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Space Attacks: Technology And Contracting Shifts May End Market Dominance

Technology, contracting shifts may end satellite market dominance

May. 31, 2013 - 03:45AM   |  
By AARON MEHTA   |   Comments
The Commercially Hosted Infrared Payload, a heat-detecting sensor installed on the SES-2 communications satellite, demonstrated that commercial satellites can host military or intelligence sensor payloads without interference.
The Commercially Hosted Infrared Payload, a heat-detecting sensor installed on the SES-2 communications satellite, demonstrated that commercial satellites can host military or intelligence sensor payloads without interference. (Orbital Sciences Corp.)
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In the spring of 1994, President Clinton approved the creation of the National Polar-orbiting Operational Environmental Satellite System, a project that would aggregatethe weather-tracking capabilities of the Air Force, NASA and the National Oceanic and Atmospheric Administration. The move was hailed as a landmark and a victory for efficiency.

In 2010, the Obama administration quietly killed the program — which had never launched a satellite — after 16 years of program delays and cost overruns. The system had collapsed under its own weight and complexity, with cost estimates shooting up to almost $14 billion. Instead of one singularly capable satellite, the White House announced, the program would be broken up into two programs: one for civil, one for military.

The fate of that program may reveal a hint of the future. For the past 20 years, almost every major U.S. government satellite system has fallen victim to production delays and high costs. Now, with an eye on shrinking budgets, the Obama administration is pursuing a new way of achieving satellite capabilities. It’s a combination of technological advances in satellite design and shifting contracting doctrine that could mean an end to the long-held market dominance of companies such as Lockheed Martin.

CHOPPING BLOCK

There’s a term in the business for this: disaggregation. It’s the notion of reversing the historical trend of putting as much capability onto one system as possible in favor of smaller platforms. Rather than build a massive satellite with nine different payloads, build a constellation of nine smaller and cheaper ones.

Proponents of disaggregation point to two advantages. The first is cost. Building one highly capable system, loaded with numerous payloads, can be more expensive than crafting a number of smaller satellites that, when combined, provide the same capabilities.

The other major advantage is resiliency. The government has always been aware of risks to the satellite network, but since 2007, when China shot down one of its own satellites with a missile, the Pentagon has been actively looking for ways to protect its increasingly vital networks. A successful attack on a system of two satellites can halve or even eliminate its capability. That’s far less true for a disaggregated system with 20 satellites.

One aspect to disaggregation that is popular with both government and commercial industry leaders is hosted payloads, or putting a government payload on a commercial satellite. The payload uses the battery power of the system but is otherwise independently controlled, providing capability without the costs of building an entirely new system and launching it into orbit. The Defense Department’s first hosted payload project, the Commercially Hosted Infrared Payload, known as CHIRP and launched in 2011, has been hailed as a success by government officials.

“Hosted payloads provide us an opportunity to meet our resiliencies. They provide us an opportunity to meet our budgetary challenges. They provide us an opportunity, quite frankly, to bring a new level of competition in to the provision of space services,” Douglas Loverro, a defense deputy assistant secretary, said at this year’s National Space Symposium in Colorado Springs, Colo. Loverro heads the Space Policy Office under the defense undersecretary for policy.

“Hosted payloads [also] provide us the ability to go ahead and do something that have been cost-effective previously,” Loverro said.

Selling it to Capitol Hill

At the April symposium, the head of Air Force Space Command laid out his service’s interest in disaggregation.

“How do we get after affordability?” Gen. William Shelton said in opening remarks to the conference. “I think one way is we can lower the complexity. Talk about lowering the capability. But if we get after concepts like disaggregation and hosted payloads and things like that, we can lower the complexity of our satellites.

“We can look at commercial buses rather than tailoring each bus to the payload that it’s going to carry. Go after commercial buses to provide the capability we need,” he said.

“One of the big problems, though, will be overcoming the naysayers that are out there,” he said. “There are people who believe that the status quo is adequate. I certainly don’t know what intelligence they’re looking at. I certainly don’t understand what operating environment they think we’re in. I certainly don’t understand what budget climate they think we’re in. But the status quo to me just doesn’t seem to be reasonable for our future.”

The term disaggregation has become an industry buzzword. Joshua Hartman, CEO of the Horizon Strategies Group and a former senior Capitol Hill staffer and Pentagon official, was an early proponent. But he said it will take time for reality to catch up with theory.

“You can’t just jump to a fully disaggregated architecture tomorrow,” he said. “There has to be something of a managed transition from here to there, in order to make sure our current operational requirements are met and we manage the risk properly.”

That “managed transition” is still taking shape, but Hartman envisions a series of replacement programs shifting existing constellations toward disaggregated systems. As each satellite in a constellation ages out, it could be replaced with five smaller systems.

Hartman said he believes the government is still 20 years away from going full scale into disaggregation. That’s a relatively short time by space program standards, and one that will require the groundwork be laid out in the near future.

Part of that groundwork requires a shift in the industrial base, Hartman said.

“We’re set up to build big systems so it’s likely we will drop the ball a couple of times,” he said. But if “someone is willing to stand up and show leadership, we’ll see movement in the next few years. And I think we’ve heard from [Air Force generals] the merits of doing something for that. And most people on the Hill will support that evolution.”

Marco Caceres, an analyst with the Teal Group, agrees that disaggregation should be a popular sell for members of Congress looking to save money in a cash-strapped environment — but warns that a change in culture is needed before it can be successful.

“I think before the traditional way of doing things goes out the door, Congress is going to have to accept a new culture of how to procure these kinds of systems,” he said.

For it to work, Congress is going to have to accept that it cannot have every tool loaded up onto one large, fancy system. It’s unclear how that will play, where more than one strategic plan has fallen by the wayside due to a congressman protecting jobs in his district.

Contracting philosophy

Proponents of disaggregation take hope from Obama administration officials who have indicated an interest in increasing competition and supporting smaller, cheaper projects.

Deputy Defense Secretary Ashton Carter, via his Better Buying Power initiative, has made purchasing efficiencies and competition a signature part of his tenure at the Pentagon.

DoD “is not likely to support further consolidation of our principal weapons systems prime contractors,” Carter said in a February 2011 speech. “A number of our specific Better Buying Power initiatives are aimed at increasing competition among all our suppliers and throughout our procurement of goods and services.”

Carter has also sought to bring in nondefense contractors to provide services for the Pentagon.

One focus has been working more closely with the commercial industry to find ways to purchase bandwidth — crucial for UAVs and other defense needs — in a more economical way.

Speaking to a group of satellite company executives March 18, Frank Kendall, defense undersecretary for acquisition, said he was setting a 90-day window to hear from industry executives on how to move forward with a new architecture.

Pushback

Not everyone is sold, especially those who potentially have the most to lose.

The mathematics of moving away from large, exquisite systems could potentially harm the bottom line of the largest military satellite contractors. For years, Lockheed Martin, Boeing and, to a lesser extent, Northrop Grumman, have ruled the world of large government satellites. Smaller competitors are eyeing disaggregation as a chance to sneak in and steal some of the work away from the big guys.

The larger firms will “have to learn to compete with smaller companies that can produce smaller systems,” Hartman said.

Lockheed, for its part, said it can adapt. “I don’t think we would suffer [from disaggregation] at all,” said Mark Valerio, vice president and general manager of Military Space programs for the company.

He argued that the company has a long history of working with smaller satellites. So if the Air Force decided to move away from larger, jam-packed systems, Lockheed would be able to accommodate them without change in business model or strategy.

“I think in some cases, disaggregation makes a lot of sense,” Valerio said, pointing to options such as military weather satellites and space situational awareness.

Still, Valerio is less bullish overall. He said disaggregation is not the magic bullet for space programs.

“Saying [disaggregation] works doesn’t make it so,” Valerio said. “You have to use real data.”

That’s something Air Force officials readily acknowledge.

“I’ll tell you the truth, there’s a whole lot of study that’s still required and we’re doing that study,” Shelton said in his National Space Symposium remarks. “That’s why I said those space modernization initiative funds have to continue and we’ll continue to get after some of these affordability and resiliency concepts.”

Shelton has indicated he expects an Air Force decision by 2015 on whether to move ahead with a more aggressive disaggregated strategy.

(This story appears in the June issue of C4ISR Journal.)

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