Satellite Communications: Strategic Approach Needed for DOD's	 
Procurement of Commercial Satellite Bandwidth (10-DEC-03,	 
GAO-04-206).							 
                                                                 
In recent years, the Department of Defense (DOD) has come to rely
more heavily on commercial satellite communications to plan and  
support operations and move toward a network-centric warfare	 
environment. DOD acquires commercial satellite bandwidth services
to support a variety of critical missions such as surveillance	 
performed by unmanned aerial vehicles. GAO was asked to assess	 
(1) whether DOD's process for acquiring these services is fair to
vendors and providers, (2) whether the process meets users'	 
needs, and (3) whether spending on these services is managed	 
effectively and efficiently.					 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-04-206 					        
    ACCNO:   A08993						        
  TITLE:     Satellite Communications: Strategic Approach Needed for  
DOD's Procurement of Commercial Satellite Bandwidth		 
     DATE:   12/10/2003 
  SUBJECT:   Communication satellites				 
	     Defense capabilities				 
	     Defense cost control				 
	     Defense procurement				 
	     Department of Defense contractors			 
	     Military communication				 
	     Procurement planning				 
	     Procurement practices				 
	     Customer satisfaction				 

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GAO-04-206

United States General Accounting Office

GAO

                       Report to Congressional Requesters

December 2003

SATELLITE COMMUNICATIONS

    Strategic Approach Needed for DOD's Procurement of Commercial Satellite
                                   Bandwidth

GAO-04-206

Highlights of GAO-04-206, a report to congressional requesters

In recent years, the Department of Defense (DOD) has come to rely more
heavily on commercial satellite communications to plan and support
operations and move toward a network-centric warfare environment. DOD
acquires commercial satellite bandwidth services to support a variety of
critical missions such as surveillance performed by unmanned aerial
vehicles. GAO was asked to assess (1) whether DOD's process for acquiring
these services is fair to vendors and providers, (2) whether the process
meets users' needs, and (3) whether spending on these services is managed
effectively and efficiently.

GAO's recommendations to DOD focus on the need to develop and implement a
strategic approach to acquire commercial satellite bandwidth services,
along with correcting specific oversight and management weaknesses. To
ensure the successful implementation of a strategic management framework,
GAO recommends that DOD develop performance metrics to assess user
satisfaction, strengthen core internal technical expertise and information
systems, and assess whether the existing acquisition process requires
changes to facilitate a strategic approach. In comments on a draft of this
report, DOD generally concurred with GAO's recommendations.

www.gao.gov/cgi-bin/getrpt?GAO-04-206.

To view the full product, including the scope and methodology, click on
the link above. For more information, contact William T. Woods at (202)
512-4841 or [email protected].

December 2003

SATELLITE COMMUNICATIONS

Strategic Approach Needed for DOD's Procurement of Commercial Satellite
Bandwidth

DOD has for many years augmented its internally owned and operated
satellite communications capability by leasing commercial fixed satellite
bandwidth services primarily through the Defense Information Systems
Agency (DISA) and its Defense Information Technology Contracting
Organization (DITCO). DISA does not acquire commercial bandwidth directly
from satellite service providers. Instead, it procures bandwidth through
several competitively selected vendors, which, in turn, compete work among
individual service providers.

GAO found that the process for acquiring commercial satellite bandwidth is
fair to DOD's vendors and their subcontractors, which are the ultimate
commercial satellite bandwidth service providers.

However, some major DOD users of commercial satellite bandwidth services
are dissatisfied with DISA's process. They view the process as being too
lengthy, particularly for time-critical military operations, and they
believe that the cost is too high. They also indicated that the contracts
resulting from the process are often too inflexible. As a result, some
users are bypassing the DISA process, either by formally obtaining a
waiver or by procuring services without a waiver. In fiscal year 2002,
nearly 20 percent of DOD's reported spending on satellite bandwidth
services occurred outside the process, and one DOD official stated that
the true percentage is probably much higher. By allowing users to bypass
the DISA waiver process, DOD is hampering its ability to ensure that its
communications networks are interoperable and to minimize redundancies.

Further, DOD does not know exactly how much it is spending on commercial
satellite bandwidth services, nor does it know much about its service
providers or whether customer needs are really being satisfied. Without
this knowledge, DOD cannot take steps to leverage its buying power, even
though it is the largest customer for commercial satellite bandwidth.
Moreover, neither DOD nor DISA is making a concerted effort to collect
forecasts of bandwidth needs from users and ensure those needs can be met
by the commercial sector. These are also important steps toward optimizing
DOD's spending.

If DISA is to remain as DOD's primary agent to acquire satellite
bandwidth, then it must implement a more strategic management approach-one
that ensures that services can be acquired in a fair, timely, and
cost-effective way that meets users' needs. Doing so will be a
considerable challenge, however, given the current environment and
potential resistance within DISA and from its users. Commitment is needed
from senior leaders within DISA and DOD to overcome challenges associated
with implementing a strategic approach.

Contents

  Letter

Results in Brief
Background
DOD's Process Is Fair to Both Vendors and Service Providers
Some Major Users Are Dissatisfied with DISA Process for

Acquiring Commercial Satellite Bandwidth Services Lack of Strategic
Approach to Managing Services Diminished

DOD's Ability to Optimize Spending Conclusions Recommendations for
Executive Action Agency Comments and Our Evaluation Scope and Methodology
1

2 4 8

13

18 25 26 27 28

Appendix I Comments from the Department of Defense

  Tables

Table 1: Major Global and Regional Commercial Providers of Fixed

Satellite Service Bandwidth Table 2: Details on Key Players in the DISA
Process Table 3: Total Number and Dollar Value of DSTS-G Task Orders for

Bandwidth Awarded, by Vendor Table 4: Teaming among DSTS-G Vendors and
Service Providers Table 5: Proposal Submission Teaming among Vendors and

Service Providers Table 6: Time to Process Satellite Service Requests
Table 7: Options That Could Improve DOD's Practices in

Leveraging Its Buying Power 5 7

9 11

12 14

23

  Figures

Figure 1: Overview of DOD Commercial Bandwidth Acquisition Process 6
Figure 2: Highlights of Analysis of DISA's Commercial Satellite
Communications Utilization Report-Fiscal Year 2002 21

Abbreviations

ASD/NII 	Assistant Secretary of Defense for Networks and Information
Integration

CIO Chief Information Officer

DISA Defense Information Systems Agency

DITCO 	Defense Information Technology Contracting Organization

DOD Department of Defense

DSTS-G 	Defense Information Systems Network Satellite Transmission
Services-Global

FAR Federal Acquisition Regulation

GIG Global Information Grid

IDIQ Indefinite-Delivery, Indefinite-Quantity

MTC Managed Transponder Contract

ORBIT 	Open-market Reorganization for the Betterment of International
Telecommunications Act

RFS Request for Service

TR Telecommunications Request

TSO Telecommunications Service Order

TSR Telecommunications Service Request

This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed in
its entirety without further permission from GAO. However, because this
work may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this material
separately.

United States General Accounting Office Washington, DC 20548

December 10, 2003

The Honorable John Ensign
Chairman
The Honorable Daniel K. Akaka
Ranking Member
Subcommittee on Readiness and Management Support
Committee on Armed Services
United States Senate

The Honorable James M. Inhofe
United States Senate

The Honorable Joseph I. Lieberman
United States Senate

The Department of Defense (DOD) relies on a vast network of ground and
space-based systems to meet its telecommunications needs-both for
military and business operations. Over the past 12 years, DOD has
experienced a ten-fold increase in the demand for telecommunication
bandwidth1 from satellites to support the war-fighting combatant
commands, the military services, and defense agencies, and some experts
predict another fivefold or sixfold jump in demand by 2010.2 Currently,
DOD-owned and -operated satellites cannot satisfy all of DOD's
telecommunication requirements, and both DOD and other sources project
sizeable shortfalls in bandwidth capacity needed by the year 2010.3 As a

1 Bandwidth is the range of frequencies that can pass over a given
transmission channel. In the commercial satellite bandwidth leases DOD
acquires, it is usually measured in millions of hertz, or megahertz
(MHz)-such as 36 MHz, 54 MHz, or 72 MHz-which determine the rate at which
information can be transmitted through the circuit.

2 Andrew Bridges, "Pentagon Turns to Commercial Satellites to Ease Wartime
Data Squeeze," the Associated Press, Mar. 27, 2003, quoting United States
Space Command sources and Rand Corporation experts.

3 The amounts of data that can be received, processed, and transmitted by
a satellite are commonly stated in megabits per second (one million bits
of data per second) or gigabits per second (one billion bits per second).
By 2010, DOD planners foresee the need for approximately 16 gigabits per
second (Gbps) of bandwidth to support a large joint-service operation.
While DOD plans to have capacity of 11 Gbps, other sources earlier had
projected that DOD's capacity might be as low as 2 Gbps at that time.

  Results in Brief

result, DOD has been leasing bandwidth on commercial satellites to support
a variety of critical missions such as surveillance being performed by
unmanned aerial vehicles and communications between commanders and field
units.

Given the importance of DOD's growing demand for commercial fixed
satellite service4 bandwidth, you requested that we assess the
effectiveness of its process for acquiring this service-specifically (1)
whether the process is fair to vendors and providers, (2) whether the
process meets user needs, and (3) whether spending is managed effectively
and efficiently.

DOD's process for acquiring commercial fixed satellite bandwidth services
is fair to both its vendors and their subcontractors, which are the
ultimate commercial satellite bandwidth service providers. Of 53 orders we
reviewed that were issued between March 2000 and June 2003, all met
general standards for ensuring fairness laid out in federal regulations.
At the subcontract level, we also found that the satellite industry
service providers have had ample and fair chances to create solutions and
to compete for and win subcontracts under DOD's newest contracts for
bandwidth. In 48 of the orders we reviewed, 12 service providers offered
DOD a total of 211 potential solutions.

Some major DOD users of commercial satellite bandwidth services, however,
are dissatisfied with the DOD's process, which is managed by the Defense
Information Systems Agency (DISA). They view the process as being too
lengthy, particularly for time-critical military operations, and they
believe that the cost is too high. In some cases, they reported that they
could acquire services directly from providers for hundreds of thousands
of dollars less per year than if they used DISA's process and that they
could do so in shorter time periods than DISA. They also indicated that
the contracts resulting from the DISA process are often too inflexible. As
a result, some users are bypassing the DISA process, either by formally
requesting a waiver or by procuring services without a waiver. For fiscal
year 2002, we were able to determine that, at a minimum, nearly 20 percent
of DOD's reported spending on fixed satellite service

4 Fixed satellite service refers to a radio communication service between
fixed earth stations at specific locations by means of one or more
satellites; mobile satellite service refers to a radio communication
service between mobile earth stations at varying locations by means of one
or more satellites. This report addresses fixed satellite service only.

bandwidth occurred outside the DISA process, and one DOD official stated
that the true percentage is probably much higher.

We identified a number of management and oversight weaknesses that
preclude DOD from assuring the mandated DISA process5 is used, and more
importantly, from optimizing its spending on commercial bandwidth
services. Little attention is paid to collecting or addressing customer
complaints; business processes are inefficient; and oversight is poor. In
fact, DOD does not know exactly how much it is spending on commercial
satellite bandwidth services, nor does it know much about its service
providers or whether customer needs are really being satisfied. Without
this knowledge, DOD cannot take steps to leverage its buying power, even
though it is the largest customer for commercial satellite bandwidth.
Further, neither DOD nor DISA is making a concerted effort to collect
forecasts of bandwidth needs from users and ensure those needs can be met
by the commercial sector. These efforts are also important steps toward
optimizing its spending.

Our past work6 has identified specific practices that can be employed to
manage services from a more strategic perspective, thereby enabling an
organization like DOD to leverage its buying power and achieve significant
savings. These practices include establishing a central agent or manager
for acquiring services, gaining visibility over spending, and revising
business processes to enable the organization to leverage its buying
power. Our seven recommendations to DOD focus on the need to develop and
implement a strategic approach, along with correcting specific oversight
and management weaknesses. In comments on a draft of this report, DOD
concurred with four recommendations and partially concurred with three
recommendations.

5 Users are required to use the DISA acquisition process by Assistant
Secretary of Defense
for Command, Control, Communications, and Intelligence memorandum, Policy
for the
Use of Commercial Satellite Communications (SATCOM), dated Nov. 8, 1993,
and by
a follow up memorandum, Policy Clarification Letter-Long Haul and Regional
Telecommunications Systems and Services for the Department of Defense,
dated
May 5, 1997.

6 U.S. General Accounting Office, Best Practices: Taking a Strategic
Approach Could
Improve DOD's Acquisition of Services, GAO-02-230 (Washington, D.C.: Jan.
2002);
Best Practices: Improved Knowledge of DOD Service Contracts Could Reveal
Significant
Savings, GAO-03-661 (Washington, D.C.: June 2003); Contract Management:
Taking a
Strategic Approach to Improving Service Acquisitions, GAO-02-499T
(Washington, D.C.:
Mar. 2002); and Contract Management: High-Level Attention Needed to
Transform DOD
Services Acquisition, GAO-03-935 (Washington, D.C.: Sept. 2003).

Background

DOD has for many years augmented its internally owned and operated
satellite communications capability by leasing additional external
telecommunications capacity on commercially owned and operated satellites.
Demand has been increasing in recent years, as the military has come to
rely more heavily on commercial satellite communications to plan and
support operations and move toward a network-centric warfare environment.
According to industry sources, DOD's current estimated $300-400 million
spending on such services has made it the satellite communications
industry's biggest customer.

DOD leases commercial satellite bandwidth services primarily through DISA
and its Defense Information Technology Contracting Organization (DITCO).
DISA does not acquire commercial bandwidth directly from satellite service
providers. Instead it procures bandwidth through several competitively
selected vendors, which in turn compete work among individual bandwidth
service providers.

There are two primary contract structures through which DISA procures
bandwidth through these vendors. The first is known as the Managed
Transponder Contract (MTC). It was competitively awarded in 1995 to one
vendor, and served as the primary acquisition vehicle for several years.
The second is an indefinite-delivery, indefinite-quantity (IDIQ)
multiple-award contract structure known as the Defense Information Systems
Network Satellite Transmission Services-Global (DSTS-G) contracts. They
were awarded competitively in February 2001, after users found the MTC
contract to be inflexible, too costly, and limited in terms of the breadth
of services it could provide. Awards were made to three small business
vendors that acquire bandwidth for DISA from the ultimate service
providers. Recently, DISA has been relying more on this second contract
structure. The agency placed 48 orders for bandwidth under the DSTS-G
contracts through June 2003 versus only 5 new orders under the MTC
contract from March 2000 through June 2003.

DISA's vendors obtain satellite services from a commercial satellite
industry market segment that has been growing at a high rate. The
commercial satellite industry is a global industry that includes many
foreign-owned businesses as well as partnerships between U.S. and foreign
corporations. Table 1 lists major global and regional satellite bandwidth
providers. While there are 10 companies listed, only 6 of them have
provided needed bandwidth through the DISA acquisition process during
recent years.

Table 1: Major Global and Regional Commercial Providers of Fixed Satellite
Service Bandwidth

Global Regional

o  SES Global  o  Eutelsat S.A. LLC

o  Intelsat  o  SES Americom

o  PanAmSat  o  Star One

o  Loral Global Alliance  o  Asiasat

o  New Skies Satellites N.V.  o  Arabsat

Source: GAO analysis of Satellite Industry Association data.

The acquisition process that DISA uses to determine user requirements and
acquire bandwidth is similar to the process it uses to acquire other
telecommunications services for its customers. Generally, the process
begins with users identifying a need and contacting DISA to fulfill that
need. Technical experts within DISA assist users in engineering a
potential solution. Other offices within DISA decide how the service
should be procured and prepare a request for the vendors to propose
solutions. Once DISA has determined which contract structure to use and
has asked for proposed solutions, an evaluation team within DISA reviews
the proposals and awards a task order or delivery order under the winning
vendor's contract. Figure 1 and table 2 further detail this process.

       Figure 1: Overview of DOD Commercial Bandwidth Acquisition Process

Table 2: Details on Key Players in the DISA Process

Users are the operating level units within the various DOD combatant
commands, military services, and defense agencies that have the actual
communication need. Users contact their organization's internal
communications services focal point to begin processing their
requirements. Each prepares an extensive document in accordance with DISA
directives called a Request for Service (RFS), which is used to initially
request telecommunications services.

DISA or service provisioners 	DISA provisioners in regional offices around
the world provide technical expertise to help decide how the user's need
can best be satisfied: existing terrestrial links, DOD-owned satellites,
or commercial satellites. For those needs to be satisfied by a lease of
commercial bandwidth, the provisioners review RFS documentation and
validate user funding. Once funding is validated, the RFS becomes a
Telecommunications Service Request (TSR) and is sent back to the
provisioners, who then add necessary technical direction and information,
turning the TSR into a Telecommunications Service Ordera (TSO), which is
then transmitted to DISA's Commercial Satellite Communications Branch.

This office assists the user in preparing an accurate RFS that is
subsequently converted into a TSR or TSO, decides whether the requirement
can be best satisfied through the MTC, DSTS-G, or other contracts and
transmits the final document and any additional procurement direction to
its supporting contracting office.

DITCO 	DITCO is a contracting organization within DISA. This office
reviews the requirements, secures any needed contract action approvals,
and creates a Telecommunications Request (TR), also known as an inquiry.
This inquiry is then sent to either the MTC vendor or the three DSTS-G
vendors, asking for technical solutions and prices for the specified
requirements.

Vendors include the MTC contract holder, and the three DSTS-G contract
holders, which are responsible for reviewing the requirement, formulating
potential solutions, coordinating with various potential service
providers, and submitting proposals to DISA.

Service providers (subcontractors) 	Service providers are companies that
receive requests for solutions from the vendors; help engineer the best
(or lowest cost) solutions, depending upon the announced evaluation
criteria; price the solutions; and submit one or more of them to the
vendors.

Source: GAO.

aA Telecommunications Service Order is needed to start, continue, or stop
the existence of a circuit.

If circumstances dictate, users can request a waiver through DOD's Global
Information Grid (GIG) Waiver Panel7 to use an alternative network and
alternative acquisition process instead of the DISA process. A business
case must be made for the requested waiver and there must be plans
outlined to migrate the outlying network back under the telecommunications
infrastructure and to bring the resulting contract under the control of
DITCO. After a waiver is approved, the user's procurement organization
takes steps to procure the bandwidth.

  DOD's Process Is Fair to Both Vendors and Service Providers

DOD's process through DISA for acquiring commercial fixed satellite
service bandwidth is fair to both its vendors and their subcontractors,
which are the ultimate commercial satellite bandwidth providers. The
majority of bandwidth orders in recent years have been made under the
DSTS-G contracts, where competition exists at both the vendor and service
provider levels. Only five orders have been placed under the MTC contract,
which by its nature is not as competitive as the DSTS-G contract, since it
was designed to obtain service through one vendor.

The Federal Acquisition Regulation (FAR), as supplemented by DOD and DISA,
requires DITCO to provide a fair opportunity to the three DSTS-G vendors
at the prime contract level. Generally, this entails

o  	writing broad, needs-based requirements able to be satisfied by
multiple vendors rather than only one;

o  providing notice and opportunity to be considered8 to each of the
vendors;

o  	giving notice of the evaluation criteria to be used to select a
winning vendor; and

o  	evaluating proposals, conducting discussions, and awarding delivery
orders or task orders in accordance with the evaluation criteria stated.

7 The GIG waiver process employs a GIG Waiver Board and a working-level
GIG Waiver
Panel, made up of principals or representatives from pertinent DOD staff
offices. The
GIG Waiver Panel reviews initial waiver requests and associated business
cases, hears
arguments for and against the waiver request, and develops the recommended
decision to
be presented to the DOD Chief Information Officer (CIO) for approval. If
there is an appeal
of that decision, the GIG Waiver Board may be convened to advise the CIO
on the appeal.

8 Effective October 25, 2002, the Defense Federal Acquisition Regulation
Supplement,
section 216.505-70, required fair notice and fair opportunity to submit an
offer and have it
fairly considered for each order exceeding $100,000. This provision
implemented
section 803 of the National Defense Authorization Act for Fiscal Year 2002
(Pub. L. 107-107,
Dec. 28, 2001). DISA Acquisition Regulation Supplement, section 16.102,
has imposed a
similar requirement on all orders exceeding $2,500 since March 1997.

We analyzed 48 task orders that were awarded under the DSTS-G contract
from its inception in February 2001 through June 2003 to determine whether
these criteria were generally followed.

    DSTS-G Vendors Had Fair Opportunity to Win Task Orders

We found that the acquisition process employed by DISA and DITCO generally
met FAR criteria, as supplemented, and was fair to competing vendors under
the DSTS-G contracts. Though we found some orders awarded under exceptions
established in FAR, the rationale for these exceptions was documented in
each task order file.

The common set of technical questions that users are required to answer
when submitting their bandwidth requests helps not only to document their
technical environment but also to preclude writing an overly narrow or
restrictive requirement. While a few valid user situations demanded a
repeat solution or narrowed the range of possible solutions, they did not
unduly impair the vendors' fair opportunity to compete.

Of the 48 task orders for bandwidth, 41 were competed among the three
vendors; six were renewals of previously competed task orders; and only
one was sole-source, awarded without vendor competition. Documentation
justifying the one sole-source action was included in the task order file,
as required.

The distribution of task order awards among the three vendors is
illustrated in table 3. The table shows the number and percentage of the
48 task orders awarded to each of the three vendors under their respective
DSTS-G contracts along with the associated dollar values and percentages.

Table 3: Total Number and Dollar Value of DSTS-G Task Orders for Bandwidth
Awarded, by Vendor

                                 Percent of total                  Percent of 
                       Number of task task orders        Dollars      dollars 
                                   orders awarded    awarded          awarded 
            Vendor A                        11 23  $17,255,942             11 
            Vendor B                        14 29   58,632,446             36 
            Vendor C                        23 48   87,562,627             54 
               Total                       48 100  $163,451,015          100a 

Source: GAO.

aPercentages of dollars awarded do not add to 100 percent due to rounding.

The evaluation criteria DISA used to select a winning vendor were
contained in each inquiry that was competed. Evaluation of the proposals,
discussions, and the award of task orders complied with the stated
evaluation and selection criteria.

DISA used the following two selection frameworks to evaluate proposals:

o  	DISA awarded 18 of the 41 competitive task orders worth $54,255,114
under a source selection process called "best value," using a
cost/technical trade-off process. Under this approach, the selection
official trades off cost and non-cost factors, identified in the inquiry,
in determining award decisions. In some cases, greater weight may be
placed on a contractor's technical approach resulting in the selection of
what may not be the lowest priced proposal.

o  DISA awarded the remaining 23 competitive task orders worth $78,645,239

under the "lowest price technically acceptable" framework. Under this
approach, the technical solution proposals are all evaluated by DISA's
Commercial Satellite Communications Branch and its supporting contractor
and placed in either a "technically sufficient" category or "not
technically sufficient" category. The winner is that proposal in the
"technically sufficient" category with the lowest total evaluated cost.

While both evaluation methods are common under FAR procurements, best
value with tradeoffs is more suitable where the risk of potential
substandard performance does not leave room for errors or service
degradation. Either method of evaluation requires a high level of
technical expertise to effectively evaluate proposed solutions.

At the subcontract level where the FAR criteria regarding fair opportunity
generally do not apply to the business arrangements among commercial
companies, we also found that commercial satellite service providers have
had ample and fair chances to team with the three DSTS-G vendors to create
solutions and to compete for and win subcontracts. All three vendors
stated that they are motivated by competition to find technically
sufficient and low-cost solutions to DOD's needs and to involve all
feasible service providers in doing so. Further, the vendors are also
required by a FAR clause in their DISA contracts to select their
subcontractors on a competitive basis.9 To determine which service
providers are potentially

DSTS-G Subcontractors Have Also Had Ample and Fair Chances to Team with
Vendors

9 FAR 52.244-5, Competition in Subcontracting, requires that contractors
shall select subcontractors on a competitive basis to the maximum
practical extent consistent with the objectives and requirements of the
contract.

capable of fulfilling a given DISA requirement, the vendors told us they
consider many factors, such as

o  location of satellites,

o  "look angle" at the desired location,

o  power,

o  bandwidth,

o  age and condition of satellites,

o  available capacity on satellites, and

o  	other factors, such as meeting schedule, acceptance of government
terms and conditions, business relationships, and prices.

Our analysis showed that six different service providers have won
subcontracts from one or more of the DSTS-G vendors. Each vendor has won
task orders using at least four of the six providers, although more than
70 percent of the wins have been with just two providers. The distribution
of task order awards to vendors and the service providers with which they
teamed for each of the 48 task orders is illustrated in table 4.

 Table 4: Teaming among DSTS-G Vendors and Service Providers Satellite service
                                   providers

     Winning vendor     Task orders won    A      B      C      D     E     F 
        Vendor A                      11   1     4.5     3     0.5    0   
        Vendor B                      14   0      5      6      1     2   
        Vendor C                      23   4      9      7      1     2   
          Total                       48   5     18.5    16    2.5    4   
    Percent of total                100a  10.4   38.5   33.3   5.2   8.3  

Source: GAO analysis of DISA data.

Note: In the columns showing the teaming arrangements for each provider, a
0.5 is credited where the satellites of two different service providers
were needed to satisfy a DISA requirement.

aPercentage totals do not add to 100 percent due to rounding.

Another indicator of participation among service providers and access to
the DSTS-G vendors is the opportunity to propose a solution for a DISA
requirement. We determined that there were 211 bandwidth solutions
proposed to DISA for the 48 task orders, or approximately 4.4 per task
order. Removing the seven instances where there was only one proposed
solution (because they were renewals of previously competed requirements
or sole-source), the average number of proposed solutions

per competitive task order was 4.9, with a range from 2 to 15. Moreover,
there were several additional potential teaming proposals considered by at
least one of the vendors, but not ultimately submitted to DISA. Table 5
illustrates the teaming arrangements in the 211 proposed solutions.

    Table 5: Proposal Submission Teaming among Vendors and Service Providers
                          Satellite service providers

    Number of                                                             
    Vendor       A    B    C    D    E    F     G     H     I     J     K 
  proposals                                                               
 Vendor A 63     2 24.5 23.5    3    5    5     0     0     0     0     0 
 Vendor B 52     4  21   19     3    4    1     0     0     0     0     0 
 Vendor C 96    12  32   28     4  10     3     2     1     1     1     1 
  Total 211     18 77.5 70.5  10   19     9     2     1     1     1     1 
  Percent of   8.5 36.7 33.4 4.7  9.0   4.3   1.0   0.5   0.5   0.5   0.5   0.5 
    total                                                                 
  Percent of                                                              
proposed                                                               
  solutions                                    No    No    No    No    No    No 
 resulting in                                                             
 subcontracts 27.8 23.9 22.7 25.0 21.1 22.2 award award award award award award 

Source: GAO.

Note: In the numbers of proposals for each provider, a 0.5 is credited
where the satellites of two different service providers were needed to
satisfy a DISA requirement.

We noted that the top two service providers in terms of proposals
submitted, labeled B and C in table 5, had more than 70 percent of the
total proposals submitted. According to the vendors, this was because
those two providers had large numbers of satellites located in the areas
of interest to DOD over the past 2 years, were willing to offer multiple
solutions, and had low prices for bandwidth. Some service providers did
not always see DOD as a preferred customer, did not always have available
capacity in the required areas, or declined to propose because they knew
they did not have the best coverage or prices. All six of the service
providers that won subcontracts had very similar percentages of winning
proposals, all between 21 and 28 percent.

Despite the involvement of a number of competitors at the subcontractor
level in the DISA acquisition process, we found several occasions where
DISA directed and justified the use of a specific service provider. This
occurred in 15 of the 41 competitive DSTS-G task orders. In all 15 of
those cases, however, the acquisition team had adequate justifications in
files to explain the need for directing that subcontract. Specifically, in
11 of the justifications, users or DISA technical staff determined that
only one particular satellite could adequately satisfy certain technical
parameters

contained in the requirement. In three cases, customers explained that any
deviation from the existing satellite provider could cause an interruption
of service and could potentially cause loss of life. In the remaining
case, both justifications applied. These requirements were submitted by
responsible officials in the combatant commands or military services and
concurred in by the DISA provisioners, the DISA Commercial Satellite
Communications Branch engineers, and the DITCO contracting officer.
Directed subcontracts were justified for three different service
providers, with none getting a disproportionately large share.

    MTC Contract Is the Result of an Earlier Competition

The MTC contract was structured to award delivery orders to one vendor,
thus competition, after the initial competition to select a vendor, has
been limited. From March 2000 to June 2003, DISA awarded only five new
delivery orders for bandwidth under the MTC contract. All were awarded
directly to the incumbent contractor that had previously won a competition
among four companies in 1995 to manage this contract for up to 10 years.
These five new orders totaled $17.8 million. There was also limited
competition at the subcontract level. Three orders were awarded directly
to service providers without competition. The remaining two orders were
competed between two providers.

  Some Major Users Are Dissatisfied with DISA Process for Acquiring Commercial
  Satellite Bandwidth Services

Some major users of commercial satellite bandwidth services are
dissatisfied with the DISA process. In particular, they view the process
as being too lengthy and costly. They also believe that the process
results in contracts that are often too inflexible. As a result, some
users have bypassed the process, either by formally requesting a waiver or
by procuring services without a waiver. For fiscal year 2002, we
determined that, at a minimum, nearly 20 percent of DOD's reported
spending on services occurred outside the process, and one DOD official
stated that the true percentage is probably much higher.

Users Do Not Believe According to some major users, DISA's process takes
too long to meet

Process Meets Their Needs 	their needs, particularly for time-critical
operations. Our analysis showed that on average from submittal of a
request for service to the award of a task order under the DSTS-G contract
took 79 days-more than a month longer than the average of 42 to 45 days
advertised by DISA.10 Moreover, as

10 DISA Briefing, "DISA's Response to Navy Concerns," undated, p. 2; DISA
Network Services Standing Operating Procedure (SOP) 02-02 (Apr. 15, 2002,
encl. 2, p. 1).

table 6 shows, only 18 of the 48 task orders we reviewed were awarded in
less than a month. In addition, only 29 were awarded within the DISA
advertised time frame of 45 days.

              Table 6: Time to Process Satellite Service Requests

               Days to process      Number of actions      Percent of actions 
               30 days or less                     18                    37.5 
                    31-60 days                     15                    31.3 
                    61-90 days                      5                    10.4 
                   91-120 days                      5                    10.4 
                 Over 121 days                      5                    10.4 
                         Total                     48                   100.0 

Source: GAO analysis of DISA data.

Further, users told us they have to spend additional time before a Request
for Service is submitted to DISA to seek out and determine all of the
technical information required in that document, and there is also
additional time between the task order award and the subcontract award
to the winning service provider and for the set up or preparation before
the start of the service. For example, under the DSTS-G contracts, the
vendors have up to 30 days to provide required service in normal
circumstances, or 5 days in emergencies. According to DISA, when users
are not familiar with RFS development or satellite services, DISA spends
substantial amounts of time educating users on requirement development,
the acquisition process, and available satellite services. Timelines can
also
be extended for other reasons, according to DISA, including instances
where customer equipment is not on hand when the service is available.
Therefore, the actual time to fully satisfy a customer's request from
realization of the need to initiation of the service is even longer than
the
mean 79-day paperwork flow time.

By contrast, users told us that the time to receive bandwidth services
outside the DISA process was considerably shorter. In one U. S. Army
example, the user was able to acquire satellite bandwidth needed to
operate a multimedia communications system during Operation
Enduring Freedom in Afghanistan within a few weeks. In another
example, a U.S. Navy office was able to acquire service to support its
commercial wideband satellite program in less than a month after
receiving the GIG waiver approval. It was critical that the Navy acquire
this service quickly as it was notified that one of its leased satellites
would
fail within 30 days.

Users also reported that estimated prices they received under the DISA
process were sometimes significantly higher than those that would be paid
directly to a commercial company for the same or similar services. For
example, the Army was able to acquire satellite services for the
communications system supporting Operation Enduring Freedom for about
$34,700 a month. DISA had quoted a price estimate earlier at $139,000 a
month. When the Army later found it needed to install another ground
terminal for this system, it acquired services for about $240,000, whereas
DISA's initial price estimate was $579,000. In another example, in
acquiring service to support its commercial wideband satellite program, a
U.S. Navy office found that the monthly price for the service it could
acquire outside the DISA process ranged from $30,000 to $90,000 a month
less than the initial DISA estimate. Over the 5 years projected for the
task order, the savings on bandwidth was nearly $4.6 million. These
projected savings, while not always calculated on a strict
"apples-to-apples" basis, were nevertheless deemed significant enough that
the GIG Waiver Panel used them when deciding to grant waivers to these
organizations to buy outside the DISA process.

The current pricing structure of the DISA acquisition process can result
in users being charged from 9 to 12 percent more than the bandwidth cost
from the service provider. Part of this added cost is due to profit and
overhead charges that DISA vendors add on to bandwidth cost. This can
total between 1 and 4 percent of the price of the service and is kept low
because of the competition among vendors to win each task order.

Another part of the added costs is attributable to surcharges that DISA
adds to prices in order to recoup their costs for tasks they perform in
acquiring the service. The surcharges-6 percent of the total price from
the vendor for DISA's Commercial Satellite Communications Branch's efforts
and another 2 percent for DITCO's efforts-are a normal practice for DISA
and other DOD activities that operate under the Defense Working Capital
Fund, which is designed to ensure that defense activities that carry out
business operations for others can recover their costs-neither making a
profit nor incurring a loss in the course of their work. If users acquired
the service themselves, they may well incur similar administrative costs,
but those costs would not be as visible to them as when receiving an
itemized bill from DISA for services. However, they would not normally
have to pay extra for an intermediary agent when procuring services
directly from industry.

Some portion of the user-reported projected savings may be attributable to
high initial estimates provided by DISA based on outdated pricing

proposals of vendors' contract line item prices. While DISA stated that
users were advised that the actual prices might be significantly lower,
users still had to commit their budget in the amount of the original
estimate. Use of this high initial estimate has been a long-standing flaw
in the DISA acquisition process that DISA has only recently taken steps to
correct. However, DISA's solution to this problem-asking the vendors to
produce more detailed and more realistic original price estimates-will
likely result in more days added to an already lengthy process.

Another reason for the difference between DISA's estimates and industry
quotes may be that DISA's estimates are based on features in its contracts
with vendors that may call for a different level of services or equipment
than required. For example, in one U.S. Army case, the bandwidth acquired
to operate its communications network was less than the minimum bandwidth
capacity that satellite providers were required to provide under the
DSTS-G contract.

In addition, users told us that the DISA process results in contract terms
that are often too inflexible. Some of the features that are common in
commercial contracts for satellite services are not in the contracts
awarded through the DISA process. For example, DISA's contracts for
commercial bandwidth, according to the three DSTS-G vendors, do not
contain the common commercial clause, "Portability of Services," or
anything comparable. This clause would typically allow a user to transfer
the remaining time from one satellite, in an area no longer requiring
coverage, to another satellite, where service is now required, at no
additional cost. Industry representatives cited this clause as an example
of flexibility that commercial customers have sought, as a best practice,
but DOD has not.

Further, DOD users often do not have the ability to change or cancel
requirements, if necessary, without continuing to pay for the original
ones. For example, while DISA's contracts with vendors contain the
"Termination for Convenience" clause, which should allow the government to
terminate service that is no longer needed and to stop incurring costs for
the unused portion, vendors' contracts with service providers do not have
this clause. In fact, the contracts that vendors have with the service
providers reflect an industry practice that holds the vendors responsible
for the remainder of the noncancelable lease, regardless of whether the
government terminates the vendors' contract. Therefore, any remaining
lease costs would be paid to the service provider by the vendor and then
submitted as part of the vendor's termination

settlement proposal to DOD, which would then bear some or all of these
costs as agreed to in the negotiated termination settlement.

    Some Users Are Bypassing the DISA Process to Get Timely, More Flexible, and
    Less Costly Services

Some users are bypassing the DISA acquisition process to acquire
commercial bandwidth through alternative processes, either by formally
requesting a waiver from the DISA process or by improperly procuring
services without a waiver. We identified 10 instances where bandwidth was
procured through an alternative process. In four of these, waiver requests
were submitted and approved in advance of the procurement action, as
called for in DOD policy. In the remaining six instances, however, users
had independently procured bandwidth without processing waivers,
inconsistent with DOD policy.

We were initially given access to information on the four procurement
actions with approved waivers and on three of the actions that had
occurred without waivers. These latter three procurements had been brought
to the attention of the Chairman of the GIG Waiver Panel, who then made
the offending organizations process "after-the-fact" waivers. While we
were interviewing user organization representatives on these, we uncovered
three additional procurement actions that should have had waivers
processed, but had not. We turned this information over to the Chairman of
the GIG Waiver Panel, who will determine whether "after-thefact" waivers
are also to be processed for these cases. Representatives of the offices
that had bypassed the DISA process and used an alternative acquisition
process to acquire needed bandwidth indicated in interviews and in
briefing documents that they had been able to achieve faster procurements,
often resulting in more flexible contract instruments, and at lower
(sometimes significantly lower) prices.

According to DOD officials, users throughout DOD have been independently
acquiring bandwidth, without an approved waiver, for years. One
knowledgeable DISA official estimated that, if all the services and DOD
entities had accurately reported their fixed satellite service bandwidth
usage costs for fiscal year 2002, the total would likely have been $200
million higher than the amount actually reported, nearly doubling the
reported amount of $221.7 million. As it was, we determined that, at a
minimum, $42.4 million, or nearly 20 percent of the $221.7 million
self-reported dollars spent, was spent outside the DISA process.

  Lack of Strategic Approach to Managing Services Diminished DOD's Ability to
  Optimize Spending

Our past work has identified specific practices that can be employed to
manage services from a more strategic perspective, thereby enabling an
organization like DOD to leverage its buying power and achieve significant
savings.11 These include establishing a central agent or manager for
acquiring services, gaining visibility over spending, and revising
business processes to enable the organization to leverage its buying
power. While there are challenges to implementing this process, DOD has
recognized its importance and called on agencies to embrace a strategic
approach for acquiring services. Even though DISA is supposed to serve as
a central manager for the acquisition of satellite bandwidth services, it
is not following a strategic approach. Little attention is paid to
collecting or addressing customer complaints, business processes are
inefficient, and oversight is limited. Moreover, neither DOD nor DISA is
making a concerted effort to collect forecasts of bandwidth needs from
users, ensure those needs can be met by the commercial sector, and take
steps needed to leverage its buying power with commercial providers.

    Strategic Approach Is Paramount to Optimizing Acquisitions of Services

Our previous work has found that leading organizations have adopted
practices and activities that enabled them to acquire services in a more
strategic manner and in turn achieve dramatic cost reductions and service
improvements. Faced with an increased dependence on services, growing
market pressures, and an economic downturn, the companies we studied
examined their service spending and found that they did not have a good
grasp of how much was actually being spent and where these dollars were
going. These companies found that responsibility for acquiring services
resided largely with individual business units or functions, hindering
efforts to coordinate purchases across the company. They also came to
realize that they lacked the tools needed to make sure that the services
they purchased met their business needs at the best overall value.

To turn this situation around, these companies reengineered their
approaches to buying services. This began with taking a hard look at how
much they were spending on services and from whom. By arming themselves
with this knowledge, the companies could identify opportunities to
leverage their buying power, reduce costs, and better manage their
suppliers. The companies also instituted a series of structural, process,
and role changes aimed at moving away from a

11 U.S. General Accounting Office, Best Practices: Taking a Strategic
Approach Could Improve DOD's Acquisition of Services, GAO-02-230
(Washington, D.C.: Jan. 2002).

fragmented acquisition process to a more efficient and effective
enterprisewide process. For example, the companies we studied often
established or expanded the role of corporate procurement organizations to
help business managers acquire key services and made extensive use of
crossfunctional teams to help the companies better identify service needs,
select providers, and manage contractor performance. These companies also
developed information systems to enable them to track their spending and
better match their needs with potential providers. They also implemented
performance measures to track their progress and make further enhancements
to their processes wherever needed. Taking a strategic approach clearly
paid off, as companies found that they could save millions of dollars and
improve the quality of services received by instituting these changes.

    DOD Process Is Hampered by Oversight and Management Weaknesses

DOD's current process for acquiring commercial satellite bandwidth is not
strategic. While DISA is supposed to serve as a centralized acquisition
function, some users are, in effect, allowed to bypass the process, and
there is little visibility over what is actually being spent on commercial
satellite bandwidth services.

For example, DOD has a formal waiver process-the GIG waiver process-in
place to ensure that any acquisition made outside the DISA process is
justified and that the service being procured is not duplicative of other
existing services, preserves interoperability, and meets network control
requirements. But the waiver process, at least until recently, has not
been enforced. This past year, officials who manage this process
recognized the problem and are now requiring users that already bypassed
the process to obtain waivers after-the-fact. According to DOD officials,
some users have been acquiring services outside the DISA process for
years.

In addition, other DOD organizations responsible for overseeing the DISA
process-including the Assistant Secretary of Defense for Networks and
Information Integration and the Office of the Chairman of the Joint Chiefs
of Staff-have not been enforcing requirements for reporting, nor have they
developed, nor required DISA to develop, performance metrics that could be
used to assess user satisfaction, timeliness, and other factors that would
give them a better sense of whether the process is efficient and
effective. DOD directives since at least 1998 have required that DISA
prepare a use and associated cost report on commercial bandwidth. DISA
only recently submitted its first report. Further, no acquisition process
measures exist at the oversight level, and DISA itself has not yet
developed

performance metrics to measure customer satisfaction. Officials indicated
that preliminary data have been collected from customers, but there was no
evidence of their being used to improve any parts of the process.

Moreover, neither DOD nor DISA has developed a complete picture of what is
being spent on bandwidth-the cornerstone to identifying what can be done
to improve the process and to leverage DOD's buying power. Our analysis
indicated that the information contained in the fiscal year 2002 report on
users and costs is incomplete, inaccurate, lacks proper identification of
users, and contains costs associated with fiscal year 2003, impairing its
reliability. Figure 2 highlights examples of our findings. Moreover, the
self-reported user information that DISA collected did not reflect many
purchases that were made outside of the DISA process. A 1998 DOD Inspector
General report also found that DOD could not determine the total leased
satellite communications bandwidth used among component commands or the
total costs associated with obtaining that capacity.

 Figure 2: Highlights of Analysis of DISA's Commercial Satellite Communications
                      Utilization Report-Fiscal Year 2002

Steps Have Not Been Taken to Leverage Buying Power

DOD also does not routinely maintain information on its ultimate providers
of bandwidth services. While DOD maintains summary totals for task orders
awarded to its three DSTS-G vendors, these data do not provide detailed
information such as which actual bandwidth service providers competed the
most, or least, or which ones were actually providing the most or next
most service in terms of numbers of procurements or dollars to DOD.

Even though DOD is the largest buyer of bandwidth in the commercial
market, neither DOD nor DISA has taken steps essential to fully leveraging
that buying power and to ensuring that future needs can be met by the
commercial sector. There are options based on common commercial practices
that are available to DOD for doing so, such as requesting most favored
customer status with providers or maximizing business volume discounts.
Table 7 discusses several of these options and their possible application
to DOD's current practices in more detail.

Table 7: Options That Could Improve DOD's Practices in Leveraging Its
Buying Power

Alerting current and new providers about projected Obtaining "Promised
Duration" discounts. Application: Two requirements to provide them the
opportunity to develop major service providers told us they would be
willing to give additional capabilities. Application: While there have
been discounts for lease durations of more than 1 year, the standard
isolated instances of this practice occurring, it was initiated by the
ordering term for DOD. They said that DOD could obtain better DSTS-G
vendors, not DOD. This could include launching new prices by committing to
longer lease periods, thus getting it out of satellites or repositioning
current assets, focusing more on DOD's the "spot market" and into the
long-term market, where most of security needs, and creating more flexible
solutions. their commercial customers operate. DOD cannot normally
Requesting "Most Favored Customer" status with service commit to periods
of service beyond 1 year, because DOD gets

providers. Application: Through DOD's mandated DISA process, its
operations and maintenance funding 1 year at a time and DOD typically
cannot order bandwidth in large quantities or for current law requires
funding to be available up front to cover long durations as commercial
customers can do. However, DOD, multiple-years' obligations of termination
liability. in the aggregate, is the market segment's largest single
Requesting discounts for use of new satellites and/or older customer,
which should warrant DOD some favored status. DOD satellites. Application:
Being the first or one of only a few could use its position to request
such treatment; however, it does customers on a new satellite, or likewise
being willing to use an not, according to two major service providers we
spoke with. older satellite which has gone into an inclined orbit can
result in Maximizing business volume discounts. Application: Some
substantial savings. Such instances are rare, but if DOD is in a

large service providers do provide DOD some volume discounts. position to
know about the possibility and can make quick 	However, total DOD spending
volume is fragmented among three decisions, DOD can benefit. This requires
up-to-date knowledge 	

DSTS-G vendors, the MTC prime contractor, and an unknown of the service
provider industry. 	number of individual procurement organizations that
are used by Obtaining "Termination for Convenience" protections.
those customers/users that avoid the DISA process. By Application:
Currently, DOD is not fully protected in the event it 	eliminating this
fragmentation, DOD could aggregate its buying must terminate a task order
before its completion. DOD has 	power to obtain better business volume
discounts. required the three DSTS-G vendors and the MTC contractor to 	

Requesting portability of services to other satellites or other accept
this clause and the risk that goes along with it. The 	areas of coverage.
Application: A couple of the service vendors do not have such a clause
with their providers, so the 	

providers, which have larger numbers of satellites in various vendors are
potentially in the position of receiving a Termination 	locations, have
been willing to offer bandwidth on alternate for Convenience from the DOD
but having to continue to pay for 	

satellites when the original satellite and its location were no the leased
bandwidth with the provider for the remaining lease longer needed. DOD
could request that all service providers period. DOD allows these payments
on the remainder of the agree to this provision in its subcontracts. Such
a request, lease period to be submitted by the vendor as part of the
however, would probably have a cost associated with the risk to
termination settlement proposal, and thus DOD would bear some the service
providers, but the added flexibility may well be worth or all of the costs
for the unused portion of the lease. the increased cost.

Source: GAO.

While these options would position DISA to achieve cost savings, they
require DISA to be able to project its future requirements and to be more
proactive in dealing with its vendors. This is not being done. Instead,
bandwidth is usually purchased on the "spot market" on an as-needed
basis-when it is most expensive compared to longer duration leases. With
few exceptions, individual small requirements are not aggregated by DISA
to take advantage of DOD's potential leverage in acquiring bandwidth in
larger and less expensive quantities. According to DISA, users often
decline opportunities to aggregate their requirements with other users.
Two providers we interviewed indicated that they would be willing to
develop creative solutions for consolidated requirements but would need to
know in advance about future requirements to do so effectively.

Several DOD and industry officials told us that DOD could benefit if
bandwidth were acquired through a program office with central funding
authority for that bandwidth. In this situation, it would be necessary for
users to submit their plans and forecasts of requirements to the central
program office. Currently, users have their own bandwidth funding and
generally do not forward forecasts of requirements to DISA. If all user
requirements were submitted to this single program office, it would then
be able to aggregate bandwidth requirements in order to leverage buying
power. In addition, some of these officials indicated that such a program
office could allow increased visibility and control over DOD-wide
bandwidth acquisitions.

    Adopting a Strategic Approach Will Be Challenging

Longer-term changes to the DISA process that are necessary to implement
more strategic management processes-including establishing better
visibility over spending, revamping business processes, strengthening
technical expertise within the agency, and securing a commitment from
senior leadership-will be challenging to implement. DOD is aware of these
challenges and has begun to study its processes.

We found that leading organizations that applied a strategic approach to
their purchases of services often spent months piecing together data from
various financial and management information systems and examining
individual orders just to get a rough idea of what they were spending on
services. The companies found it was necessary to develop new information
systems that could provide them with reliable spending data in a timely
fashion. The task of gaining accurate visibility over spending will be
equally, if not more, difficult for DOD given the lack of information

systems available to provide spending data and the magnitude and breadth
of spending involved with commercial satellite bandwidth services.

Companies we studied also found that in establishing new procurement
processes, they needed to overcome resistance from individual business
units reluctant to share decision-making responsibility and to involve
staff that traditionally did not communicate with each other. While DISA
will likely face similar resistance within the agency, we believe it will
also need to overcome resistance from users that manage their own
operations and maintenance funds and have long been dissatisfied with the
DISA process. Another challenge for DISA is obtaining the expertise needed
to review complex technically sophisticated solutions proposed by vendors.
Industry representatives and some vendors believe that DISA currently
lacks the appropriate level of expertise.

Lastly, the companies we studied found that they needed to have sustained
commitment from their senior leadership; to clearly communicate the
rationale, goals, and expected results from reengineering efforts; and to
measure whether the changes were having their intended effects. We believe
similar commitment will need to be secured not only from DISA leadership,
but also from leaders within DOD and the user communities.

DOD has recognized many of these challenges and is in the process of
awarding a contract for a study to determine if it should change its
approach to identifying, acquiring, and managing commercial satellite
services. According to a DOD official, DOD has also initiated a study that
will address ways to arrange for multiyear leasing and bulk discounts
based on projected customer requirements.

DOD recognizes it has an increasing need to supplement its own satellite
bandwidth capacity with capacity from the commercial sector. But it does
not have a firm idea on how much bandwidth it will require in the short or
long term or whether the private sector can even continue to support its
requirements. Moreover, though it has become the largest consumer of
satellite bandwidth, it still buys its bandwidth on an as-needed basis,
thereby missing significant opportunities to leverage its buying power and
to achieve considerable savings as a result. Moreover, by allowing users
to bypass the DISA waiver process, DOD is hampering its ability to ensure
that its communications networks are interoperable and to minimize
redundancies. If DISA is to remain as DOD's primary agent to acquire
satellite bandwidth, then it must implement a more strategic management
approach-not only one that continues to ensure that acquisitions are

  Conclusions

processed fairly, but also one that ensures services can be acquired in a
timely and cost-effective way that meets users' needs. Doing so will be a
considerable challenge, however, given the current environment and
potential resistance within DISA and from its users. Commitment is needed
from senior leaders within DISA and DOD to overcome challenges associated
with implementing a strategic approach.

To strengthen DOD's ability to obtain commercial bandwidth effectively and
efficiently, we recommend that the Secretary of Defense direct the
Assistant Secretary of Defense for Networks and Information Integration to
develop, in coordination with the Joint Staff and the Director of DISA, a
strategic management framework for improving the acquisition of commercial
bandwidth. Specifically, this framework should include provisions for

  Recommendations for Executive Action

o  	inventorying current and potential users of commercial bandwidth to
determine their existing and long-term requirements;

o  	identifying and exploiting opportunities to consolidate the bandwidth
requirements of combatant commanders, the military services, and defense
agencies;

o  	adopting, when appropriate, commonly used commercial practices, such
as conducting spend analyses and negotiating pricing discounts based on
overall DOD volume, to strengthen DOD's position in acquiring bandwidth;
and

o  	improving the current funding structure by considering new funding
approaches, such as centralized funding of commercial bandwidth, and
seeking legislative authority for multiyear procurements.

To ensure the successful implementation of this strategic management
framework and to better leverage DOD's buying power and increase user
satisfaction, we recommend that the Secretary of Defense direct the
Assistant Secretary of Defense for Networks and Information Integration to

o  	develop performance metrics to assess user satisfaction with the
timeliness, flexibility, quality, and cost in acquiring commercial
satellite services;

o  	strengthen DOD's capacity to provide accurate and complete analyses of
commercial bandwidth requirements, spending, and the capabilities of
commercial satellite providers by enhancing core internal technical
expertise and information systems; and

o

  Agency Comments
  and Our Evaluation

assess, and implement as needed, changes to the key elements of the
existing acquisition process-including requirements generation, solution
development and evaluation, and contract vehicles-to facilitate a more
strategic approach to bandwidth acquisition.

DOD, in commenting on a draft of this report, generally concurred with our
findings, conclusions, and recommendations. Specifically, DOD concurred
with four of our recommendations and partially concurred with the
remaining three recommendations.

DOD concurred that a strategic management framework for improving the
acquisition of commercial bandwidth be developed to include inventorying
current and potential users to determine their current and future needs,
and adopting, where appropriate, commonly used commercial acquisition
practices. It also concurred in developing performance metrics to assess
user satisfaction with its process and in assessing and changing its
process to facilitate a more strategic approach to commercial bandwidth
acquisition.

DOD partially concurred with our recommendations addressing consolidating
user requirements, improving the current funding structure, and enhancing
core internal technical expertise and information systems. In its comments
DOD indicated it had initiated a review of its current approach to
determine if process changes were necessary and is waiting to decide
whether or how to act on these three issues until after the review is
complete. While we agree it is important to review these issues, we also
believe that actions, along the lines of our recommendations, will be
necessary in order to develop a strategic framework to acquire commercial
satellite bandwidth more efficiently and effectively.

DOD also provided informal technical comments, which we incorporated as
appropriate.

  Scope and Methodology

To determine whether DOD's process for acquiring fixed satellite services
is fair and meets the needs of DOD users, we met with officials from DOD
component organizations involved in procurement of these services,
including officials from agency contracting offices, DISA, Assistant
Secretary of Defense for Networks and Information Integration, and Joint
Staff. We also interviewed the four DOD vendors (Lockheed Martin Global
Telecommunications; Arrowhead Global Solutions, Inc.; Artel, Inc.; and
Spacelink International, L.L.C.) that procure the needed bandwidth from
industry, and officials from three commercial service providers, which are
major suppliers of commercial bandwidth to DOD. We obtained available DISA
data on all contractual actions awarded since enactment of the Open-market
Reorganization for the Betterment of International Telecommunications
(ORBIT) Act in March 2000, the beginning date given to us by our
congressional requestors. We reviewed contract file documentation, as well
as applicable sections of the FAR, as supplemented, and DOD policies and
procedures, to determine the extent to which competition was obtained for
each delivery or task order included in the universe under either the MTC
or the DSTS-G contracts. For those orders not awarded competitively, we
reviewed task order files to obtain sole-source or directed subcontractor
justifications. We obtained details on all GIG waiver requests for fixed
satellite service commercial bandwidth procurements processed since
enactment of ORBIT. To determine the elapsed calendar days required to
award the 48 DSTS-G task orders, we reviewed task order files to extract
pertinent dates. For 11 of the task orders where we were unable to obtain
the start date, we imputed the start date (request for service) based on
37 task orders for which we had actual start dates.

To determine what DOD does to oversee spending on fixed satellite services
and ensure cost-effective results, we reviewed policies and procedures DOD
uses and interviewed DOD officials on oversight practices. We obtained and
analyzed cost data reported by combatant commands, military services, and
defense agencies. We reviewed task and delivery order documentation,
including applicable modifications and amendments, awarded under the MTC
and DSTS-G contracts since enactment of the ORBIT Act. We analyzed the
current DSTS-G contract to identify the terms, conditions, and benefits
available to large volume customers and compared our results to the
reported practices of private sector buyers purchasing similar bandwidth
capacity. We reviewed available contracts for bandwidth from U.S. Army and
U.S. Navy sources, and we analyzed reported cost data to see if they
included satellite bandwidth capacity obtained through sources outside of
the DISA process.

We conducted our review from February to October 2003 in accordance with
generally accepted government auditing standards.

We are sending copies of this report to other interested congressional
committees; the Secretary of Defense; the Deputy Secretary of Defense;
the Secretaries of the Army, Navy, and Air Force; the Under Secretary of
Defense (Acquisition, Technology, and Logistics); the Under Secretary of
Defense (Comptroller); and the Director of the Defense Information
Systems Agency. We will also provide copies to others on request. In
addition, the report will be available at no charge on the GAO Web site
at http://www.gao.gov.

If you have any questions regarding this report, please call me at
(202) 512-4841 or John Needham at (202) 512-5274. Other major
contributors to this report are Gary L. Delaney, John D. Heere,
Oscar Mardis, Marie P. Ahearn, and Gary Middleton.

William T. Woods
Director
Acquisition and Sourcing Management

                  Page 30 GAO-04-206 Satellite Communications

Note: Page numbers in the draft report may differ from those in this
report.

                  Page 31 GAO-04-206 Satellite Communications

                  Page 32 GAO-04-206 Satellite Communications

                  Page 33 GAO-04-206 Satellite Communications

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