[Satellite News 04-03-12] Proposed military budget cuts, the degree of which are to be outlined in an upcoming report from the United States government’s defense and intelligence agencies, may threaten the National Geospatial-Intelligence Agency’s (NGA) $7.3 billion contract with GeoEye and DigitalGlobe to provide high-resolution images over 10 years, according to analysts.
Benchmark Defense and Homeland Security Research Analyst Josephine Millward said that the proposed reduction for next fiscal year could fall between 30 percent and 50 percent. “The [upcoming] budget report is supposed to convey the degree to which the government needs commercial satellite images and should offer some guidance on future budgets cuts,” Millward said in a report. “How this will come out is very hard to predict, but it would be very hard to see the NGA program coming out untouched.
The NGA awarded satellite imagery providers DigitalGlobe and GeoEye with separate 10-year, $3.5 billion contracts under the NGA’s EnhancedView procurement program in August 2010. DigitalGlobe’s contract began the following month upon expiration of its NextView agreement with the agency. To support requirements under the agreement, DigitalGlobe said it immediately would begin procurement and construction of its next satellite, WorldView-3, and will launch the satellite by the end of 2014.
GeoEye’s NGA EnhancedView program award provided for the engineering, construction and launch of the GeoEye-2 satellite and the design and procurement of associated ground station equipment. NGA said it would contribute up to 40 percent of the overall construction costs of the GeoEye-2 program, subject to certain contract limitations.
GeoEye also will provide satellite imagery deliveries under a one-year service level agreement with the NGA that includes a nine-year option as well as design and procurement of additional infrastructure to support government operations. NGA will have options under the agreement to buy value-added products and other services. The GeoEye-2 satellite will deliver imagery under the NGA agreement in early 2013.
In October 2011, DigitalGlobe received a one-year, $37.9 million value-added services contract from the NGA under its new Enhanced GEOINT Delivery (EGD) program. The contract allowed DigitalGlobe to provide value-added support to NGA to meet the agency’s advanced imagery requirements and provide final product deliverables.
“This award advances the production capabilities of our Rapid Delivery of Online Geospatial Intelligence (RDOG) — a capability first pioneered jointly by DigitalGlobe and NGA in 2009. Initial production and deliveries under the agreement are expected to accelerate beginning in the fourth quarter 2011, with revenue to be recognized in accordance with deliveries,” DigitalGlobe said in a company statement issued with the contract extension.
But now, almost two years after the initial deals were signed, those programs have been targeted for budget cuts as the federal government looks to cut spending and lower the deficit, according to NGA Spokeswoman Karen Finn.
“We expect the cuts to be significant,” Finn said in a statement. “The government always looks at the total value of each contract to the contribution to our mission to determine how to allocate the reduction.”
GeoEye and DigitalGlobe said they would continue to expand their client base to include foreign governments, as well as commercial clients from industries such as energy, agriculture and real estate. The NGA EnhancedView program, however, still represents a majority of the firms’ business.
“Certainly [GeoEye and DigitalGlobe] have other opportunities, and if their programs were to be reduced by the U.S. government it would free up capacity to do more international and commercial business,” said Millward.