The satellite industry has for some time pushed the Department of Defense (DoD) to buy satcom more efficiently. Currently, the DoD only procures commercial satcom on a short-term, spot-market basis.
Most satellite communication services are funded with O&M dollars on an annual basis, often with option years. One year contracts simply do not allow for the economies of scale achievable when services are leased for multiple years. The Defense Business Board (DBB) recently recommended to the DoD that cost savings upwards of $150M annually could be achieved by long term leasing of satellite services, rather than its current practice of leasing on the spot market.
With sequestration and significant budget cuts, it would benefit the DoD to have the ability to buy services in this manner. To that end, Intelsat has urged Congress to authorize DoD to procure services for terms of up to ten years.
On June 5th, the House Armed Services passed H.R. 1960, the National Defense Authorization Act (NDAA) for FY14. While the bill did not specifically authorize DoD to make such investments, it will require the DoD to develop a strategy to lower the cost, through multi-year procurement of commercial satellite services.
We believe this to be a positive step toward the ability to commit to satellite services long term. The NDAA was passed by the full house during the week of June 10th, and will be marked up by the Senate Strategic Forces subcommittee the same week.
The DoD’s ability to lease satcom on a long term basis not only provides the economies of scale fitting for a budget constrained environment, but also would allow industry to better understand where and when to invest in needed capabilities. Commercial space operators are in a long-term relationship with the government, and they’re eager to serve. Making the satcom procurement process more efficient will benefit both parties and strengthen that relationship, and our country’s continued superiority in space.