Project run by Boeing had suffered from missed deadlines and cost overruns and had spent $1 billion to monitor just 53 miles of the Arizona border

By Jeremy Pelofsky

WASHINGTON (Reuters) - President Barack Obama's administration on Friday canceled the troubled "virtual fence" project meant to better guard stretches of the vast U.S. border with Mexico and will replace it with other security measures.

The project, begun in 2006 and run by Boeing Co, has cost about $1 billion and was designed to pull together video cameras, radar, sensors and other technologies to catch illegal immigrants and smugglers trying to cross the porous border.

Homeland Security Secretary Janet Napolitano said commercially available surveillance systems, unmanned aerial drones, thermal imaging and other equipment would be used instead, suggestions made by critics of the Boeing SBInet program.

"This new strategy is tailored to the unique needs of each border region, providing faster deployment of technology, better coverage, and a more effective balance between cost and capability," she said in a statement.

The Obama administration has been under intense pressure to beef up security to stem the flow of illegal immigrants flooding across the U.S.-Mexico border as well as halt the smuggling of drugs and weapons.

Last year, Obama signed a $600 million bill to fund some 1,500 new Border Patrol agents, customs inspectors and law enforcement officials along the border, as well as pay for two more unmanned drones.

Additionally, he ordered some 1,200 National Guard troops to the southwest border to help with security.

The SBInet project has faced setbacks, missed deadlines and cost overruns. The future of the project has been in doubt for some time after criticism by lawmakers and Napolitano.

"The SBInet system is not the right system for all areas of the border and it is not the most cost-effective approach to secure the border," the Department of Homeland Security said in its assessment of the project. It did note that some of the project developments provided useful capabilities.

Boeing said in a statement it was pleased the Department of Homeland Security planned to continue using surveillance towers already constructed and that it "remain committed to providing valuable solutions and supporting DHS."


An assessment of the Boeing program released by DHS found that $1 billion was spent to cover just 53 miles in Arizona. The new approach should cost less than $750 million to cover the rest of Arizona's border, some 323 miles, DHS said.

"The department's decision to use technology based on the particular security needs of each segment of the border is a far wiser approach, and I hope it will be more cost effective," said Senate Homeland Security Committee Chairman Joe Lieberman.

While other lawmakers also hailed the end to SBInet, the Republican chairman of the House Homeland Security Committee expressed concern there would be further delays in beefing up security along the border.

"The Obama administration must promptly present the people of this country with a comprehensive plan to secure our borders, incorporating the necessary staffing, fencing, and technology," said Representative Peter King.

The market for hi-tech border solutions is worth billions of dollars and the competition is fierce.

Other firms in the market include defense and homeland security contractor Raytheon and Arizona-based ICx Technologies, which develop and market high-tech detection and surveillance systems with border security uses.

"There were things that (SBInet) did right, and things that it did wrong, but one of the concerns was always that this was more of a gimmick than substance. By pulling it, that tends to reinforce that impression," said Steven Camarota, research director of the Center for Immigration Studies think tank.

The Boeing project had been on the chopping block for some time. Napolitano last year pulled $50 million of funding for it that was included in the economic stimulus package and she froze other funds for it pending a review.

She said in March the money would be used instead to buy existing technologies such as thermal imaging devices and ultra-light plane detection systems.

Boeing's shares closed up 24 cents to $70.07 in regular trading on the New York Stock Exchange.

(Additional reporting by Tim Gaynor in Phoenix and Kyle Peterson in Chicago; Editing by Peter Cooney)