Companies Seek Profits In Fee-For-Service Surveillance Aircraft

By Dan Parsons
Airborne surveillance has become so popular that even countries that can’t afford their own platforms are scrambling to acquire the capability.

Hearing the call, industry is developing new business models to help militaries and other agencies field intelligence, surveillance and reconnaissance capabilities without the hefty expense of developing their own systems. For nations and agencies with limited means, the fee-for-service model could bring expensive technologies like unmanned aerial vehicles within their price range.

Company officials who have pioneered the fee-for-service model believe it represents a novel way to do business with the military and other government agencies. They also believe it is an ideal opportunity for contractors to thrive while providing high-demand services at a lower cost than traditional procurement programs.

“It would not be too strong a statement to say that this is a fundamentally different way of doing business with the government,” said Steve Reid, senior vice president and general manager of unmanned aircraft systems for AAI Textron Systems, a Maryland-based aerospace and defense company.

Companies like AAI have been offering fee-for-service models to the U.S. military for years now. But the practice is expanding as other manufacturers get in on the trend, new markets open and a greater variety of systems is developed.

For now, it is a model uniquely suited to ISR platforms. In combat situations, fee-for-service models are limited to unmanned systems, given strictures on placing civilian operators in harm’s way.

With sensor and platform technologies that have changed rapidly since their introduction, fee-for-service also allows customers — military or otherwise — access to the latest and greatest technologies without repeated capital investment and upgrade costs.

“That’s one advantage that is pushing the trend toward the fee-for-service,” said Reid. “Customers can get the very latest technology without being stuck with older technology. Plus, now that it’s being done in a competitive environment, it’s a really good deal for the government to look at this and be able to have the very latest technology with minimal startup cost.”

There are both manned and unmanned airborne ISR systems for rent. Each has its own unique advantages and drawbacks. UAVs, for instance, are not yet able to fly within U.S. or European civil airspace. (See related story here.)

Manned or unmanned, the same technology that allows troops in Afghanistan to monitor insurgents is in high demand in both military and civilian markets.

“ISR has always been in demand,” said Mark Grablin, director of airborne reconnaissance systems for Lockheed Martin. “What’s happened over time is that demand has increased while budgets have decreased. So various customers are saying I would rather just purchase ISR as a service as opposed to developing platforms.”

The primary market for ISR on demand has been border security,  Grablin said. As operations in U.S. Central Command dial back, coalition nations, particularly in Europe, are starting to look to their own border protection, he said.

Lockheed Martin has developed a product line of manned aircraft and accompanying sensors that can be tailored to fit a customer’s desired capabilities, including border surveillance.

The “Dragon” family of ISR systems runs the gamut from fully staffed corporate jet-like platforms to ISR suites that can be inserted into cargo aircraft the customer already owns.

The company already is working with international and domestic border patrol agencies, the U.S. Defense Department and international ministries of defense.

“What we’re doing is putting in front of a customer a set of configurations that allows them to visualize how they can meet their needs without having to pick a serial number and say, ‘Well, I guess that will fit,’” said Charles Gulledge, director of airborne reconnaissance business development for Lockheed. “We’re giving them a set of options that includes new platforms. We’ll use what you’ve got, and if we don’t have something, we’ll even loan you something.”

Lockheed’s menu of sensors and platforms ranges from customer-owned, contractor operated platforms to an arrangement where the company owns everything and provides data on an hourly basis using its own equipment. Gulledge was quick to point out that Lockheed still offers its ISR systems for sale.

Once the company arrives at a sensor package that will fit the customer’s needs, it comes down to a per-hour rate. Reid and Gulledge both declined to elaborate on the cost of providing ISR services.

Lockheed is in negotiations with a Nordic country to augment its existing fleet with multi-mission aircraft that can do broad-area surveillance. The country was interested in converting some of its C-130 cargo planes into ISR platforms.

“They had a need to add a capability but they didn’t necessarily want to bring a new platform into their Air Force,” Grablin said.

Lockheed’s Dragon Shield is designed to roll onto a cargo aircraft, creating a multi-mission aircraft.

Another European customer also was unable to afford a new platform but did not have aircraft that could accept Lockheed’s roll-on sensor. Instead, the company was able to provide both the platform and sensors while retaining ownership of the equipment.

“We fly it, they put their operators on board,” Grablin said.

AAI has also begun contracting with foreign customers, said Reid. For nations with limited means, the fee-for-service model puts new capabilities within reach, he said.

“It’s quite a bit to stand up your own fleet, your own schoolhouse, [and] keep everybody current. That’s a pretty substantial commitment to the technology,” Reid said. “While the military has shown commitment, other customers want to crawl, walk, then run before they make that full acquisition commitment.”

While airborne ISR has become an indispensible military tool, other technologies are quickly being adapted for some unexpected purposes. As Gulledge put it: “Successful products tend to find their ways into interesting markets.”

Lockheed has been approached by agencies interested in using its Dragon products to monitor forest fires and to measure crop growth.

“If you’re talking about a big area where it’s thousands of acres, to monitor things like that from the ground is very difficult,” he said. “If you fly the right sensor, you can record these sorts of things very effectively. In that broad sense, the technologies have many applications.”

Reid envisioned a scenario like Hurricane Katrina, where the airspace over New Orleans was restricted to emergency aircraft. Though civilian planes were not allowed over the city, perhaps UAVs could have augmented search-and-rescue operations carried out by manned aircraft. In the case of the I-95 sniper who terrorized the Washington, D.C., area in 2002, unmanned surveillance drones could have provided persistent search capabilities, Reid suggested.

“It’s here to stay,” said Reid. “If the military can justify it, certainly it’s going to appeal to commercial and non-military customers, because they are going to have fewer resources to have aviation assets.”

“I see that as a huge barrier to traditional acquisition to commercial customers,” Reid said. “They’re going to want professionals who do this for a living to come in and execute the use of this technology to solve their mission requirements.”

The U.S. military already has non-ownership arrangements with some of the drones it flies in war zones, one of which is AAI’s Shadow. Within that program, the government owns the equipment but AAI operates it. At a minimum, the company fields two service representatives with every Shadow. Then there is an enhanced-platoon configuration where around 27 soldiers flying the aircraft are supplemented with seven or eight service reps.

The company’s newest endeavor is the Aerosonde UAV. With that aircraft, AAI retains ownership of all equipment. Company technicians deploy with customers, bringing everything that’s required.

The fee-for-service model inherently involves a civilian to operate the aircraft, and/or the sensors it carries. With a civilian operator, it likely cannot be extended to lethal weapon systems like armed drones. Companies that rent airborne ISR to the government are strictly limited to ISR missions. Civilian representatives are not allowed to fly an aircraft that is loaded with live ordnance and tasked with targeting or engaging an enemy — “sending metal downrange,” as Reid put it.

Integrating contractors into front-line units to operate surveillance drones was a threshold that, when crossed, allowed the rental model to exist. Because the technology allowed the operator to be out of harm’s way, it opened the door to remote pilots who were civilians.

“The technology lends itself more to contractor operations than, say, a tank,” Reid said. A vehicle manufacturer “is not going to provide a [field service representative] to drive a tank in battle. ISR and unmanned technologies are almost exclusively, uniquely suited for this kind of a business model. The stars and sun and moon all lined up and allowed for this fee-for-service model to be born, really.”                               

Topics: C4ISR, Intelligence, Sensors, Robotics, Unmanned Air Vehicles

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