The National Reconnaissance Office (NRO) buys intelligence satellites faster than necessary in an effort to stabilize the industrial base, which could cost taxpayers billions of dollars, according to the House Permanent Select Committee on Intelligence (HPSCI).

HPSCI released an unclassified summary of a classified, bipartisan report that recommends “sufficiently scrutinizing” NRO’s assumptions about how fast it needs to buy satellites in order to achieve industrial base stability, which could reveal the potential for billions of dollars in savings over the next decade. The report is part of a larger HPSCI study on intelligence community (IC) major systems acquisition. HPSCI said the report was unanimously approved.

The summary said NRO assumes it must buy satellites at a relatively fast pace because a slower pace would lead to an increased cost per satellite. Slower production paces can also increase technical risk, the summary said, but much of the increased risk is priced into the higher unit cost. Unless the higher cost of slower production exceeds the cost of an excess satellite, the assumption that slower paces are too costly is flawed, the summary said.

The summary said it may be true that cost performance is degraded when the government has to pay extra for the same capability because it stretch the production pace. But the additional unit cost that results from a slower production pace needs to be weighed against the total cost of excess satellites.

HPSCI made numerous recommendations. Its primary recommendation was that the Office of the Director of National Intelligence (ODNI) should verify NRO’s assumptions about production paces and the industrial base. Instead of relying on information from prime contractors and running models that aggregate historical information, NRO should have its assumptions externally verified. NRO and ODNI should also create a plan for using Commerce Department data to verify assumptions, the committee said.

NRO should include multiple paces in all requests for proposals (RFP) on new satellite block buys, HPSCI said. The specified paces should include one based solely on functional availability to establish a baseline for cost comparisons. The Defense Contract Audit Agency (DCAA) and NRO should both scrutinize the price differences of the various pacing options.

NRO should justify to ODNI and Congress how it chooses the pace of its satellite acquisitions, HPSCI said. NRO should be specifically required to demonstrate during the acquisition process that it weighed the estimated additional cost of a slower production pace against the cost of excess satellites, the summary said. If NRO requests excess satellites, it should either have to show that the cost of the excess satellite is lower than anticipated additional cost from a slower production pace or that the cost of the excess satellite is necessary to reduce risk, which would need to be quantified in terms of dollars.

HPSCI said prime contractors should be required to notify NRO of any single-source suppliers it uses. NRO should consider modifying requirements when these single-source parts are identified such that a standard commercial part could be used instead of a specialized part, the committee recommended. NRO should build this flexibility into its prime contracts up front.

The final recommendation was ODNI should develop a plan on how to encourage more standardization of components and parts on IC satellites. ODNI should also include a strategy for implementing and securing funding for the standardization of interfaces through the Space Universal Modular Architecture.

NRO did not provide comment by press time.