The Defense Department is considering multi-year approaches to acquiring commercial satellite communications (SATCOM) services, according to the Pentagon’s information technology (IT) czar.
DoD Chief Information Officer (CIO) Teri Takai told the House Armed Services intelligence, emerging threats and capabilities subcommittee March 13 the Pentagon is putting together a “cost recovery model” that takes into account multi-year acquisition. DoD spokesman Air Force Lt. Col. Damien Pickart last week described a cost recovery model as a “deterministic, proactive” process part of DoD’s annual budget development as opposed to a reactive process initiated by individual DoD users that relies on the availability of overseas contingency operations (OCO), or wartime, funding.
“One of the things that we’re doing is to actually put together a cost recovery model that takes into account a multi-year acquisition to look at what’s the best approach so that we can guide programs going forward,” Takai told the House.
DoD meets 75 percent of its commercial SATCOM requirements through leases and 25 percent through spot market purchases, according to Defense Business Board (DBB) task group briefing slides from January that cited the Defense Information Systems Agency (DISA), which procures commercial SATCOM for DoD. Spot market buying costs more than long-term leases because it occurs at the last minute when limited bandwidth resources are available. DISA, which procures commercial satellite services as needed to augment military SATCOM, leases commercial satellite services predominately through one-year leases, DBB said. DBB also said DoD in fiscal year 2010 spent $640 million, or 40 percent of its total SATCOM costs of $1.6 billion, on commercial SATCOM.
DBB predicted the cost of DoD-purchased commercial SATCOM services could grow to between $3 billion and $5 billion in the next 15 years. With declining defense budgets combining with a shift in focus to the Asia Pacific region, experts predict increased DoD reliance on SATCOM due to an inability to build expensive military SATCOM satellites itself plus increased bandwidth due to intelligence, surveillance and reconnaissance (ISR) use from unmanned aerial vehicles (UAV).
“With a deterministic planning process, a multi-year acquisition (with potential cost savings) may be a viable and desirable contract mechanism to lease commercial SATCOM services,” Pickart said.
Commercial satellite industry leaders have been frustrated by DoD’s spot market approach to acquiring SATCOM. Intelsat General CEO Kay Sears told Defense Daily in November DoD’s spot market buying stunts industry’s growth because it doesn’t know where, nor when, to invest. Sears said spot market buying doesn’t give industry a signal as to how long it is going to need that capability and/or whether there are enhancements that are needed to that capability (Defense Daily, Nov. 29).
Takai told the House DoD is implementing a “converged SATCOM gateway” architecture that will help standardize the way DoD buys commercial, and its own SATCOM. Pickart said DoD currently manages over 60 strategic SATCOM gateways that enable departmental and war fighting networks worldwide. As IT technologies have advanced and user requirements have rapidly evolved, SATCOM architectures have had to be reactive rather than proactive, which has limited DoD’s ability to fully take advantage of the commercial SATCOM market, Pickart said.
Philip Harlow, president and chief operating operator (COO) of commercial satellite provider XTAR, applauded both DBB and Takai’s office for heeding the commercial satellite operator industry’s concerns.
“We applaud the board’s findings and recommendations, which are consistent with, and clearly reinforce, industry’s arguments that DoD adopt multi-year leases and hosted payloads to meet its spiraling bandwidth demands,” Harlow said in a statement last week. “Ms. Takai’s recent testimony before the HASC acknowledges the ‘benefit in looking at’ longer-term leases as a ‘cost recovery’ model for commercial SATCOM. This statement indicates forward motion, but industry is eager to see DoD move beyond the ‘we’re looking at it’ phase to actionable policy.”
DBB made numerous short-term and long-term recommendations in its briefing slides. In the near-term, DBB recommended DoD take advantage of more capital lease opportunities, continue hosted payload efforts, consider alternative new contractual opportunities and arrangements and use the 2014 Quadrennial Defense Review (QDR) to elevate the importance of SATCOM by specifically addressing the balance of commercial satellites and military satellites for requirements.
DBB’s long-term recommendations included supporting the DoD CIO in establishing a governance and usage plan for military and commercial satellite ecosystem, including aerial and terrestrial elements. DBB also recommended addressing which organization has operational and tactical execution authority and facilitate future governance by designating a single DoD point for procuring all SATCOM assets and services, which Harlow appreciated.
“The implementation of a ‘converged SATCOM gateway architecture’ structure infers Ms. Takai is advocating for a single purchasing authority to ensure that DoD maximizes the value for its SATCOM acquisitions—something that has frustrated the commercial satellite operator community for some time,” Harlow said.