Boeing is expected to lose its multi-billion-dollar contract to develop secret imaging satellites owing to ballooning costs and schedule slips, and U.S. National Intelligence Director John Negroponte will likely hand the work to rival Lockheed Martin.

The government's decision to switch contractors could be finalized as soon as Friday, Sept. 16, sources close to the program told Aviation Week & Space Technology.

The satellites will provide high-resolution electro-optical pictures to the U.S. intelligence community as part of the Future Imagery Architecture (FIA) being managed by the National Reconnaissance Office (NRO). Another portion of FIA, for which Boeing remains the contractor, will consist of radar imaging satellites.

FIA was among the first efforts up for changes during Negroponte's first program review, which began earlier this month, and his decision may reflect a new hard line for underperforming contractors.

The transfer is a major loss for Boeing's space business, which is suffering after the downturn in the commercial communications satellite market and the subsequent crash in demand for space launches.

The cost for FIA, a classified program, has soared from $6 billion to more than $15 billion. Roger Roberts, Boeing's senior FIA official, left the company last month under the cloud of FIA's problems. Boeing officials say he simply retired. Howard Chambers was named Roberts's interim successor this week.

Negroponte and Defense Secretary Donald Rumsfeld, who jointly approve funding for FIA, were scheduled to meet Sept. 16 to finalize the shifting of work from Boeing to Lockheed Martin.

Lockheed Martin for many years was the NRO's contractor on electo-optical imaging satellites, including the Keyhole series, but lost to Boeing's lower-cost FIA proposal. The new NRO director, Donald Kerr, recently said that the government may consult with legacy contractors that lost work on projects that are now flailing.

"If you are asking two companies to team, at the end of the day, they have to want to," Kerr said. "If you are setting one up to raid the other . . . that doesn't necessarily lead to good outcomes either. One has to be careful about this."

Lockheed Martin declined to confirm the new arrangement, although spokesman Tom Jurkowsky said the company "stands ready to support our government customers & when asked." He referred all questions to the NRO. The NRO declined to discuss the program. Boeing had not returned calls on the subject by Friday afternoon.

FIA is among several U.S. military and intelligence space programs suffering from management problems and cost growth. Developing the high-resolution electro-optical satellites has led to at least a five-year delay to 2009 in launching the first satellite.

Lockheed Martin is believed to have technology already in development for another program than could be applied to FIA.

Editor's note: Aviation Week & Space Technology produced this article after its Sept. 19 edition had gone to press.