NRO’s strategy to buy satellite imagery shaped by thriving commercial market
WASHINGTON — The U.S. satellite imagery industry will soon see the details of a highly anticipated procurement by the National Reconnaissance Office.
The NRO is the U.S. intelligence agency responsible for developing, launching and operating the nation’s spy satellites. It is also the primary acquirer of commercial imagery for the federal government.
The agency in the coming months is expected to launch the Electro-Optical Commercial Layer (EOCL) program, an open competition for satellite imagery products.
The NRO in June issued a draft solicitation for the EOCL procurement. A final request for proposals is being reviewed by the Defense Department and the U.S. intelligence community, and should be released before the end of the year, an NRO spokesman told SpaceNews.
Under this new imagery procurement, the NRO plans to buy products from multiple vendors and move beyond the current single-supplier arrangement that the National Geospatial Intelligence Agency signed more than a decade ago with DigitalGlobe, which is now Maxar Technologies. The NGA in 2017 turned over responsibilities for commercial imagery procurement to the NRO, while the NGA remains the primary buyer of commercial geospatial data analytics.
The NRO is expected to select at least three U.S. suppliers and structure the program with onramps for new providers. The agency also will require vendors to sign “end user license agreements” so imagery can be shared across government agencies without additional licensing fees.
“We reconfigured our next-generation commercial contracts to include pricing that incentivizes innovation and rewards the development of new capabilities,” NRO Director Christopher Scolese said Aug. 24 at the the 36th Space Symposium in Colorado.
The EOCL program is focused primarily on acquiring imagery for military users but will also obtain imagery to help domestic agencies monitor natural disasters, crop production and climate change. “Today’s commercial partners now provide imagery as a service, which allows us to focus on the difficult tasks,” said Scolese.
EOCL TO REPLACE ENHANCEDVIEW
Maxar Technologies is the NRO’s sole supplier of commercial high-resolution satellite imagery under the EnhancedView contract, a deal that dates back to 2010 when NGA selected two imagery providers — DigitalGlobe and GeoEye. By 2012, government spending cuts forced NGA to slash its imagery budget by half. EnhancedView subsequently was reduced from more than $7 billion to about $3.5 billion, which led to the merger of the two companies under DigitalGlobe.
The NRO pays Maxar $300 million a year for access to the former Digital Globe’s WorldView-1, WorldView-2, WorldView-3 and GeoEye-1 satellites, as well as the company’s image archive. EnhancedView was a 10-year deal set to expire in 2020 but when the NRO took over the management of the contract, it added three one-year options worth about $300 million each. The agency so far has exercised two one-year options, extending the contract through August 2022.
A loud and clear sign that the NRO wanted to shift to a multi-vendor agreement was the 2019 award of three study contracts. One was to incumbent Maxar and the other two to smallsat constellation operators Planet and BlackSky. The contracts gave the NRO access to the companies’ business plans and finances as well as the projected capacity of their satellite constellations.
Peter Muend, director of the NRO’s Commercial Systems Program Office, said the agency has invested a lot of time working with suppliers in preparation for the EOCL procurement.
“Our office was created to embrace advanced commercial sources with the underlying philosophy of buying everything that we can as an enterprise and only building those national systems when we have to,” Muend said Sept. 8 at a Defense News conference.
“It’s not just about the contracts and the imagery itself but a big part of what we do is focus on the ground enterprise and making sure that we can make maximum use of all sources, and fuse all the data in order to provide the insights that the user community needs,” said Muend.
The study contracts signed with commercial companies, he said, have helped to “lay the groundwork for a next generation of contracts that we’re really excited to be embarking on right now.”
REQUEST FOR BIDS LATER THAN PLANNED
Industry analyst Chris Quilty, of the market research firm Quilty Analytics, said the NRO initially planned to solicit bids for the EOCL program in 2020 but the agency needed more time to assess the capabilities of the industry, a process that was slowed by the coronavirus pandemic.
Quilty said Maxar is expected to remain the largest supplier of imagery to the U.S. government but it is almost certain that Planet and BlackSky will get some share of the EOCL contracts.
It remains to be seen, however, if the NRO will increase imagery spending beyond $300 million a year in order to fund additional vendors, Quilty said. “I fully suspect that all three companies will be awarded contracts, and I guess the question is what the aggregate value of that contract will look like.”
There is a chance that the NRO will increase its imagery budget and Maxar will continue to get $300 million “because they’re the only ones that have the advanced high-resolution imaging capability,” Quilty said.
Maxar is investing $600 million in the next-generation Worldview Legion imaging constellation, and its success will be key in continuing to serve as the U.S. government’s sole provider of the sharpest 30-centimeter imagery, he noted. The company plans to launch six Legion satellites to eventually replace aging Worldview and GeoEye spacecraft.
Just months before it was acquired and rebranded as Maxar, DigitalGlobe in 2017 announced plans to build the Legion constellation and launch the first two satellites in 2021. Raytheon Intelligence & Space was selected to build the high-resolution imaging instrument.
The first Legion launch has now slipped to 2022, Maxar CEO Dan Jablonsky said in August during an earnings call.
Tony Frazier, Maxar’s executive vice president of global field operations, said in a statement to SpaceNews that the Legion constellation will increase the company’s capacity so it can support the NRO as well as international and commercial customers.
“Legion is intended both to ensure continuity in capacity for all of our customers as well as to expand capacity, particularly in those parts of the world where there is high demand,” Frazier said. Two Legion satellites will travel in sun-synchronous orbits and four in mid-inclination orbits to concentrate capacity over high-demand regions.
“Most of the world’s population is in the mid-latitudes, and so is most of the commercial demand as a result,” Frazier said. “By having a mix of sun-synchronous and mid-inclination satellites, we will have global coverage but with capacity that is better matched to where demand is greatest.”
The mid-inclination satellites also are designed to improve revisit throughout the day as opposed to only imaging at a fixed time each day.
“For example, today we can image Kabul International Airport one or two times during the day,” Frazier said. “WorldView Legion will give us around a dozen looks at that location from sun-up to sun-down.”
Quilty noted that improved revisit rates are achieved by having more satellites, placing them in an inclined orbit rather than sun synchronous orbit, and designing satellites with a rapid slewing capability. He said Legion’s primary advantage is high-resolution imaging but also unique spectral bands and a high revisit rate.
MAXAR TO FACE COMPETITION
Maxar’s competitors Planet and BlackSky bring other products to the market that the NRO also wants, Quilty said. Both are rising commercial players in the geospatial intelligence industry that have expanded their reach into the government market in recent years.
Planet and BlackSky satellites capture lower-resolution imagery than Maxar satellites, but the firms provide intelligence based on repeated observations. The revisit rate, or time elapsed between observations of the same point on Earth, makes it possible to detect patterns of change. Planet has a competitive edge in this area by virtue of having more satellites and more revisits.
Planet and BlackSky are poised to receive a large influx of capital through mergers with special-purpose acquisition companies, or SPACs. BlackSky in September began trading as a public company on the New York Stock Exchange. Planet’s SPAC deal is expected to be approved by regulators before the end of the year.
The NRO, in writing the EOCL solicitation, “clearly carved its requirements into three pieces aimed specifically at Maxar, Planet and BlackSky,” observed Quilty.
The draft RFP says NRO is seeking imagery products in three areas. One is “foundation imagery” used for mapping, charting and other applications where Maxar’s high-resolution images are preferable, Quilty said.
The second area is global “taskable” area imagery primarily for military intelligence requirements. Taskable imagery services allow the government to direct a satellite to capture the precise images it needs.
The third is medium-resolution imagery to track objects, activities and change detection. Quilty observed that tracking and monitoring requirements are suited to the capabilities of Planet and BlackSky. With the Legion constellation, Maxar will be more competitive in taskable imagery with a more rapid slewing capability.
The NRO in the draft solicitation “didn’t put any value associated with each of the three pieces,” Quilty said. And it’s still unknown whether that structure will survive in the final RFP.
Another looming question is the duration of the EOCL contracts. Quilty doubts the NRO will want to sign 10-year deals like EnhancedView.
“Given the dynamic nature of this industry and the number of satellites expected to be launched in the next three to five years, I’m guessing that the NRO will want to reserve some flexibility in their contracting capability by not overextending the length of this contract,” he said.
Robert Cardillo, chairman of the board and chief strategist of Planet Federal, said the NRO’s new imagery procurement is an opportunity for the government to invest in new capabilities.
Cardillo led the NGA from 2014 until 2019. During that time, he advocated for greater government investments in commercial imagery.
Cardillo noted that the industry has come a long way since former President George W. Bush issued a presidential directive in 2003 urging the U.S. government to use commercial remote sensing space data, products and services.
“That was a big, bold policy statement that explicitly said it is in the U.S. national interest for us to have leadership in remote sensing space activities,” said Cardillo. It was that policy that ultimately led to the EnhancedView contract.
The challenge for the NRO is to figure out the right balance between investing in government satellites and in commercial capabilities, he said. “We want our government to be thoughtful.”
After many years when the industry faced an uncertain future, “it is now standing up on its own,” said Cardillo. “Great progress has been made to reduce barriers to space.”
Cultural resistance in the intelligence community to commercial contracts is real but the tide appears to be turning, Cardillo added. American entrepreneurship and privately funded innovation “is part of the secret sauce of our country,” he said. “I think the government’s going to benefit greatly from it.”
Cardillo said Planet and other imagery providers have provided feedback to the NRO on the draft RFP but he has no insight into what might come out in the final request for bids.
Planet’s constellation of about 200 three-meter resolution imaging satellites provide high-frequency revisits. They are supplemented by 21 SkySats offering 50-centimeter resolution.
“I can say with confidence and Planet is leaning in, and I fully expect us to compete” for EOCL contracts, Cardillo said. “I love the fact that there’s multiple players. I think that’s great for the country. It’s great for the industry.”
Brian O’Toole, CEO of BlackSky, said the company is prepared to compete for EOCL contracts. It currently has six one-meter resolution imaging satellites in orbit and expects to have 12 deployed by the end of the year.
The plan is to transition next year to a new satellite design with 50-centimeter resolution and short-wave infrared instruments for low light and nighttime imaging. O’Toole said BlackSky aims to have 30 satellites in orbit within a few years.
This article originally appeared in the October 2021 issue of SpaceNews magazine.