PARIS — The U.S. government agency that contracted with two commercial companies to purchase Earth observation imagery for 10 years is bracing for fresh questioning of the $7.3 billion program from a U.S. Congress hunting high and low for budget cuts, the agency’s commercial acquisition director said.
The U.S. National Geospatial-Intelligence Agency (NGA) is not predicting it will come through the process unscathed. But one year into the planned 10-year EnhancedView program, the agency sees nothing in it that would not stand up to the scrutiny, Duncan Scot Currie said.
Currie, NGA’s director for commercial imagery acquisition and integration, said his office is going all-out to brief Congress on EnhancedView’s status in hopes of limiting the damage.
“Congress is currently debating the fiscal year 2012 budget while at the same time we are building the [Defense Department] budget from 2013 to 2017,” Currie said in an interview here Sept. 15 during World Satellite Business Week, organized by Euroconsult. “What we want above all is budget stability through at least fiscal year 2014, when both new satellites are launched.”
Currie was referring to the two high-resolution optical imaging satellites being developed by the EnhancedView contractors as one of the conditions NGA set before making the awards. GeoEye of Dulles, Va., and DigitalGlobe of Longmont, Colo., were given broadly similar EnhancedView contracts that required not only imagery, but also investment by the companies to more closely tailor their product line and image-reception network to NGA requirements.
The $7.3 billion program, which is formally a one-year commitment followed by nine one-year renewals, guarantees both companies a stable and predictable annual revenue stream — assuming they meet NGA image criteria — and also finances part of their capital investment in new infrastructure. GeoEye is building the GeoEye-3 satellite and DigitalGlobe is building WorldView-3.
Interrupting or canceling EnhancedView would have an immediate negative impact on both companies, which depend on NGA for more than half their revenue.
“It’s a tough budget environment, but I am confident we can demonstrate the value of this program to the Congress,” Currie said. “We have a contract that is providing tremendous value to the U.S. government and we are on schedule and on budget for developing the next generation of commercial satellites. It is reasonable to assume that budgets across the board are going to be reduced. Everybody’s going to be affected. We hope we can manage it.”
GeoEye Chief Executive Matthew O’Connell told the conference that EnhancedView stacks up very well against other big-ticket defense items.
“Both of our companies are working on firm, fixed-price contracts that are on time and on budget,” O’Connell said. “Find another program like that in the defense world. No one customer pays the whole freight” of EnhancedView’s costs, he said. The imagery is distributed to a broad array of U.S. government agencies, and GeoEye and DigitalGlobe are using their own funds for much of the up-front capital spending needed.
Too Much Rocket?
Both GeoEye and DigitalGlobe are publicly traded companies using standard business criteria before making investments. But their relationship with NGA seems much tighter than that of a service provider to a big customer.
For example, GeoEye and DigitalGlobe both selected a United Launch Alliance Atlas 5 rocket to launch their satellites.
The Atlas 5 is a much bigger rocket than either company needs to place its satellite into polar low Earth orbit, and the vehicle is known among commercial satellite operators as being perhaps the most expensive on the market. Atlas 5 has arguably the best reliability record of the world’s major rockets in recent years, but its price is viewed as making it uncompetitive, and commercial Atlas customers have become a vanishing species in the past decade.
Asked whether NGA or the U.S. government forced the two EnhancedView contractors to use Atlas 5, Currie said the decision-making process was less cut and dried than that. But he made clear that both NGA and the U.S. Defense Department had a vote in the matter.
“If you are going to go offshore, we want you to tell us why it is in the best interest of the U.S. government to do so,” Currie said in explaining how GeoEye and DigitalGlobe made their choices. “Everything being equal, we’ll prefer a U.S. vehicle.
“New risks are introduced into the program with the use of non-U.S. launch services. We used independent consultants to evaluate what options were out there in terms of potential launch vendors and what were the availability, reliability and costs associated with each launch vehicle. We also had the Defense Department look at this, so it was bigger than just us.”
The choice of Atlas 5 has opened the possibility that one or both of the two Earth observation satellites could ride into orbit with a co-passenger given Atlas’ excess capability.
John Zivic, general manager of Lockheed Martin Commercial Space Systems of Sunnyvale, Calif., said here Sept. 13 that each launch could carry a second passenger weighing up to 4,000 kilograms alongside GeoEye-2 and WorldView-3. He said the launches could be purchased a near-marginal cost given the GeoEye and DigitalGlobe contracts.
The two companies did not welcome the news.
Rafay Khan, senior vice president of DigitalGlobe, said his company would take a hard look at the proposal for a second passenger before accepting it. O’Connell agreed, saying GeoEye would need to be assured that the second passenger was at near-zero risk of being late and delaying the launch.
