The U.S. Space Force canceled a multibillion-dollar Northrop Grumman Corp. program to develop a classified military communications satellite because of increased costs, difficulties developing its payload and a schedule delay, according to a regulatory filing and people familiar with the decision.

Northrop was formally notified last month of the termination within “our restricted Space Business,” the defense contractor said in a regulatory filing, using jargon for classified programs. The filing offered no details on the classified satellite or the reasons it was called off, which were provided by people who commented on condition of anonymity because of its secret status.

The company expects to reduce its space segment’s $40.4 billion backlog by about $2 billion during the first quarter “related to the termination,” according to the filing. An industry official said the program was awarded to Northrop in January 2020.

Northrop has been lobbying the House defense appropriations subcommittee to salvage some of the program, according to the people familiar with the issue.

David Keffer, Northrop’s chief financial officer, referred cryptically to the project’s cancellation during the company’s Jan. 25 earnings call, mentioning that a decrease in space unit sales partly “reflects declines in a restricted program due to shifts in government priority.”

Northrop spokesman Lindsey Borg said in a statement that he couldn’t comment “given that it’s in the restricted domain” and referred questions to the Air Force. Northrop also has unclassified space contracts, such as the Tranche 1 Transport Layer satellite system to identify hypersonic weapons and advanced missiles.

Air Force space acquisition spokesperson Laura McAndrews said the service “doesn’t have anything to provide on this query given classification.” A spokesperson for John Plumb, the Defense Department’s assistant secretary for space policy, also declined to comment, citing “operational security.”

The decision to cancel the program — described in Pentagon nomenclature as a “termination of convenience” — was spearheaded by Frank Calvelli, the Air Force’s assistant secretary for space acquisition, according to a U.S. official and the industry official familiar with the decision. Calvelli notified congressional committees last year of his intention to seek cancellation as part of preparation for the Space Force’s budget presentation for fiscal 2025.

As a result, funding for the program contained in a $841 million procurement request for “Space Force Special Space Activities” was slashed in the final defense policy bill for fiscal 2024, the current year, with lawmakers citing a $497 million “classified overrun.”

Separately, the House defense appropriations subcommittee cut the request by $481 million and its Senate counterpart cut $461 million. A final version of that bill is being negotiated.

More stories like this are available on bloomberg.com

©2024 Bloomberg L.P.