Pentagon awards $1.8 billion in contracts to build out its military satellite internet

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Aerial view of the United States military headquarters, the Pentagon.
Jason Reed | Reuters

The Space Development Agency, an acquisition arm of the Department of Defense, on Monday announced nearly $1.8 billion in contracts to three companies for a next-generation military communications network of 126 satellites.

A pair of aerospace giants – Lockheed Martinand Northrop Grumman and private venture York Space will each build 42 satellites for the SDA’s Transport Layer Tranche 1 (T1TL).

Lockheed Martin won $700 million, Northrop Grumman won $692 million, and York won $382 million.

The SDA’s Transport Layer network represents the Pentagon’s bid to build a satellite internet system. Companies such as SpaceX’s Starlink, OneWeb, Amazon, Telesat have been pouring funds into developing private broadband satellite networks in low Earth orbit.

But the Pentagon aims to create its own “mesh network” with the Transport Layer, which is envisioned as “a resilient, low-latency, high-volume data transport communication system.” The Transport Layer is being built in “tranches,” with the military wanting to utilize an iterative design with small, low-cost satellites to make its network more robust and adaptable.

SDA awarded Lockheed and York with the first contracts for the Transport Layer in 2020 for Tranche 0, with each building 10 satellites that are scheduled to launch later this year. The Tranche 1 contracts awarded on Monday require delivery in 2024.

York’s growth continues

The S-CLASS platform, designed for missions for a wide variety of government and commercial customers.
York Space Systems

While Northrop Grumman and Lockheed Martin have long histories of building valuable satellites for the U.S. government, the continued Transport Layer awards represent a boon for York, which was founded in 2015.

“The fact that SDA is leading in this area of leveraging commercial off-the-shelf kinds of satellites is a big deal,” York Space chairman Charles Beames told CNBC.

Beames said York’s revenue growth year over year has been anywhere from 40% to 100%, with the company continuing to expand its manufacturing capabilities in Denver, Colorado.

“Even with conservative backlog projections, we’re at well over $1 billion in backlog” of satellites to build over the next few years, Beames said.

Sophie Tremblay

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