Satellite Communications
Strategic Approach Needed for DOD's Procurement of Commercial Satellite Bandwidth Gao ID: GAO-04-206 December 10, 2003In 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.
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.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-04-206, Satellite Communications: Strategic Approach Needed for DOD's Procurement of Commercial Satellite Bandwidth
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Report to Congressional Requesters:
United States General Accounting Office:
GAO:
December 2003:
Satellite Communications:
Strategic Approach Needed for DOD's Procurement of Commercial Satellite
Bandwidth:
GAO-04-206:
GAO Highlights:
Highlights of GAO-04-206, a report to congressional requesters
Why GAO Did This Study:
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.
What GAO Found:
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.
What GAO Recommends:
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 woodsw@gao.gov.
[End of section]
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:
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:
Figures:
Figure 1: Overview of DOD Commercial Bandwidth Acquisition Process:
Figure 2: Highlights of Analysis of DISA's Commercial Satellite
Communications Utilization Report--Fiscal Year 2002:
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:
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
bandwidth[Footnote 1] 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.[Footnote 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.[Footnote 3] As a 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 service[Footnote 4] 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.
Results in Brief:
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 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 process[Footnote 5] 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 work[Footnote 6] 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.
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: * SES Global; Regional: * Eutelsat S.A. LLC.
Global: * Intelsat; Regional: * SES Americom.
Global: * PanAmSat; Regional: * Star One.
Global: * Loral Global Alliance; Regional: * Asiasat.
Global: * New Skies Satellites N.V.; Regional: * Arabsat.
Source: GAO analysis of Satellite Industry Association data.
[End of table]
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:
[See PDF for image]
[End of figure]
Table 2: Details on Key Players in the DISA Process:
Users; 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 Order[A] (TSO), which is then transmitted to DISA's Commercial
Satellite Communications Branch.
DISA 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 (prime contractors); 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.
Evaluation team; The team includes DISA's Commercial Satellite
Communications Branch, supported by its technical support contractor,
and the contracting office, DITCO. The Commercial Satellite
Communications Branch evaluates the technical soundness of proposed
solutions and DITCO reviews pricing proposals. The selection of the
winning vendor and its solution is usually a joint process, and DITCO
then issues an order under the winning vendor's contract.
Award of subcontract; This occurs when the winning vendor awards a
commercial contract to the service provider that provided the winning
solution input.
Source: GAO.
[A] A Telecommunications Service Order is needed to start, continue, or
stop the existence of a circuit.
[End of table]
If circumstances dictate, users can request a waiver through DOD's
Global Information Grid (GIG) Waiver Panel[Footnote 7] 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:
* writing broad, needs-based requirements able to be satisfied by
multiple vendors rather than only one;
* providing notice and opportunity to be considered[Footnote 8] to each
of the vendors;
* giving notice of the evaluation criteria to be used to select a
winning vendor; and:
* evaluating proposals, conducting discussions, and awarding delivery
orders or task orders in accordance with the evaluation criteria
stated.
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:
Vendor A; Number of task orders: 11; Percent of total task orders
awarded: 23; Dollars awarded: $17,255,942; Percent of dollars awarded:
11.
Vendor B; Number of task orders: 14; Percent of total task orders
awarded: 29; Dollars awarded: 58,632,446; Percent of dollars awarded:
36.
Vendor C; Number of task orders: 23; Percent of total task orders
awarded: 48; Dollars awarded: 87,562,627; Percent of dollars awarded:
54.
Total; Number of task orders: 48; Percent of total task orders awarded:
100; Dollars awarded: $163,451,015; Percent of dollars awarded: 100[A].
Source: GAO.
[A] Percentages of dollars awarded do not add to 100 percent due to
rounding.
[End of table]
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:
* 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.
* 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.
DSTS-G Subcontractors Have Also Had Ample and Fair Chances to Team
with Vendors:
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.[Footnote 9] To
determine which service providers are potentially capable of fulfilling
a given DISA requirement, the vendors told us they consider many
factors, such as:
* location of satellites,
* "look angle" at the desired location,
* power,
* bandwidth,
* age and condition of satellites,
* available capacity on satellites, and:
* 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:
Winning vendor: Vendor A; Task orders won: 11; Satellite
service providers: A: 1; Satellite service providers: B: 4.5; Satellite
service providers: C: 3; Satellite service providers: D: 0.5; Satellite
service providers: E: 0; Satellite service providers: F: 2.
Winning vendor: Vendor B; Task orders won: 14; Satellite
service providers: A: 0; Satellite service providers: B: 5; Satellite
service providers: C: 6; Satellite service providers: D: 1; Satellite
service providers: E: 2; Satellite service providers: F: 0.
Winning vendor: Vendor C; Task orders won: 23; Satellite
service providers: A: 4; Satellite service providers: B: 9; Satellite
service providers: C: 7; Satellite service providers: D: 1; Satellite
service providers: E: 2; Satellite service providers: F: 0.
Winning vendor: Total; Task orders won: 48; Satellite service
providers: A: 5; Satellite service providers: B: 18.5; Satellite
service providers: C: 16; Satellite service providers: D: 2.5;
Satellite service providers: E: 4; Satellite service providers: F: 2.
Winning vendor: Percent of total; Task orders won: 100[A];
Satellite service providers: A: 10.4; Satellite service providers: B:
38.5; Satellite service providers: C: 33.3; Satellite service
providers: D: 5.2; Satellite service providers: E: 8.3; Satellite
service providers: F: 4.2.
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.
[A] Percentage totals do not add to 100 percent due to rounding.
[End of table]
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:
Vendor: Vendor A; Number of proposals: 63; Satellite service
providers: A: 2; Satellite service providers: B: 24.5; Satellite
service providers: C: 23.5; Satellite service providers: D: 3;
Satellite service providers: E: 5; Satellite service providers: F: 5;
Satellite service providers: G: 0; Satellite service providers: H: 0;
Satellite service providers: I: 0; Satellite service providers: J: 0;
Satellite service providers: K: 0; Satellite service providers: L: 0.
Vendor: Vendor B; Number of proposals: 52; Satellite service
providers: A: 4; Satellite service providers: B: 21; Satellite service
providers: C: 19; Satellite service providers: D: 3; Satellite service
providers: E: 4; Satellite service providers: F: 1; Satellite service
providers: G: 0; Satellite service providers: H: 0; Satellite service
providers: I: 0; Satellite service providers: J: 0; Satellite service
providers: K: 0; Satellite service providers: L: 0.
Vendor: Vendor C; Number of proposals: 96; Satellite service
providers: A: 12; Satellite service providers: B: 32; Satellite service
providers: C: 28; Satellite service providers: D: 4; Satellite service
providers: E: 10; Satellite service providers: F: 3; Satellite service
providers: G: 2; Satellite service providers: H: 1; Satellite service
providers: I: 1; Satellite service providers: J: 1; Satellite service
providers: K: 1; Satellite service providers: L: 1.
Vendor: Total; Number of proposals: 211; Satellite service
providers: A: 18; Satellite service providers: B: 77.5; Satellite
service providers: C: 70.5; Satellite service providers: D: 10;
Satellite service providers: E: 19; Satellite service providers: F: 9;
Satellite service providers: G: 2; Satellite service providers: H: 1;
Satellite service providers: I: 1; Satellite service providers: J: 1;
Satellite service providers: K: 1; Satellite service providers: L: 1.
Vendor: Percent of total; Satellite service providers: A: 8.5;
Satellite service providers: B: 36.7; Satellite service providers: C:
33.4; Satellite service providers: D: 4.7; Satellite service providers:
E: 9.0; Satellite service providers: F: 4.3; Satellite service
providers: G: 1.0; Satellite service providers: H: 0.5; Satellite
service providers: I: 0.5; Satellite service providers: J: 0.5;
Satellite service providers: K: 0.5; Satellite service providers: L:
0.5.
Vendor: Percent of proposed solutions resulting in subcontracts;
Satellite service providers: A: 27.8; Satellite service
providers: B: 23.9; Satellite service providers: C: 22.7; Satellite
service providers: D: 25.0; Satellite service providers: E: 21.1;
Satellite service providers: F: 22.2; Satellite service providers: G:
No award; Satellite service providers: H: No award; Satellite service
providers: I: No award; Satellite service providers: J: No award;
Satellite service providers: K: No award; Satellite service providers:
L: No 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.
[End of table]
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 Process Meets Their Needs:
According to some major users, DISA's process takes too long to meet
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.[Footnote 10] Moreover, as 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: 30 days or less; Number of actions: 18; Percent of
actions: 37.5.
Days to process: 31-60 days; Number of actions: 15; Percent of actions:
31.3.
Days to process: 61-90 days; Number of actions: 5; Percent of actions:
10.4.
Days to process: 91-120 days; Number of actions: 5; Percent of actions:
10.4.
Days to process: Over 121 days; Number of actions: 5; Percent of
actions: 10.4.
Days to process: Total; Number of actions: 48; Percent of actions:
100.0.
Source: GAO analysis of DISA data.
[End of table]
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-
the-fact" 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.[Footnote 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
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:
[See PDF for image]
[End of figure]
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.
Steps Have Not Been Taken to Leverage Buying Power:
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 requirements to
provide them the opportunity to develop additional capabilities.
Application: While there have been isolated instances of this practice
occurring, it was initiated by the DSTS-G vendors, not DOD. This could
include launching new satellites or repositioning current assets,
focusing more on DOD's security needs, and creating more flexible
solutions.
Requesting "Most Favored Customer" status with service providers.
Application: Through DOD's mandated DISA process, DOD typically cannot
order bandwidth in large quantities or for long durations as
commercial customers can do. However, DOD, in the aggregate, is the
market segment's largest single customer, which should warrant DOD
some favored status. DOD could use its position to request such
treatment; however, it does not, according to two major service
providers we spoke with.
Maximizing business volume discounts. Application: Some large service
providers do provide DOD some volume discounts. However, total DOD
spending volume is fragmented among three DSTS-G vendors, the MTC
prime contractor, and an unknown number of individual procurement
organizations that are used by those customers/ users that avoid the
DISA process. By eliminating this fragmentation, DOD could aggregate
its buying power to obtain better business volume discounts.
Requesting portability of services to other satellites or other areas
of coverage. Application: A couple of the service providers, which
have larger numbers of satellites in various locations, have been
willing to offer bandwidth on alternate satellites when the original
satellite and its location were no longer needed. DOD could request
that all service providers agree to this provision in its
subcontracts. Such a request, however, would probably have a cost
associated with the risk to the service providers, but the added
flexibility may well be worth the increased cost.
Obtaining "Promised Duration" discounts. Application: Two major
service providers told us they would be willing to give discounts for
lease durations of more than 1 year, the standard ordering term for
DOD. They said that DOD could obtain better prices by committing to
longer lease periods, thus getting it out of the "spot market" and
into the long-term market, where most of their commercial customers
operate. DOD cannot normally commit to periods of service beyond 1
year, because DOD gets its operations and maintenance funding 1 year
at a time and current law requires funding to be available up front to
cover multiple-years' obligations of termination liability.
Requesting discounts for use of new satellites and/or older
satellites. Application: Being the first or one of only a few
customers on a new satellite, or likewise being willing to use an
older satellite which has gone into an inclined orbit can result in
substantial savings. Such instances are rare, but if DOD is in a
position to know about the possibility and can make quick decisions,
DOD can benefit. This requires up-to-date knowledge of the service
provider industry.
Obtaining "Termination for Convenience" protections. Application:
Currently, DOD is not fully protected in the event it must terminate a
task order before its completion. DOD has required the three DSTS-G
vendors and the MTC contractor to accept this clause and the risk that
goes along with it. The vendors do not have such a clause with their
providers, so the vendors are potentially in the position of receiving
a Termination for Convenience from the DOD but having to continue to
pay for the leased bandwidth with the provider for the remaining lease
period. DOD allows these payments on the remainder of the lease period
to be submitted by the vendor as part of the termination settlement
proposal, and thus DOD would bear some or all of the costs for the
unused portion of the lease.
Source: GAO.
[End of table]
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.
Conclusions:
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 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.
Recommendations for Executive Action:
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:
* inventorying current and potential users of commercial bandwidth
to determine their existing and long-term requirements;
* identifying and exploiting opportunities to consolidate the bandwidth
requirements of combatant commanders, the military services, and
defense agencies;
* 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:
* 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:
* develop performance metrics to assess user satisfaction with the
timeliness, flexibility, quality, and cost in acquiring commercial
satellite services;
* 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:
* 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.
Agency Comments and Our Evaluation:
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:
Signed by William T. Woods:
[End of section]
Appendix I: Comments from the Department of Defense:
ASSISTANT SECRETARY OF DEFENSE:
6000 DEFENSE PENTAGON WASHINGTON, DC 20301-6000:
DEC - 4 2003:
NETWORKS AND INFORMATION INTEGRATION:
Mr. William T. Woods:
Director, Acquisition and Sourcing Management U.S. General Accounting
Office:
441 G Street, N.W. Washington, D.C. 20548:
Dear Mr. Woods:
This is the Department of Defense (DoD) response to the GAO draft
report, `CONTRACT MANAGEMENT: Strategic Approach Needed for DOD's
Procurement of Commercial Satellite Bandwidth,' dated November 10,
2003, (GAO code 120200/GAO-04-206).
The Department generally concurs with the report and its
recommendations. The DoD recognizes that satellite communications
requirements are ever expanding and that commercial systems will and
must play a strategic role in the overall DoD SATCOM architecture in
the foreseeable future.
In parallel with your review, I have directed the Director, Defense
Information Systems Agency (DISA) and my staff to review the policies
and practices associated with planning, acquisition, vulnerabilities,
and management of commercial SATCOM services to determine if we should
make a course change in our approach to the use of commercial SATCOM.
Your findings and recommendations will provide an important
contribution to our review and determination of the appropriate
approach for DoD utilization of commercial SATCOM in the future.
The Department appreciates the opportunity to comment on the GAO draft
report. Detailed comments on the report's recommendations, and
requested changes to correct factual errors are attached.
Sincerely,
Signed for:
John P. Stenbit:
Enclosures: As stated:
GAO DRAFT REPORT - DATED NOVEMBER 10, 2003 GAO CODE 120200/GAO-04-206:
"CONTRACT MANAGEMENT: STRATEGIC APPROACH NEEDED FOR DOD'S PROCUREMENT
OF COMMERCIAL SATELLITE BANDWIDTH":
DEPARTMENT OF DEFENSE COMMENTS TO THE RECOMMENDATIONS:
BACKGROUND:
The DoD leases commercial satellite communications (SATCOM) services to
augment the services available from DoD-owned "military satellite
communications" (MILSATCOM) systems. The bulk of these leases are for
Fixed SATCOM services to augment capacity available from the Defense
Satellite Communications System (DSCS).
Since 2001 the leasing of commercial SATCOM services has been
accomplished via a "fee for service" business model wherein military
services and other DoD organizations and agencies that have identified
a need for commercial SATCOM capacity place funds into a Defense
Working Capital Fund (DWCF). Current DoD policy is that the Defense
Information Systems Agency (DISA) contracts for the commercial SATCOM
capacity, and uses the funds in the DWCF to pay for the contracts. This
business model provides the flexibility of leasing the capacity when
and where it is needed, and only for as long as it is needed.
Recognizing that the assumptions made in developing the current
business model have changed in recent times, the Department has
initiated a review of our approach for use of commercial SATCOM to
determine if process changes are required. ASD(NII) and DISA are
coordinating the review, which will provide a comprehensive analysis of
our commercial SATCOM practices including planning and requirements
analysis, acquisition strategies and contract vehicles,
vulnerabilities, operations management, and relations/impacts to
collateral programs.
The following are responses to the specific recommendations made by the
GAO.
RECOMMENDATION 1: The GAO recommended 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 the Defense Information Systems Agency (DISA), a strategic
management framework for improving the acquisition of commercial
bandwidth. Specifically, this framework should include provisions for
inventorying current and potential users of commercial bandwidth to
determine their existing and long-term requirements. (p. 21/GAO Draft
Report):
DOD RESPONSE: The Department concurs with this recommendation.
The DoD currently has a process in place whereby user requirements for
satellite communications services are obtained and maintained in a
centrally managed Satellite:
Database (SDB). The requirements are segmented in the database
according to the timeframe when they are needed - current (in the next
two years) and future (beyond the next two years). One of the areas
being reviewed by ASD NII and DISA is whether we have adequate and
accurate information in the SDB regarding current and future
requirements for commercial SATCOM, and whether we can perform critical
analysis of this information to determine possible trends in the
Department's use so we can plan for the future.
RECOMMENDATION 2: The GAO recommended 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 the Defense Information Systems Agency (DISA), a strategic
management framework for improving the acquisition of commercial
bandwidth. Specifically, this framework should include provisions for
identifying and exploiting opportunities to consolidate the bandwidth
requirements of combatant commanders, the armed services, and DOD
agencies. (p. 21/GAO Draft Report):
DOD RESPONSE: The Department partially concurs with this
recommendation.
Consolidating bandwidth requirements makes sense if the primary object
is to lease bulk amounts of commercial satellite capacity. However, the
current business model for acquiring commercial SATCOM services is
generally based on the philosophy of "acquire as needed", so bulk
capacity purchases are not always an option. There are cases where like
requirements have been identified and bulk capacity buying was
accomplished from a single satellite service provider. In addition, for
those requirements specified through the SDB process, DISA makes every
attempt to engage in multi-year leases when the user organization
agrees to obligate funding for the expected period of the contract. As
part of the DoD review of the current processes we will be evaluating
methods for exploiting opportunities to consolidate the bandwidth
requirements of combatant commanders, the armed services, and DoD
agencies..
RECOMMENDATION 3: The GAO recommended 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 the Defense Information Systems Agency (DISA), a strategic
management framework for improving the acquisition of commercial
bandwidth. Specifically, this framework should include provisions for
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. (p. 21/GAO Draft Report):
DOD RESPONSE: The Department concurs with this recommendation.
The ongoing DoD review is investigating improving the methods and
procedures for acquisition of commercial SATCOM capacity, including the
types of contracting methods, the terms and conditions included in our
contractual requirements, and ways to improve and leverage DOD's buying
power in the commercial SATCOM industry.
RECOMMENDATION 4: The GAO recommended 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 the Defense Information Systems Agency (DISA), a strategic
management framework for improving the acquisition of commercial
bandwidth. Specifically, this framework should include provisions for
improving the current funding structure, by considering new funding
approaches such as centralized funding of commercial bandwidth and
seeking legislative authority for multi-year procurements. (P. 21/GAO
Draft Report):
DOD RESPONSE: The Department partially concurs with this
recommendation.
The Department agrees that steps need to be taken to improve the
current funding structure in order to realize savings associated with
bulk leases and multi-year contracts. However, centralized funding for
acquisition of commercial bandwidth, combined with existing regulations
regarding multi-year procurements could pose a significant burden on
the organization tasked to execute and manage the multi-year
procurements. This is because multi-year procurements require a multi-
year obligation of funds (subject to their availability in the budget)
to cover contract costs and potential contract termination liability
charges, and these funds must be protected against non-specific budget
cuts. This would result in other programs having a disproportionate
impact from non-specific budget cuts.
The Department will evaluate strategies for improving the current
funding structure once the current review is completed.
RECOMMENDATION 5: To ensure the successful implementation of the
recommended strategic management framework, to better leverage DOD's
buying power and to increase user satisfaction, the GAO recommended
that the Secretary of Defense direct the Assistant Secretary of Defense
for Networks and Information Integration to develop performance metrics
to assess user satisfaction with timeliness, flexibility, quality, and
cost in acquiring commercial satellite services. (p. 21/GAO Draft
Report):
DOD RESPONSE: The Department concurs with this recommendation.
Properly developed customer surveys and process performance metrics are
arguably important aspects of any quality improvement program. DISA has
recently developed a customer survey and distributed it to its
commercial SATCOM customers. The ongoing Department study will
ascertain what metrics are appropriate for future customer surveys
based on the business model developed.
RECOMMENDATION 6: To ensure the successful implementation of the
recommended strategic management framework, to better leverage DOD's
buying power and to increase user satisfaction, the GAO recommended
that the Secretary of Defense direct the Assistant:
Secretary of Defense for Networks and Information Integration to
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. (p. 21/GAO Draft Report):
DOD RESPONSE: The Department partially concurs with this
recommendation.
The Department agrees with the need for strong core internal technical
expertise and information systems. We feel that DISA, using both
government and contract personnel, possesses the requisite technical
expertise to evaluate existing information, use existing tools, and
operate under the current business model.
In responding to Recommendation #1 we noted that one of the areas being
reviewed by ASD NII and DISA is whether we have adequate and accurate
information regarding current and future requirements for commercial
SATCOM, and whether we can perform critical analysis to determine
possible trends in the Department's use so that we can plan for the
future. In addition, our review is also focusing on providing tools and
applications that would significantly increase utilization efficiency
and reduce costs. When these tools and information systems have been
selected and implemented the Department will ensure that we have
appropriate technical expertise, at all levels within the Department,
for their use.
RECOMMENDATION 7: To ensure the successful implementation of the
recommended strategic management framework, to better leverage DOD's
buying power and to increase user satisfaction, the GAO recommended
that the Secretary of Defense direct the Assistant Secretary of Defense
for Networks and Information Integration to 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. (p. 21/GAO Draft Report):
DOD RESPONSE: The Department concurs with this recommendation.
In summary, the DoD is engaged in a comprehensive review of our
commercial SATCOM practices including planning and requirements
analysis, acquisition strategies and contract vehicles, operations
management and the relations to collateral programs. The results of
this review will be used by the Department to restructure, as
appropriate, our approach and processes for integration of commercial
SATCOM into the overall DoD SATCOM architecture.
[End of section]
FOOTNOTES
[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.
[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.
[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).
[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.
[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.
[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).
[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).
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