Defense Dept. Weighs SATCOM Reform
Despite assurances to the contrary from the Defense Dept., sources say the agency may drastically alter the structure of it’s $2.1 billion commercial satellite contract. Major service providers such as Intelsat and SES Americom have sought the changes.
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DoD’s commercial satellite communications (SATCOM) has quickly become the crux of a significant debate in defense procurement. The agency’s reliance on purchasing commercial capacity has skyrocketed since the U.S. began military operations in Afghanistan and Iraq. In Sept. 2001, the agency was using 305 Mbps of commercial capacity and as of May 2003 was using 3.2 Gbps, said Otto Hoernig, exec. vp & COO of Spacelink International, one of the small firms that contracts with DoD.
Earlier this fall, the Senate Committee on Small Business & Entrepreneurship pressed DoD to take “all necessary measures” to prevent redirecting funds away from the Defense Information Network Satellite Transmission Services-Global (DSTS-G) contract, after hearing reports that the Dept. was contemplating ending its relationship with its 3 prime small business contractors. At the time the DSTS-G award was made in Feb. 2001, it was the largest DoD small business contract in history -- and was a big win for the little companies.
The DSTS-G 3-year base contract expired in Feb. 2004, and the project is currently in the first of 7 optional years. But its trio of beneficiaries -- Hoernig’s firm, Arrowhead Space & Telecom and Artel -- are hopeful they'll finish out a full decade. The companies’ role is to broker deals with satellite providers, compete the carriers against one another and then compete amongst themselves to provide the govt. with the lowest price. Opponents of the structure have said it would be more efficient to cut out the middlemen and have the agency work directly with carriers -- a view that, for now, DoD doesn’t share.
DoD has historically been an inefficient buyer of satellite capacity, and in 2004 alone commercial satellite procurement will account for about $500 million, the Satellite Industry Assn. (SIA) said. The group has urged the govt. repeatedly to become a smarter buyer and a better predictor of its SATCOM needs, and SIA’s Exec. Dir. David Cavossa said the agency may finally be listening. DoD said it plans to release a report on the issue in April 2005 and a source close to the dispute indicates that an RFP for a new contract could be released in a matter of months -- a step that calls into question the fate of the DSTS-G.
The 3 contractors, however, are optimistic about their future with DoD, and Arrowhead isn’t shy about touting its growth in the years since the contract began. The company said its revenue has soared 1,000% since 2001. “This contract isn’t going anywhere anytime soon,” Spacelink’s Hoernig said. “With over $500 million in awarded task orders to date and a program ceiling of over $2.1 billion, there’s plenty of room for expansion and growth.” He said all 3 contractors have DoD commitments for work for many years to come.
The SATCOM contract controversy came to a head in Dec. 2003 when the Govt. Accountability Office published an analysis that found no fault with DSTS-G but said the Defense Information Systems Agency -- the division that manages the contract -- was in need of an overhaul. In the year since the report, DISA has requested feedback from industry on how to streamline its procurement process, Hoernig said.
Cavossa said that when DoD issues a final decision, the agency’s solution won’t completely satisfy the major carriers or DSTS-G’s contractors: “But anything that DISA does that changes the current system will be positive.”