SUBJECT: Agreement to Commercialize Government Funded Technology
Also participating in this event are Bryan Bullock, chairman, Intermap Technologies, Inc., Michael Bullock, president, Intermap Technologies, Inc. and Col. Richard M. Bridges, USA, director, Pentagon Press Office.
Colonel Bridges: Good morning, ladies and gentlemen. I'm proud to introduce today some participants that are going to sign an agreement that I think is a relative novelty in the industry. Dr. Paul Kaminski, the Under Secretary of Defense for Acquisition and Technology will sign the document for DARPA; Dr. Peter Banks, President and Chief Executive Officer of the Environmental Research Institute of Michigan, otherwise known as ERIM, will sign for that particular institution; and Mr. Bryan Bullock, Chairman of Intermap Technologies Incorporated, and Mr. Michael Bullock, President of Intermap Technologies Incorporated, will also sign the document.
This particular agreement that they will sign today allows Intermap to commercialize a government-funded advanced radar system. The commercialization will maintain and improve an important military mapping capability, and the agreement guarantees the Department of Defense continued preferred access.
The system was originally developed and demonstrated by ERIM in a 1992 through 1996 effort jointly funded by DoD and ERIM.
Ladies and gentlemen, Dr. Kaminski.
Dr. Kaminski: Thank you. Good morning.
We are here today to formally sign an agreement between the Department of Defense and the Environmental Research Institute of Michigan, ERIM, and Intermap Technologies Incorporated. This agreement is breaking new ground for the DoD. We are taking here a capability that was developed by ERIM under a Defense Advanced Research Project Agency or DARPA project and transitioning it from a purely military use into a dual use commercial operation.
This initiative, I think, is exemplary of the kinds of things we're continuing to do in acquisition reform, bringing commercial kinds of business practices into our DoD procurement and development operations.
The government-owned system will be transferred to ERIM for commercial use. ERIM will then bear the cost of operating, maintaining, and improving the system, but DoD will benefit by retaining quick reaction rights to use the system and to use it at preferred rates.
Even more innovative in this arrangement, ERIM will pay the DoD royalties based on their commercial sales. Those royalties will be paid until the DoD is paid back for its development costs in the program.
To conduct this new way of doing business, we are using the provisions of Title 10, U.S. Code 2371. This special authority here is necessary for the government to be able to recapture its investment through the receipt of royalty payments. This is something very unusual for the Department to have done.
The system in question here is the Interferometric Synthetic Aperture Radar Elevation, or so-called IFSARE system. It is mounted in a ERIM-owned Lear Jet aircraft.
DARPA, in partnership with the Army Topographic Engineering Center, started this IFSARE program back in 1992. They started it to develop an airborne, all weather, day/night, radar based mapping system. Since then, this IFSARE system has imaged large geographic areas with a very high degree of terrain height accuracy. So what we're doing here is mapping terrain in all weather, all night conditions, and mapping it with very precise elevation information across this large piece of terrain. We're doing so at a cost that is significantly lower than permitted by previous methods to do this work.
The system has the capability to combine information from synthetic aperture radar and digital terrain elevation models to create large, very high quality digital and photographic maps for our military forces.
In 1996, DARPA and the Army Topographic Engineering Center validated the ability of the system to achieve better than two meters absolute height accuracy over an area greater than 2500 square meters. Think of that -- two meter absolutely accuracy. Data of this quality was obtained at the National Training Center in Fort Irwin, California, and it is being used today by the Army for simulation and training of both helicopter and tank crews in a realistic geographical environment.
More recently, the DoD used the system over Bosnia for mapping purposes. The high quality digital elevation models are available for the U.S. sector and for the corridor from Sarajevo to the Adriatic Sea. It is anticipated that this engineering data will be used for construction of roads and other projects in this region where no accurate data of this sort was previously available. Over a half a trillion bytes of digital model data is now available for this area for use in transportation and communication projects as the area is rebuilt.
The system also has numerous commercial uses, but I'll let Peter Banks from ERIM tell you a little more about that in a few minutes.
The IFSARE capability is quite beneficial to the military, and many DoD and government activities are interested in its products. The Army Corps of Engineers, the National Imagery and Mapping Agency, the Federal Emergency Management Agency, our Special Operations Forces, the State of California, the U.S. Geological Survey are just a few who are interested in this capability, and I think as it becomes better known, the list will grow.
But the level of use by the DoD and the federal government today is just not high enough to make the cost of maintaining and upgrading the system worthwhile to us in the DoD in this time of scarce resources. So we welcome this agreement as a way for DoD to once again operate as a partner with industry. DoD and the federal government now have access to a needed capability without ourselves bearing the full cost of maintaining and operating this equipment. Industry is available to commercialize the military capability and to make it profitable. This is a win/win situation for us both, and I hope it serves as a model for our future business relationships and our future work in acquisition reform.
I'd now like to introduce Peter Banks from ERIM.
Dr. Banks: Thank you, Dr. Kaminski. Dr. Buchanon is also here, who I want to give some special thanks to on this very happy day for the transfer of the licenses from ERIM to Intermap Technologies USA located in Colorado.
ERIM is very pleased to have had the opportunity to work with the Defense Department, DARPA, and other groups to develop this technology. As you said in your comments, Dr. Kaminski, it is a complicated technology. It took the best efforts of many of the finest technical minds in this country to develop. The opportunity to have it available continuing for the U.S. Government as well as commercializing around the world is most welcome.
The vision, as you mentioned, for this technology, is to create a method by which the IFSARE technology itself can be transitioned from a purely military use environment into commercial applications. As we all know, this is a very complex type of transition. Cost factors become important, marketing of the product, the opportunity to understand customer needs is extremely important for us.
As part of the agreement that's to be signed today, Intermap will undertake specific obligations to the U.S. Government, and these include the following:
First, that the U.S. Government will continue to have long term, quick reaction priority access to the IFSARE system, the Lear jet that was mentioned before with the twin radar systems operating in it, as this can be used to support military and civilian national emergencies -- perhaps of the type that we saw recently in California.
The U.S. Government will not be required to incur direct costs in order to maintain the quick reaction capability. The plane will not be kept in a hangar waiting for emergencies or other applications, but will be in use almost on a daily basis at various places around the world.
The U.S. Government will benefit from improvements to the technology which are driven by the commercial market. Better coverage, the ability to extract information from those better terrain maps. These will come with time in response to the commercial industry.
The U.S. Government will be assured of the best available pricing for the products it requires because of the competition inherent in the commercial market. And I have to tell this group that this is not a unique technology in the world, that we face competition from abroad; and that as part of the competitive posture, we must work very hard to stay ahead of that competition.
The United States will benefit from being the global leader in the deployment of the IFSARE technology. As alluded to in my last comment, we have the opportunity of being ahead of other countries in developing this, and we would very much like to see this as a U.S. technology that is available for the benefit of the world.
The assignment to Intermap supports the policy of the Defense Department to encourage private investment in technological developments. The improvements to the system will be funded out of the profits that are made by the company involved, Intermap Technology.
It's clear something like this doesn't happen out of a vacuum in terms of the commercialization, and in particular I'd like to thank DARPA's legal and contracts department, Barbara Marawitz was very instrumental in working with Robert Henry of ERIM in developing the method to create this cooperation between industry and the U.S. Government.
I'd also like to extend my congratulations to Dale Ausherman who is in the audience today who spent a good fraction of his career pulling together this project and working, of course, with many others to make it a success. And to Ralph Mitchell who is head of the business group that Dale works with.
It's been a wonderful collaboration not only within ERIM, with Intermap Technologies, but others across the country who have been part of the DARPA team.
Ned Evans, I want to say thank you also. Ned is the commercialization focus for this. Ned, you've had to work for almost one year on this project to bring about the synthesis with all of the people within the government as well as with the Bullocks, Bryan and Mike Bullock who will represent Intermap Technology in a few moments in the signing.
The Pentagon has used the IFSARE system to map Bosnia. I think it's important, Dr. Kaminski made his comments a few moments ago, the extraordinary accuracy, the relative accuracy is probably better between point to point inside the maps we make, it may be just a few feet. The absolute accuracy, knowing precisely where in the world a given bright spot or rock or terrain elevation feature is is known to about two meters or six feet, anywhere in the world, any time we make these maps. That is an extraordinary process.
Any of you who might have taken civil engineering in college remember theadolytes and lines and measurements -- we don't have to do that any more. Of course we need to know somewhere in the world we know precisely by definition, but from that, we know the location of things in three dimensions. Not only the horizontal dimension but the vertical dimension extremely precisely. And the application of this to a given piece of terrain over and over enables us to see changes in that terrain that can be extremely important for people that are doing development or perhaps worried about changes in the natural environment.
We see applications within the government to a number of agencies across the board. The Topographical Engineering Agency, the U.S. Army; the Federal Imaging Mapping Agency; the Federal Emergency Management Agency; the U.S. Geological Survey; the Army Corps of Engineers; and Special Operations Forces. All of these benefit from modern digital mapping technologies.
Now in the commercial sector we find it exciting to see the most advanced mapping radar technology being used for constructing bridges, roads, telecommunication systems, for helping in oil and gas exploration, protecting the world's forests, and these are problems not only of this country but all countries around the globe.
As for ERIM itself as the innovators and system developers, we will continue to upgrade the technology, and we're currently designing and building a new high speed data processor for Intermap that will advance the technology for the U.S. and the worldwide mapping industry.
Intermap has been organized to develop and market commercial applications for IFSARE. It is engaged at the present time with a backlog of more than $8 million in contracts in various countries of the world including Indonesia, Venezuela, and Nigeria.
So Dr. Kaminski, Dr. Buchanon, thank you very much for having faith in us to help deliver this, and we're now seeing a new phase of the project. Thank you very much.
Dr. Kaminski: Peter, let me invite you as well as Bryan and Michael Bullock now to come join and sign the agreement, and then we'll all be happy to take some questions.
Q: Why can't a lot of this detailed mapping be done with commercial or national space-based systems? And secondly, what are the restraints for the sale of this digital data overseas? Because some countries certainly could be using this for targeting.
Dr. Kaminski: The first issue, if we look at current, for example, airborne survey photography for mapping, doing that photographically today, you would end up with weather limitations in most areas, so you would need a radar kind of system to be able to do this on an all-weather basis. And the problem of doing this with a radar system is that with a single pass, with a synthetic aperture radar image, you can get an accurate 2D measurement. What this system does is give you 3D, it gives you the third dimension. It has another aperture to do an interferometric calculation so that the data is processed so that when you're done you get an all weather map in three dimensions with great vertical precision. There is no other capability to bring that combination to bear.
Our space radar program, like the radar satellite, which doesn't have that aperture for a single pass and it doesn't have the resolution to give the fine performance. So this is a unique combination. There will be controls, for example, on release of this information so that it isn't just available across the board.
Q: What types of controls are they? They can sell to any foreign countries, or they have to go through a COCOM process or...
A: This is a dual-use technology so it will require some review. In fact I think your, I might let Peter, either you or the Bullocks describe where you are today in your negotiations and discussions with the State Department for use outside the U.S., if you want to come up and...
Dr. Banks: The answer is yes, there are controls, and of course we're quite concerned about inappropriate uses of data like this, and the State Department, we go through the normal process of clearing this through them, which involves all agencies of the federal government. So we are complying completely with those requirements.
Q: Does this replace the DMA's terrain elevation model, the DTED? Does this replace that? And now can commercial vendors -- you could never get the DTEDs data before from DMA because it was all "classified" -- but this now is basically the same thing but higher resolution?
Dr. Kaminski: What this does is it gives you the capability very quickly to produce the same kind of data you have in the Digital Terrain Elevation Database, in fact a higher precision version of it, to be able to collect it very, very quickly and process it. I think when you have the new processor that's being developed it will be processed very quickly. Not quite in real time, but it will be a very, very quick turn-around, whereas the usual cycle for our DTED production is a cycle that probably takes weeks or months.
Q: What's this mean for Denver at all, in particular?
Dr. Banks: As you are probably aware, the world of remote sensing is changing very rapidly. There's a lot of strides taking place in the commercial arena with satellites that are being planned for launch as soon as later this year. A lot of that activity is centered in the Colorado region, for whatever reasons, and we felt it appropriate that this is an equal stride forward in technology for remote sensing, and that we also be located in Colorado to take advantage of the synergies and the remote sensing market. It will be our base of operations for the IFSARE aircraft. We have brought U.S. citizens on board and trained them for the operation and also the data processing of the system.
Q: Dr. Kaminski, are you satisfied with the current restrictions placed on remote sensing satellites, commercial ones that will be launched in the near future that are higher resolution than we've seen before? Are you satisfied that the restrictions are tight enough? Or are they too loose?
Dr. Kaminski: I think we have a reasonable set of restrictions. I'm happy with where we are today. I think that is something, though, we're going to continue to evolve because of the degree of restrictions will be influenced by what's available elsewhere in the commercial market. So we have a balance to be made here in terms of what our competitors are doing, and balancing our own national security interests. So this will, I believe, continue to evolve in the future, but I'm happy with where they are today.
Q: Last year Israel tried to make an end run and tried to get a certain cap over their territory from commercial imaging systems launched by U.S. companies. Have any other countries come into the federal government and asked for similar type restrictions over their national territory?
A: We've had discussions with each of our allies on working arrangements so that everybody is mutually satisfied, and I would say that everybody is mutually satisfied with where we are at the moment.
Q: So there have been no other countries coming in asking for restrictions?
A: Not of the same sort.
Q: What type of sort?
A: We have just general agreements for operation and sharing of data, and we've discussed both sides of both our national capabilities and these commercial abilities with allies?
Q: How much did the system cost to develop? I mean how much did DoD invest in the system and how much did Intermap invest or ERIM invest in this system to bring it up?
A: It is actually hard to find the overall trail of investments because there have been other agencies beyond DoD who have been supporting this work over a period of time. Perhaps something like a total of $20 million went into this over a period of several years.
If we looked at the replacement cost of this radar system today, it would be a little over $6 million.
Q: How many more of these systems will be coming on line? Right now you only have one system, I understand, and one Lear jet. Is there going to be a fleet of say 10, 20 aircraft that are going to be ranging all over the globe taking pictures?
Dr. Banks: We hope so. I would estimate three to four in the next two years.
Q: When you mentioned competitors, what specific country? The French or Brits or Germans?
A: In terms of competition, both the Germans and the Japanese have Interferometric SARE programs at different stages of development. Canada also has done some work in Interferometric SARE and operates, currently has an Interferometric SARE operating. So those are the three primary countries that we look at as competitors.
Q: Canada is pretty much the guys who have it first operational, you would be second, and then the Germans and Japanese would fight it out for whoever is third or fourth on the market with an operational system?
A: Intermap is first in the world. We're beating everybody up pretty bad right now. And marketwise we're having a great time. The technology came from the DARPA funding and ERIM's work is well ahead of the technology in any of the other countries. We're just running like hell to stay ahead of everybody and try and dominate the market before anyone else gets out there.
Q: There are no other U.S. competitors that you are aware of at this point?
Q: Does your organization get a subsidy from the federal government? Even though you're going to pay royalties, but are you going to get a subsidy?
A: I look at it the other way. We're subsidizing the U.S. Government now. We've already authorized $3 million of capital spending to add to this aircraft. By the time next year goes by we'll have spent more money than the U.S. government will have spent on this system, so...
Dr. Kaminski: Actually, I agree. We're actually the ones getting the subsidy. When I talked about that $6.1 million replacement cost, the agreement is we will get a discount on services, that is the services will be subsidized for us until the $4.8 million is paid back, and then the $1.3 million in addition to that to come up to $6.1, we'll collect royalties on other uses until that's paid back to us. So it really is a win/win arrangement. We'll get a discount on our service.
Q: It's pocket change.
A: It's pocket change for this particular program, but the principle of picking this up and extending it into other areas is very important. Here I really want to commend the DARPA leadership -- Larry Lynn and Lee Buchanon -- not only for the foresight in developing this capability together with ERIM, but the business practice foresight, and using the legislative authority we have to begin to move to this kind of a commercial model with the DoD receiving royalties. It's a pretty unusual arrangement. It's the kind of best practice I want to pick up and distribute and make known throughout the Department, for us to be able to leverage this kind of capability.
Q: Roughly how much royalties, how long do you think it will take to get that $6.1 million from the contract repaid in terms of royalties?
A: I can't answer that. It depends upon the business base.
Q: Any sort of projected, like five years, three years?
Dr. Banks: I think it's less than five, more than two.
Q: What are some other systems, sir, that you'd like to see... You said this sort of sets the groundwork. Do you have any specific ideas about what other technologies you could sign similar agreements?
Dr. Kaminski: Some of these principles, we've applied some features of them, although not in the same exact way. I would highlight a couple of things that I've talked about before in previous press conferences.
One is a model program called CRAF -- Civil Reserve Air Fleet. What we're doing there is using our commercial airline capability, we're in essence buying an insurance policy. So we subsidize that operation a bit. In some of the airliners we strengthen the floors and widen the doors to be able to handle our equipment, and that costs the airlines' operating expenses to go up a little bit because the airplanes are heavier. We also compensate them for that. In exchange, in time of a national crisis, we're able to call up that capability. Every time we've called it up, it's been available. It's worked very well. We used it in Desert Storm in a very major way.
What's of interest to me in that program is we have about a five-to-one return on that capability over what we would have spent had we bought and operated our own airplanes and had them sit there on a contingency basis. That is a big deal when you look at the financing of that kind of operation. So it's another idea of buying a service that's available commercially and leveraging it for our use.
We're in the throes right now of examining a very similar policy to buy communications capability in the same way, to be able to leverage off a commercial capability satellite as well as terrestrial and be able to call it up for our use on favorable terms.
Q: What about the commercial purchase of higher resolution satellite imagery?
A: That's another area where the same approach is open. That is, as a commercial capability is developed to provide earth resources information, that's a capability we will look to buy off of as an alternative to our own capabilities, that which is going to be made available commercially, to the extent we can get it at a better price, we're open to buying that from a commercial vendor.
Q: You said commercial communications capability, you're talking things like Challenge Athena, Direct Broadcasts, Eagle Vision, things like that?
A: In the future, if you look at the constellations of Leo and Mio systems that are being developed, we're wide open to buying that service for our own use.
Press: Thank you.