Will Congress Overrule the White House on Key ISR Programs?

For those who watch ISR spending, a large portion of the drama this budget season centers on whether Congress will step in to overturn cuts proposed for three programs that, until a few months ago, were labeled as crucial for the war in Afghanistan and intelligence gathering elsewhere.

In a change of heart, the Obama administration now wants to save some $6 billion over a decade by canceling, or in one case scaling back, three programs: The Block 30 versions of the Global Hawk unmanned planes that were to replace eavesdropping, photo-taking U-2s in 2015; the 370-foot long multi-intelligence Blue Devil 2 airship that was going to be delivered to Afghanistan as a harbinger of more airships to come; and the Enhanced View commercial satellite imagery purchasing program, whose broad area images the National Geospatial-Intelligence Agency converts into foundational maps for other kinds of intelligence.

As Congress mulls the administration’s 2013 budget proposal, lobbyists and corporate executives are working furiously behind the scenes, and in some cases through the media, to rescue their programs. While Northrop Grumman appears to be winning support on Capitol Hill, Enhanced View contractor GeoEye and Blue Devil 2’s Mav6 are bracing for the cuts. For Mav6, which depends on the airship for nearly 90 percent of revenue, finding a new sponsor could be crucial to survival for the 85-person company.

Block 30 Global Hawk

Northrop’s camera- and SIGINT-equipped Block 30 Global Hawks have been gaining the most traction in Congress, although the restoration of all 31 aircraft is seen as a long shot.

“It’s likely that the cancellation will stick, but there will be a compromise,” said Phil Finnegan, an analyst with the Teal Group of Fairfax, Va. “Any administration always has trouble with cancellations because Congress likes to keep production lines open.”

Finnegan noted moves in the House of Representatives to retain the 18 Block 30s that are either flying or in production, and the possibility that three additional aircraft could be put on contract.

Lawmakers on both sides of the aisle had chafed at the service’s proposal to box up the aircraft and send them to the “boneyard,” a Tucson, Ariz., facility known formally as the Aerospace Maintenance and Regeneration Center.

If the House authorization language were to become law, it would bar the Air Force from spending any money to retire the Block 30s, and it would require the Air Force to keep flying them at least through the end of 2014. The appropriators were considering ordering the Air Force to spend previously appropriated funds.

Meanwhile, the Air Force, having delayed the U-2s’ retirement dates repeatedly during Global Hawk’s bumpy development, is now making plans to continue flying the manned planes for years to come. A notice posted to the website of Beale Air Force Base, Calif., in April invites pilots to apply to fly the “Dragonlady.”

In the view of many intelligence professionals, Global Hawk’s key advantage — the ability to fly for 28 to 32 hours — is irrelevant because the Global Hawk’s sensors do not provide the fidelity of the U-2s, even if, as contractors and Air Force officials report, they are performing to specifications.

Pentagon planners had argued that the Global Hawk’s anticipated sensor performance would be “essentially the same” as the U-2s, but in reality, the tradeoff of persistence over performance was never accepted by many intelligence professionals. As for the Global Hawk’s range, the country’s long history with the U-2 shows that it can deployed where needed, one intelligence official said.

While developments continue to play out on Capitol Hill, the Air Force and Northrop Grumman continue to fly and build Block 30 Global Hawks.

“We think the program is X — what the ’13 [president’s budget] says — but until Congress makes up their mind, it could be B. So we’ve got to move forward smart,” said Global Hawk’s director, Col. Karl Rozelsky, who heads the 180-member team at Wright-Patterson Air Force Base, Ohio, that is in charge of developing and fielding versions of the Global Hawk.

In a candid presentation at a conference organized by the Institute for Defense and Government Advancement, Rozelsky dove into the Block 30’s travails.

For much of the last two years, Rozelsky said, he has made twice-weekly trips to the Pentagon from Ohio to figure out how the Block 30 program might be put on track. Pentagon officials finally agreed on a plan to save the program by reducing the production run from 42 aircraft to 31. The key was a reduction in the predicted “attrition” — the loss of aircraft due to crashes or damage, Rozelsky said.

As required by U.S. Nunn-McCurdy cost-control law, the Pentagon told Congress the revised program was essential for national security.

“Then we turned around and in the [president’s 2013 budget request], it’s zero” planes, he said.

Rozelsky’s tone conveyed frustration, but not just with the administration. He suggested that if the Block 30 planes do survive, management and technical problems will need to be addressed.

“For two years now, I’m flopping around on a roller coaster being [dragged] every which way with the harness halfway up. I don’t need anybody to cry for me. I’m actually looking for help as I proceed through the path here,” he told the audience of ISR experts and contractors.

He rattled off a list of needed technical improvements:

• Lighter sensors so the Global Hawks can fly longer than 32 hours and higher than 60,000 feet.

• Establishing technical standards so that intelligence collections can be shared widely.

• Creating compatible ground stations for the Global Hawks and the Navy version of the aircraft, the radar-equipped Broad Area Maritime Surveillance plane.

“Right now — ready, ready, ready — the BAMS ground station will come out and it will not fly the Global Hawk. Holy smokes, is that stovepiped or is that stovepiped?” Rozelsky said.

He said the problem needs to be fixed and that there is still time.

His sternest words, however, were reserved for the Global Hawk management structure. Rozelsky bears the title of program director, but he said that he is just one figure in a structure that includes the Navy’s BAMS planes and versions for NATO and Germany. This situation, he said, makes it hard for him to implement the Pentagon’s acquisition decision memorandums across the management structure.

“When I reach out, they’re like, ‘Nobody tells me what to do. I work for someone else,’Ÿ” he said.

If Congress were to restore some or all of the Block 30s, the move would not be historically unprecedented. Finnegan pointed to the V-22 tilt-rotor aircraft program, which Congress saved in the early 1990s when then-Defense Secretary Dick Cheney wanted to cancel it. He said the bureaucratic dynamic was different in the case of the V-22, which makes full restoration of the Global Hawk unlikely.

“With V-22, the difference was you had the Marine Corps” — and special operations forces — “strongly supporting it, working behind the scenes. You don’t have that strong support for the Global Hawk Block 30” in the Air Force, Finnegan said.

Indeed, at a breakfast talk, the Air Force’s top intelligence official defended the decision to cancel the Block 30s and rely on the U-2s to meet the high-altitude requirement approved by the Joint Chiefs of Staff.

“As we stepped back and looked at that, we were able to meet that with the existing U-2 and then frankly save a lot of money by not going forward with Global Hawk Block 30,” said Air Force Lt. Gen. Larry James.

The key to allowing the U-2 to meet the requirement was a Joint Staff-approved reduction in the number of high-altitude orbits required around the world, analysts and retired military officials said.

Even so, Global Hawk advocates have been questioning the wisdom of the Block 30 decision in light of the Obama administration’s decision to pivot the U.S. defense strategy toward the Pacific region, an announcement the Pentagon made shortly before releasing the 2013 budget proposal in February. Advocates argue that Global Hawk’s ability to keep flying long after a human pilot on a U-2 would need to land is perfect for covering a vast area like the Pacific region.

“Global Hawk Block 30 fits the new defense strategy like a glove,” said retired Air Force Lt. Gen. David Deptula, CEO of Mav6 and a consultant to Northrop Grumman, the Global Hawk prime contractor.

U-2 advocates point out that the aircraft are flown from South Korea, putting them in ISR range of North Korea, for example.

Blue Devil 2

Mav6, the small company founded in 2007 to shake up the tactical intelligence industry, has been scouting for a transition partner to continue allocating funds to the Blue Devil 2 project after June 30, when the Air Force plans to cut off funds.

By Mav6’s calculation, about $63 million in unallocated funds would remain for Blue Devil 2 in 2012. The company is suggesting that the Army or Navy could use the funds without a congressional reprogramming.

Mav6 has also appealed to staff members on the House and Senate intelligence committees about the possibility of one of the intelligence agencies sponsoring the airship. Mav6 has also appealed to the Department of Homeland Security’s Customs and Border Protection Agency for possible domestic use.

One of the requirements that drove Blue Devil 2 to bust its budget by 10 percent was the Air Force’s decision that the optionally piloted airship would need to earn a Federal Aviation Administration flight certificate. Mav6 didn’t like the requirement, but in theory, it could make the aircraft more attractive for domestic use.

What are the odds Mav6 can find a new sponsor for Blue Devil 2?

“Given the different interest expressed by investors and the discussions with other groups in [the Department of Defense] and DHS, I would say 50-50,” said Dave Bither, Mav6 senior vice president for strategy and corporate development.

For now, Mav6 and its airship hull contractor, TCOM, continue to work on Blue Devil 2 in a giant hangar at TCOM’s site near Elizabeth City, N.C.

Enhanced View

The worst fears of executives at DigitalGlobe and GeoEye were realized in February, when they read the Obama’s administration’s “Defense Budget Priorities and Choices” document. The paper, released as a prelude to the 2013 defense budget request, said “substantial reductions” would be made to commercial satellite imagery purchases to avoid buying imagery that would be “excess to requirements.”

News quickly broke that the government was planning to reduce by half the 10-year, $7.3 billion Enhanced View program under which the government funds commercial satellites and buys their imagery.

The administration said the remaining funds would still boost U.S. imaging capability in the coming years, but the news was of no solace to GeoEye of Dulles, Va., and DigitalGlobe of Longmont, Colo., which operate competing constellations of imaging satellites.

GeoEye, for example, reports that 66 percent of its first quarter 2012 revenue came from sales to the U.S. government. The company would receive $3.82 billion over the course of the Enhanced View program, and Digital Globe was to receive $3.55 billion. The money would aid the companies’ plans to add new satellites to their imaging constellations.

GeoEye’s reaction was the boldest among the two companies. It reached out to the media, but it also quietly started merger negotiations with DigitalGlobe in hopes of avoiding a competition over a smaller pie. Those talks broke down after several months, and a series of dueling press releases ensued.

On May 4, GeoEye revealed the failure of the secret negotiations over PRNewswire, and sent CEO Matthew O’Connell into a teleconference with analysts to announce that GeoEye would now seek to acquire DigitalGlobe.

On May 6, DigitalGlobe announced that its board of directors had unanimously rejected the hostile takeover attempt, saying it “substantially undervalues” the company.

On May 7, O’Connell issued a statement expressing disappointment at DigitalGlobe’s rejection of what he called “our highly attractive proposed acquisition.” O’Connell said a combined company “would generate substantial synergies while better satisfying the needs of all customers, domestic and international.”

The events mark a dramatic break from the industry’s optimism in 2009, when the Obama administration announced an ambitious plan to buy two additional fine resolution imaging satellites for the National Reconnaissance Office and underwrite construction of two additional commercially owned satellites, a decision that was dubbed the “2 + 2” plan.

DigitalGlobe and GeoEye felt reassured that there would be a long-term successor to a project called NextView, under which they were providing imagery to the government. The successor was to be Enhanced View.

After the administration released its priorities document, news broke that the Enhanced View cuts would be around 50 to 52 percent. The National Geospatial-Intelligence Agency, which launched Enhanced View in September 2010, has not disputed the reports, but it can’t say much because the details of the intelligence budget are classified. The Enhanced View agreements with DigitalGlobe and GeoEye, however, are public.

Under Enhanced View, GeoEye is using the first funds to build GeoEye 2, which is scheduled for launch by the first half of 2013. DigitalGlobe plans to launch WorldView-3 in 2014.

If the Enhanced View decision stands — there is some question because of an unusual post-decision review undertaken by intelligence officials for the White House Office of Management and Budget— the fallout could extend beyond Digital Globe and GeoEye to the entire concept of public-private partnerships, one industry executive said.

“It really undermines the confidence of the satellite providers because these are guys that looked like they’d figured out how to do this between NGA, and GeoEye and DigitalGlobe,” said Tip Osterthaler, president and CEO of SES World Skies US Government Solutions, which sells commercial satellite capacity to the government. “It looked like a real public-private partnership, or about as close as we ever get to one in the U.S.

“It turns that partnership doesn’t mean very much for the U.S. government.”