass all tests on the ground," said Diana Ball, a Boeing spokeswoman. "But once you put it into space, you encounter some phenomena that an earth environment just can't replicate. This particular antenna is not used on any other Boeing satellite. So it was a bit revolutionary for us."
The other two satellites remain on schedule to be launched on Oct. 29, 2001 and October 2002.
Boeing has firm orders for 32 commercial, civil and defense satellites, including the remaining TDRS models, for $4.8 billion, as well as options on eight others for an additional $1.2 billion.
Sources said the satellites are insured so the financial setback will not have an adverse effect on Boeing's earnings statement.
Furthermore, analysts said the reputation that came with the Hughes purchase will ensure that the Boeing name will not be tarnished by the setback.
"Hughes ran a very good ship," said Jeffrey Pittsburg, owner of Great Neck, N.Y.-based Pittsburg Research Inc. "They've been doing it for a lot of years. Boeing bought a good project when it bought (Hughes.)"
The first seven satellites in the TDRS series were constructed by TRW Inc.'s Space and Electronics unit in Redondo Beach.
There were no performance problems with any of the spacecraft, the first of which was launched in 1983, said TRW spokesman Jack Prichett. One was lost in the explosion of the Space Shuttle Challenger in January 1986.
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