Taking risks is part of being in business, but companies shouldn’t have the rug pulled from under them by an anchor customer, especially the U.S. government. There are indications, however, that imaging satellite operators DigitalGlobe and GeoEye are facing just such a prospect.
The U.S. National Geospatial-Intelligence Agency (NGA) in August 2010 awarded the companies contracts worth a combined $7 billion over 10 years for imagery and related services under a program dubbed EnhancedView. Based on that, the companies ordered new, highly capable satellites — GeoEye’s GeoEye-2 is expected to cost more than $800 million to build and launch — and are expanding their ground infrastructure to deliver products more quickly to their primary customer.
But the U.S. government is under tremendous pressure to rein in spending, and senior U.S. intelligence officials have publicly warned that their programs and agencies will have to absorb their fair share of the budgetary pain. Among the intelligence activities specifically cited as vulnerable are information technology and EnhancedView.
NGA budgets are classified, but a bipartisan group of U.S. lawmakers recently wrote Defense Secretary Leon Panetta and Director of National Intelligence James Clapper to express concern that the Pentagon is considering “major reductions that could potentially result in severe damage” to the EnhancedView program. Also at risk is the Pentagon’s ability to negotiate future contracts for commercial services including launch and satellite communications, they wrote.
Times are indeed tough: EnhancedView is not the only important national security program under scrutiny. DigitalGlobe and GeoEye, who owe their existence to the government, must find ways to further diversify their customer base to be able to weather NGA budget fluctuations; in short, they need to become truly commercial businesses.
But a deal’s a deal. The time for the government to rethink its imagery requirements was in 2010, when the EnhancedView contracts were being negotiated. In any event, it is difficult to imagine that requirement changing dramatically, even with U.S. military operations in Iraq winding down.
If the NGA must dial back slightly on EnhancedView because of the budget crunch, so be it. But so long as DigitalGlobe and GeoEye are meeting their performance expectations — GeoEye recently has had issues in this area and paid accordingly — the agency must honor the commitment that led the companies to recapitalize their infrastructure. A failure to do so will make the lawmakers’ warning about lost government credibility an unfortunate reality.