Department of Defense Actions to Modify its Commercial		 
Communications Satellite Services Procurement Process (17-APR-06,
GAO-06-480R).							 
                                                                 
The Department of Defense (DOD) continues to rely on commercial  
satellite communications to plan and support operations. DOD use 
of commercial satellite bandwidth has increased over the past few
years, making the department the largest single customer of	 
commercial satellite bandwidth. In recent years, DOD's process	 
for acquiring commercial satellite communications has received	 
criticism for being lengthy, inflexible, and costly. DOD is now  
reexamining how it procures commercial satellite services to	 
address these issues. Congress asked us to summarize the actions 
that DOD has taken to date in revising its requirements and	 
acquisition approach for commercial satellite services. 	 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-06-480R					        
    ACCNO:   A51704						        
  TITLE:     Department of Defense Actions to Modify its Commercial   
Communications Satellite Services Procurement Process		 
     DATE:   04/17/2006 
  SUBJECT:   Communication satellites				 
	     Cost effectiveness analysis			 
	     Defense procurement				 
	     Policy evaluation					 
	     Procurement planning				 
	     Procurement policy 				 
	     Strategic planning 				 
	     Bandwidth						 

******************************************************************
** This file contains an ASCII representation of the text of a  **
** GAO Product.                                                 **
**                                                              **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced.  Tables are included, but    **
** may not resemble those in the printed version.               **
**                                                              **
** Please see the PDF (Portable Document Format) file, when     **
** available, for a complete electronic file of the printed     **
** document's contents.                                         **
**                                                              **
******************************************************************
GAO-06-480R

     

     * PDF6-Ordering Information.pdf
          * Order by Mail or Phone

United States Government Accountability Office Washington, DC 20548

April 17, 2006

Congressional Requesters

Subject: Department of Defense Actions to Modify its Commercial
Communications Satellite Services Procurement Process

The Department of Defense (DOD) continues to rely on commercial satellite
communications to plan and support operations. DOD use of commercial
satellite bandwidth has increased over the past few years, making the
department the largest single customer of commercial satellite bandwidth.
In recent years, DOD's process for acquiring commercial satellite
communications has received criticism for being lengthy, inflexible, and
costly. DOD is now reexamining how it procures commercial satellite
services to address these issues. You asked us to summarize the actions
that DOD has taken to date in revising its requirements and acquisition
approach for commercial satellite services.

Summary

DOD has taken several actions to develop a new approach for procuring
commercial satellite communications services. On December 14, 2004, the
department issued a new policy for implementing an approach for planning,
acquiring, and managing commercial fixed satellite services. To address
the cost-effectiveness element of the new policy, in July 2005, the
Defense Information Systems Agency (DISA) completed a cost-benefit
analysis that considered multiple options for procuring satellite
services. Summaries of these documents are presented below. 1

DOD is working to determine how to improve its procurement processes by
studying different acquisition methods. Also, DOD has been reaching out to
industry in order to learn about capabilities and costs related to the
planning, acquisition, and management of commercial fixed satellite
services. DOD will make a final determination on whether the existing or
modified contracts can meet the full range of capabilities needed by the
warfighters or whether any successor contracts will be required. In
parallel, DOD and DISA officials are working with the Navy to consolidate
the Navy's worldwide satellite communications requirements under one task
order. 2 Upon completing the above mentioned analysis and determining the
success of the Navy consolidation effort, DOD

1

Assistant Secretary of Defense for Networks and Information Integration,
Policy for the Planning, Acquisition, and Management of Commercial
Satellite Communications Fixed Satellite Services (FSS), (Washington,
D.C.: Dec. 14, 2004).

2

A task order is an order for services placed against an established
contract or with government sources.

Page 1 GAO-06-480R Status Report on Commercial Communications Satellite Services

expects to have the information necessary to finalize its approach for
acquiring commercial satellite communications.

DOD Moving to a More Strategic Approach

On July 29, 2005, DOD issued a report to Congress on how it would
implement a more strategic approach for the planning, acquisition, and
management of commercial fixed satellite services. 3 The report summarized
DOD's new policy, which includes four overarching elements that frame its
approach for acquiring commercial fixed satellite services:

     o planning to integrate well-defined, long-term needs; flexible
       requirements of intermittent users; and surge capacity requirements
       for satellite communications;
     o acquiring cost-effective services through leveraging the department's
       buying power while providing the warfighter with timely access to
       leased services;
     o integrating the management of commercial fixed communication satellite
       services 4 and DOD-owned satellite services; and
     o aligning collateral programs, such as earth terminals, that are
       affected by the type and amount of commercial satellite communications
       services leased.

DOD's policy identified several steps that would be needed to implement a
new strategic approach to plan, acquire, and manage commercial satellite
communication services. It emphasizes that the processes for acquiring
commercial satellite communications need to be responsive to the users
while leveraging DOD's buying power and sets out a study process to
accomplish these goals. The policy goes on to task DISA and others to
develop plans for integrating commercial satellite communications
operational control with other DOD satellite operations centers. The new
approach will be phased in and is intended to be the only mechanism
available to DOD components to acquire commercial satellite services. Both
the policy itself and its implementation are to be reevaluated annually.

Cost-Benefit Analysis Considered 10 Options

In order to address the cost-effective component of the new policy, DISA,
in 2005, completed a cost-benefit analysis that considered 10 options for
procuring systems engineering, integration services, and commercial
satellite bandwidth. In developing the 10 acquisition options in the
cost-benefit analysis, DISA took into account the four procurement
mechanisms outlined in Section 803 of the Ronald W. Reagan National
Defense Authorization Act for Fiscal Year 2005 (Pub. L. No. 108-375):

o  procurement under indefinite delivery, indefinite quantity contracts of
other departments and agencies of the federal government;

3

The Ronald W. Reagan National Defense Authorization Act for Fiscal Year
2005, Pub. L. No. 108-375, S: 803, October 28, 2004, directed DOD to study
alternative acquisition mechanisms and to provide this report.

4

Fixed satellite service refers to a radio communication service between
fixed earth stations at specific locations by means of one or more
satellites.

Page 2 GAO-06-480R Status Report on Commercial Communications Satellite Services

     o procurement directly from commercial sources that are qualified as
       described in subsection (b) of Section 803, using full and open
       competition (as defined in section 4(6) of the Office of Federal
       Procurement Policy Act (41 U.S.C. 403(6)));
     o procurement by any other means that had been used by DISA's Director
       or the Secretary of a military department to enter into a contract for
       commercial communications satellite services that is in force on
       October 28, 2004, including through commercial communications
       satellite service integrators and resellers; and
     o procurement under the method used as of October 28, 2004, the date of
       the enactment of Section 803, modified with streamlined processes to
       ensure increased efficiency and cost effectiveness.

When looking at the full and open competition options, DISA took into
account whether the government or the contractor had responsibility for
procuring bandwidth for the users and whether the work was allocated to a
single global contractor, multiple regional, or multiple global
contractors.

The costs considered in the analysis included government management costs,
contractor management costs, satellite bandwidth costs, ground segment
operations, and protection costs for the options considered. Also, the
cost-benefit analysis evaluated contracting and commercial satellite
bandwidth funding strategies used by other U.S. government organizations.
Each option was qualitatively evaluated against the seven capabilities
derived from stakeholder and user interviews and endorsed by the
Net-Centric Functional Capabilities Board. 5

In addition, each option was assessed against its ability to support a
strategic approach to acquiring systems engineering and integration
services and commercial satellite bandwidth, and whether the option was
consistent with or contrary to the commercial market.

DOD's Implementation Actions Focus on Warfighter Requirements and Industry
Involvement

Since the issuance of its July 2005 report to Congress, DOD has taken a
number of steps to implement its new approach. Initially, the agency is
focusing on improving the operational effectiveness of the existing
Defense Information Systems Network Satellite Transmission Services-Global
(DSTS-G) contract vehicles and associated processes, by:

     o incorporating changes to the DISA requirements and provisioning
       processes to reduce costs by improving responsiveness and aggregate
       bandwidth, and
     o implementing as many warfighter requirements as possible within the
       constraints of current contracts. DISA assessed whether or not the new
       warfighter requirements would lie within the scope of its current
       contracts and briefed DISA senior

A permanently established body, chaired by Joint Staff J-6, that is
responsible for the organization, analysis, and prioritization of joint
warfighting capabilities for communications and computers as well as
information technology systems. The board focuses on capabilities that
include data transport, information services and dissemination, as well as
information assurance and information sharing.

Page 3 GAO-06-480R Status Report on Commercial Communications Satellite Services

acquisition officials, who concurred with the assessment and authorized a
meeting

with vendors.

As a part of DOD's strategy to involve industry, in October 2005, DISA and
the Navy met with DSTS-G vendors on potential modifications of the
existing contract vehicles to incorporate warfighter requirements and to
achieve economies by leveraging the volume of bandwidth. According to a
senior DOD official, the vendors were very receptive to these changes.
Once these current contracts have been modified, DOD will determine how
best to craft successor contracts, assuming that a new vehicle would be
needed to satisfy warfighter requirements. As part of this effort, DISA
has been reaching out to industry:

        * In August 2005, DISA requested information from small businesses to
          determine their interest in and capability to provide commercial
          satellite communications services. Only small businesses that can
          provide services under the North American Industry Classification
          System Code 517410, Satellite Telecommunications
          Carriers/Resellers, with an associated size standard of $12.5
          million receipts per year or less, or other qualified and capable
          businesses, such as veteran-owned small businesses and women-owned
          small businesses, were asked to respond. 6 Small businesses were
          asked to describe their demonstrated ability to perform the work in
          five specific areas:
             o leasing satellite bandwidth on a worldwide basis from multiple
               global and regional providers;
             o determining feasibility and leasing technical solutions in
               response to highlevel communications requirements;
             o implementing strategies that optimize performance or minimize
               overall lease costs;
             o providing fixed satellite services quickly to a customer; and
             o developing an enterprise-level situational awareness picture
               from various sources, including monitoring and reporting
               performance.
     o In October 2005, DISA requested commercial satellite communications
       industry experts to provide technical descriptions and general cost
       data regarding their commercial satellite capabilities. Also, DISA and
       the Navy met with the DSTS-G vendors on plans for consolidating 16
       Navy contracts into a single task order using the DSTS-G contract
       vehicles. Subsequently, DISA issued a task order solicitation under
       the DSTS-G contract vehicles to obtain proposals for this consolidated
       requirement. According to DOD, the DSTS-G vendors welcomed the
       opportunity to bid for this work and offer technical solutions to meet
       the Navy's needs. This is an important step because it will aid DOD in
       determining if it can consolidate requirements using these contract
       vehicles.

The North American Industry Classification System is a system for
classifying establishments by type of economic activity. It was developed
as the standard for use by federal statistical agencies in classifying
business establishments for the collection, analysis, and publication of
statistical data related to the U.S. business economy. The Small Business
Administration establishes size standards for whether a business entity is
a small business by types of economic activity, or industry, generally
under the North American Industry Classification System.

Page 4 GAO-06-480R Status Report on Commercial Communications Satellite Services

o  In November 2005, DISA met with commercial satellite communications
industry experts to obtain information regarding industry capabilities to
enable DOD to further refine the warfighter requirements and capability
attributes in preparation for review by the Net-Centric Functional
Capabilities Board.

Finally, the Network-Centric Functional Capabilities Board endorsed the
commercial satellite communications capabilities, contained in table 1, on
February 21, 2006. Upon completion of the study of alternative acquisition
mechanisms, DOD will make a final assessment to determine if the existing
or modified contracts will meet the full range of capabilities needed by
the warfighters. If a successor contract is required, DISA would plan for
and schedule the appropriate acquisition activities. According to DOD, any
successor contract would have to meet the full range of warfighter
requirements and capabilities as defined by the Network-Centric Functional
Capabilities Board, achieve cost savings from leveraging bandwidth
requirements, be consistent with applicable statutes, including the Small
Business Act, and capitalize on the lessons learned from the earlier
operational effectiveness modifications to make the new contract most
effective.

Table 1: DOD Commercial Satellite Communication Attributes

                             Capability Requirement

Floor:a C-, Ku, Ka- and X Band from 70o N to 70o S worldwide, subject to
availability, and position of satellite and the location of the user

Coverage Selectable:b Above and below 70o N to 70o S per specific need,
subject to availability, and position of satellite and the location of the
user

Floor: Monitoring (near real time), fault reporting

NetOps Selectable: Situational awareness (access to spectrum monitoring
detail)

Floor: "Regrooming" space segment and earth terminal / teleport resources
for spectral, operational, and price efficiencies selectable upon
Flexibility/ request within same provider

Optimization Selectable: Specific terms and conditions for unique
situations to be negotiated up front

Floor: Ability to lease commercial satellite communications capacity as
Capacity needed

Selectable: Not applicable

Protection/Operations Floor: Satellite operations clearances; operations
security clearances; Security telemetry, tracking, and control encryption
on command link;

electromagnetic interference/radio frequency interference geolocation

Floor: Portability of bandwidth from one region to another, user invoked

when needed subject to availability

Portability Selectable: Specific portability terms and conditions for
unique situations to be negotiated up front.

Floor: Transponder available less than or equal to 30 days from task
Responsiveness order award Selectable: Time critical requirements-7 days,
4 hours

Source: Department of Defense. a"Floor" refers to the capability that all
the contracts must provide for all users. b"Selectable" refers to
capability that the contracts must make available as an option to the
user.

Page 5 GAO-06-480R Status Report on Commercial Communications Satellite
Services

                                Agency Comments

We provided a draft of this letter to DOD for comment, and the department
provided technical comments, which we incorporated where appropriate. DOD
indicated by e-mail that it would not be submitting any official comments.

                             Scope and Methodology

To accomplish our objective, we analyzed DOD's December 2004 commercial
satellite policy describing DOD's new approach for acquiring commercial
satellite communication services. We reviewed DOD's July 2005 report to
Congress and analyzed the supporting cost-benefit analysis to determine
the extent of the options DOD considered in its analysis for acquiring
fixed satellite services. We did not validate the results of the
cost-benefit analysis. We interviewed DOD and Joint Staff officials to
discuss the process used in developing the user requirements. We
interviewed officials from the Office of the Assistant Secretary of
Defense for Networks and Information Integration and the Defense
Information Systems Agency to ascertain their plans for implementing a new
strategic approach for acquiring commercial satellite services. We
conducted our work at the Wireless Directorate of the Office of the
Assistant Secretary of Defense for Networks and Information Integration,
Washington, D.C., and the Defense Information Systems Agency, Falls
Church, Virginia, from August 2005 to March 2006 in accordance with
generally accepted government auditing standards.

We plan no further distribution of this report until 6 days from the
report date. At that time, we will send copies of this report to other
interested congressional committees and members and to the Secretary of
Defense. In addition, the report will be available at no charge on the GAO
Web site at http://www.gao.gov.

If you or your staff have any questions regarding this letter, please
contact me at (202) 512-4841 or [email protected]. GAO staff who made
contributions to this letter were John Needham, Assistant Director, and
Jose Ramos.

Page 6 GAO-06-480R Status Report on Commercial Communications Satellite Services

                        List of Congressional Requesters

The Honorable Olympia J. Snowe Chair Committee on Small Business

and Entrepreneurship United States Senate

The Honorable Donald A. Manzullo Chairman Committee on Small Business
House of Representatives

The Honorable Tom Davis Chairman Committee on Government Reform House of
Representatives

The Honorable James M. Talent United States Senate

(120433)

Page 7 GAO-06-480R Status Report on Commercial Communications Satellite Services
*** End of document. ***