Bureaucracies move slowly – DoD being no exception. Rules originally put in place for good reason sometimes become outdated and counterproductive. The world has changed. Satellites, and commercial SATCOM specifically, are now an essential – not merely supplemental, but ESSENTIAL – part of the military operational capability. Over the past 10 years or more, commercial SATCOM has made up as much as 80% of the DoD’s capability in this area.
I suspect that our commercial industry has become a bit of a thorn in the side of DoD for pushing change so aggressively. We know there are many more steps to get from A to B than can be encompassed in a simple blog post, op-ed, or discussion. Yet, as an industry, we push on because we really are rooting for a positive outcome in the end. We see some bite-sized changes that can really make a difference in the short term, but remain focused on those items that could result in a greater capability, both in scope and protection, to support DoD missions. Digging deeper into some of the concepts commercial satellite operators proposed in our Seven Ways paper, there are some small, but critical improvements that DoD and Congress should consider that will make a noticeable difference.
The Department of Defense claims it cannot enter into long-term contracts for commercial SATCOM capacity because it is unable to quantify how much, how long, and where it will need bandwidth. This, in itself, is a problem. But the solution may be in Congress not the Pentagon.
The Congressional Budget Office (CBO) scoring system for funding DoD services ought to end termination liability. Currently, the commercial SATCOM leases require termination liability for each year of the contract. For scoring purposes, a one-year lease with four one-year options only requires one year of termination liability (with each option year carrying liability only if it is exercised), but a five-year lease requires five years of termination liability up front. In both scenarios, DoD gets five years of leased capacity and, when five years’ capacity is used, the termination liability is charged. (You don’t have any termination liability if you do not exercise option years.) Aside from the expensive termination liability, the cost of the one-year-plus-options is far more expensive than the five-year lease. But the CBO scoring methodology actually skews the true costs in favor of short-term leasing.
Title 10 on FAR
Coupled with the above is another challenge to long-term leasing for commercial SATCOM: The GSA’s Federal Acquisition Regulation (FAR) Title 10 list, which dictates what services can be purchased on multi-year leases, today does not list satellite services. DoD should insist on satellites being on that list, and to start exercising the benefits and discounts that commercial companies have been enjoying for decades.
DoD is in a position to help make changes happen in concert with new Congressional leadership that have taken a keen interest in the acquisition debate. Without active DoD support, high prices for commercial SATCOM are here to stay.