By Mike Stone

WASHINGTON (Reuters) – The cost of an Air Force program to replace aging nuclear missiles has ballooned to about $160 billion from $95.8 billion, three people familiar with the matter said, threatening to slash funding for other key modernization plans.

The project, now named the Sentinel intercontinental ballistic missile (ICBM) program, is designed and managed by Northrop Grumman Corp and aims to replace aging Minuteman III missiles.

Its latest price tag has risen by around $65 billion since a 2020 cost estimate, according to a U.S. official, an industry executive and a hill aide briefed on the matter. This may force the Pentagon to scale back the project’s scope or time frame, a second industry executive said.

Bloomberg reported earlier on Friday that the new price tag was around $141 billion with the Pentagon assessing modifications of construction and schedule.

Northrop Grumman declined to comment. The Pentagon did not comment on the figure, but said it expects to give a new cost estimate around Tuesday.

The new Sentinel cost estimate eclipses an increase to “at least” $131 billion that the Air Force made public in January.

That triggered the Nunn-McCurdy Act, a 1982 law that requires the Pentagon to formally justify to Congress the importance of a program whose unit acquisition costs have risen more than 25% above a baseline.

Secretary of Defense Lloyd Austin is expected to deliver that notification next week.

Though Air Force leaders argue that Sentinel is crucial for maintaining America’s nuclear deterrent, the Pentagon asked industry to provide cost estimates on a service life extension program for the existing inventory of Minuteman III missiles, according to documents seen by Reuters.

Increased cost estimates are putting pressure on other Air Force priorities like the Next Generation Air Dominance fighter jet program, according to two of the sources.

Other programs potentially at risk include hypersonic weapons development, the B-21 bomber, and various space initiatives.

(Reporting by Mike Stone in Washington; Editing by Alexandra Alper and Rod Nickel)