Maxar’s exit from DARPA satellite servicing program a cautionary tale
WASHINGTON — The news on Wednesday that Maxar Technologies bowed out of a partnership with the Defense Advanced Research Projects Agency to build an orbiting satellite servicing vehicle is a reminder of the risks that the government and private companies take on when they sign cost-sharing deals, experts and analysts told SpaceNews.
Maxar’s SSL division cited business and financial reasons in ending its participation in the Robotic Servicing of Geosynchronous Satellites, or RSGS, program. DARPA launched the project in 2016 and in 2017 selected SSL as its commercial partner under an agreement known as Other Transaction Authority. In OTAs, the government and contractors commit to sharing the cost of a project, with the expectation that both parties end up benefiting from the investments.
This is a painful turn of events for DARPA, said former RSGS program manager Gordon Roesler, who played a central role in setting up the partnership with SSL.
Roesler, who is now retired from government service, predicts DARPA will figure out a way to salvage the program. “The RSGS capability is so revolutionary, the nation really needs to find a way to get it on orbit,” he said.
When DARPA conceived the RSGS, it concluded that the spacecraft had to be from a commercial company if it was going to service satellites in geosynchronous Earth orbit. “We had to show that this was not going to be some nefarious military sneaky device that would go after other people’s satellites,” said Roesler.
Under the OTA agreement, SSL agreed to invest in the program. In return, DARPA committed to providing robotic arms made by the Naval Research Laboratory to be integrated with the satellite. With projected revenues from upgrades, inspections, repairs, refueling, SSL saw a significant upside to the investment, he said. DARPA at the time was confident that SSL was financially viable and that it would complete the satellite “so we could transfer the ownership of the government-developed robotics to the partner after it had been tested on orbit,” Roesler said. “Legally they had to put skin in the game,” he added. “We were very careful in assessing where the funding what going to come from. We thought things were very solid.”
Commercial companies under OTAs typically agree to fund one-third of the project. In RSGS, however, SSL was making a larger-than-average commitment of resources over many years, Roesler said. “They were putting in a lot more than just the cost of the bus. They would have had to pay the operations cost during the entire life of the satellite.” SSL also would have had to pay for the ground segment, he added. “Their contribution over the life of the program would have been enormous.”
DARPA in February 2017 selected SSL as its RSGS partner over competitor Orbital ATK (now Northrop Grumman Innovation Systems). Roesler said he stands by that decision because SSL submitted a “superior” bid. Orbital ATK’s subsidiary Space Logistics developed a commercial robotic spacecraft to service satellites in geosynchronous orbit. After DARPA announced its decision to award SSL a $15 million contract for RSGS, Orbital ATK filed a lawsuit in a federal court arguing that DARPA was violating the 2010 National Space Policy, which directs government entities to “refrain from conducting United States government activities that preclude, discourage, or compete with U.S. commercial space activities.” But the court in February 2018 sided with DARPA.
In just two years since the deal was signed, the business climate has changed, Roesler noted. SSL was producing six to eight GEO satellites a year; now it is considering divesting the business. “They were going to fund this out of their operating capital.” The calculus was that the company would finance the project for several years and recoup the investment from on-orbit operations. Roesler had estimated it would take about three to five years of on-orbit repair work to recover the upfront investment. But that was before the GEO downturn.
To outside observers, there was no obvious sign that RSGS was in trouble. DARPA last fall fought to get funding in the Air Force’s 2019 budget to make sure a launch contract could be awarded on time to get RSGS into orbit by spring 2021.
In a statement on Wednesday, DARPA said it will spend the next few months evaluating other options for RSGS, including a potential re-competition or restructuring of the program. Northrop Grumman did not respond to questions from SpaceNews about any plans to re-enter the program.
“It’s going to be a lot of work for DARPA to restructure this program,” Roesler said. “This is going to be a huge pain for them.”
That said, Roesler believes this is a hiccup and not a harbinger of trouble for the satellite servicing industry at large.
This is an entire industry that is just getting off the ground, he said. RSGS was viewed as a catalyst. “Servicing is just the beginning. Then you start thinking about in-space assembly and manufacturing, using products coming from the Moon. This is going to be a major industry. The fact that one company had a financial setback I think it’s almost insignificant.”
According to recent market analyst by NSR, the satellite servicing industry is poised to reach $3 billion a year some time in the next decade.
James Vedda, senior policy analyst at the Aerospace Corporation’s Center for Space Policy and Strategy, said the RSGS setback should not be read “as an indictment of satellite servicing.” SSL has been in a financial slump for some time, he said, “even though its GEO satellites are very highly regarded.” The company is trying to sell off its GEO satellite manufacturing division due to disappointing revenue. Satellite servicing won’t be a profitable business line for a while, Vedda said, “so this may be part of a bigger rethinking of the business plan rather than a rejection of satellite servicing as a viable business endeavor.”
DARPA organized a consortium last year to bring together satellite servicing companies and draw up strategies for how to operate safely. The nonprofit Secure World Foundation provides technical and outreach support to the consortium. Brian Weeden, director of program planning at the foundation said the turn of events in RSGS should not have “much impact on the consortium or the future of the commercial satellite servicing industry.”
The group has 22 members, many of whom are developing satellite servicing capabilities unrelated to this specific DARPA contract, Weeden said. “Several of our members already have, or are currently negotiating, contracts with commercial customers.” The commercial satellite servicing market is broad, he noted, ranging from inspections to life extension to refueling and on-orbit assembly. “We strongly feel that it is still viable.”
But Weeden said there is still a lot of work to be done to help enable a successful commercial satellite servicing industry.
A number of key projects are moving forward. Northrop Grumman said it plans to launch its first Mission Extension Vehicle to dock with Intelsat-901 and take over orbital station-keeping duties, extending the satellite’s service life by several more years.
Another up and coming player, Effective Space, is developing a satellite servicing vehicle called Space Drone, to provide satellite life extension services.
And SSL is under contract to NASA to build the Restore-L satellite servicing spacecraft, slated to launch in 2020. Restore-L will be owned by NASA, however, and will operate in low Earth orbit, not the geosynchronous arc as was the plan for RSGS.
Andrew Rush, president and CEO of Made In Space Inc., said the RSGS failure is not likely to deter government agencies from signing OTA deals or from embracing on-orbit logistics activities. “Maxar SSL going out of RSGS is symptomatic of broader financial issues going on at Maxar today,” Rush said Wednesday. “I don’t think that speaks to the efficacy of the RSGS program or of satellite servicing,” he added. “That will continue to blossom.”