WASHINGTON: The military can’t buy enough unmanned aerial systems to suit imagery-hungry combat commanders. Procurement programs are harder than ever to start in these days of ever-tightening defense budgets. And using a 20th Century defense acquisition system to buy 21st Century technologies often means getting too little too late too expensively anyway. What to do?
Don’t buy planes, buy pixels — as the U.S. military is doing from companies offering a service best described as “rent-a-drone.” It may be too soon to call rent-a-drone contracts a trend, but they’re a solution both the Special Operations Command (SOCOM) and Naval Air Systems Command (NAVAIR) have turned to in recent weeks to get intelligence, surveillance and reconnaissance (ISR) capability in a hurry. Those involved say it’s a new business model that’s generating considerable interest in the unmanned aircraft industry.
Rent-a-drone contracts aren’t entirely new. Boeing subsidiary Insitu Inc. pioneered the business model, which it calls “pixels by the hour,” flying its ScanEagle UAS for the Marines before and during the battle of Fallujah in Iraq in 2004. Insitu employees deployed with the Marines to fly the missions. SOCOM and NAVAIR have awarded Insitu similar contracts for ScanEagle services once each in the years since. But as the variety and capabilities of UAS proliferate, buying imagery instead of the systems that produce it may be an ever more attractive option for the armed services, and new players are entering the market.
“We’ve been the only ones who’ve been providing this fee-for-service up until this year,” said Ryan Hartman senior vice president for business development at Insitu. With ScanEagle approaching 600,000 combat flight hours in such rent-a-drone missions, however, “Other companies have recognized that this must be a viable market and they’re following us.”
Jeff Brody, vice president of business operations for unmanned aircraft systems at AAI Unmanned Aircraft Systems, a unit of Textron Inc. which was a winner in both the SOCOM and NAVAIR awards, said Defense Department interest in the fee for services structure is growing.
“Within DoD there is a recognition that you don’t always have to own the system. It doesn’t always have to be a GOCO model — government-owned, contractor-operated,” Brody said. “It can be a COCO – contractor-owned, contractor-operated — so it reduces the operating costs for the military.”
SOCOM awarded AAI a three-year contract April 11 to fly its Australian-built, catapult-launched Aerosonde Mark 4.7 UAS on ISR missions for special operations overseas. The Mid-Endurance Unmanned Aircraft Systems II contract, valued at just under $600 million, resembles a $250 million deal Insitu has had since 2009 to fly missions for SOCOM with its ScanEagle, also catapult-launched.
“They basically give us a mission,” Brody said, “then we’ll go out and perform that and then deliver the required material.” Brody said he wasn’t at liberty to discuss what types or the number of missions AAI might fly for SOCOM, but $600 million clearly would cover more than a few hours of video. “We’re building inventory and we go live with our SOCOM customer June 1,” he said.
Five days after the SOCOM award, NAVAIR included AAI, Insitu and CSC of Falls Church, Va., in a “multiple award contract” worth up to $874 million total over five years, under which the companies will compete to fly ISR missions for the Navy, Marine Corps and Air Force. AAI offered its Aerosonde, Insitu the ScanEagle and CSC the T-20, another catapult-launched UAS, built by privately held Arcturus UAV of Rohnert Park, Calif.
“Each new task order that we compete, the companies will be vying for that task order,” explained Mike Shutty, principal deputy program manager for the NAVAIR program office in charge of the program, PMA-263 Navy & Marine Corps Small Tactical UAS.
The companies will provide not only the UAS but also personnel to fly them, shifting the risk for reliability, repairs and replacement of lost aircraft from the military to the contractors.
“People in the past have always used the term ‘leasing,’” Shutty said. “We are not leasing anything here. Leasing implies that you take custody of something. All we’re really doing is buying an imagery product from a vendor.”
Selecting three companies that will compete to fly missions rather giving a long-term award to single company, as in NAVAIR’s earlier fee for services deal with Insitu, was a new wrinkle imposed “from on high within DoD,” Shutty explained. “They want to maximize the amount of competition. The thinking is, if you do a multiple award contract and you compete these various different task orders, you hopefully will get the best value to the government each and every time, versus being locked into a single vendor and a single system.”
The contract gives NAVAIR’s Navy, Marine Corps and Air Force customers three UAS sizes to choose from. The Insitu ScanEagle’s maximum takeoff weight is about 42 lbs., the AAI Aerosonde’s is about 70 lbs. and the CSC/Arcturus T-20′s is about 185 lbs. All three generally carry either a daylight or infrared video camera. The T-20 has hard points under its wings that can carry a variety of other payloads as well, and has been displayed at a trade show with MBDA Inc.’s SABER (Small Air Bomb Extended Range), a 10- to 30-lb. guided bomb, hung under its wing.
“We carry all manner of payload, both internally and externally,” said Arcturus’s senior applications engineer, Steve Smith.
Under the NAVAIR contract, though, the deciding factor on any given task order, won’t be simply size, capability or cost but an assessment of “best value,” deputy program manager Shutty said.
The missions covered by the NAVAIR contract are divided into sea-based and land-based. Insitu and AAI were approved to fly both types while CSC was approved only for land-based task orders. The Arcturus T-20 offered by CSC, Shutty said, is “unproved at this point. They haven’t really flown it or used it in combat in any way, shape or form, but it certainly shows potential.”
As under the existing contract with Insitu, most sea-based missions will likely involve providing ISR for DDGs — guided missile destroyers — which typically operate on their own rather than in battle groups and usually have no helicopter for airborne ISR, Shutty said. DDGs typically use UAS for general sea surveillance and anti-piracy missions and to check out target ships before Visit Board Search and Seizure operations, he added.
The Marines in Afghanistan have been the biggest user of land-based ISR services under NAVAIR’s previous contract with Insitu, Shutty said, and the Air Force has used contractor-flown ScanEagles for base perimeter security there as well. Demand for such services obviously should decline quickly as the Marines withdraw from Afghanistan and U.S. combat operations wind down. The Marines also don’t figure to be major customers for the rent-a-drone program after 2014, when they expect to start fielding their new Small Tactical UAS, or STUAS, known as the RQ-21A Integrator, which Insitu is developing for them.
Shutty said he wasn’t sure if fee-for-services deals for UAS operations are a trend. “It is simply a means of very quickly filling ISR capability gaps anywhere around the world, certainly much faster than trying to do some kind of a program of record,” he said. He also doesn’t know if it’s cheaper for the military to buy and operate their own UAS or to take the COCO route.
“There’s a big argument on that,” Shutty said. “There’s no easy way to do an apples to apples cost comparison between a service and procurement because there are so many different variables there. What we do know is that, in terms of flexibility and very quickly meeting an urgent need, we believe this is the way to go. It takes quite a long time to get through a program of record because you have very strict acquisition policies that you have to follow.”
The uncertainty of the military ISR fee for services market may be one reason Insitu, like AAI, is also now positioning itself to offer UAS services to civilian customers, once the Federal Aviation Administration opens civilian air space to unmanned aircraft, as required by a new law beginning in 2015.
UAS can’t be flown for commercial purposes under existing regulations and can be used in national airspace by federal, state or local government agencies only with a special FAA Certificate of Authorization. The FAA is also expected to publish a proposed new regulation soon that could allow UAS as small as the ScanEagle to be flown for commercial or civil purposes at low altitudes as soon as 2014.
“The commercial market is something that we’re keeping a very close eye on and we’re positioning ourselves for,” Hartman said, noting that his company has created an “Insitu Rapid Response Team” that is set up to rapidly provide imagery to responders in natural disasters, forest fires, search and rescue operations or other civilian missions. “We believe that our experience in operating unmanned systems for 600,000 combat flight hours positions us well to understand how to deliver capability to any customer,” he said.
CSC’s entry into the NAVAIR competition, however, suggests new competitors see an emerging market for providing UAS services that’s interesting in its own right, possibly because it’s easier than selling drones themselves to the military. CSC, a leader in information technology services, had to partner with subcontractor Arcturus to enter the NAVAIR competition.
“It’s flattering,” offered Insitu’s Hartman, “that companies like CSC would try and emulate the business model that we perfected.”