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Military Satellite Communications: DOD Needs to Review Requirements and
Strengthen Leasing Practices (Letter Report, 02/24/94, GAO/NSIAD-94-48).

Congress has urged the Pentagon to make greater use of commercial
satellites to reduce the cost of military communications.  Although the
Defense Department (DOD) is studying the issue, a new criterion that DOD
uses to set communication requirements has reduced general purpose
requirements by more than 40 percent.  In addition, core requirements
may be overstated because users may have favored military communications
that are provided at no direct cost to them.  General purpose
requirements may also be understated because users must pay for
commercial services through their units' budgets.  All these factors
reduce the potential use of commercial satellite services.  DOD's
current approach to leasing commercial satellite services is not
centrally managed and does not take advantage of economies of scale.
According to DOD, most of this leasing is done on an ad hoc basis.  In
addition, leasing individual circuits is costly, compared with packaging
them into larger quantities and using full satellite transponders that
have the capacity to handle multiple circuits.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  NSIAD-94-48
     TITLE:  Military Satellite Communications: DOD Needs to Review 
             Requirements and Strengthen Leasing Practices
      DATE:  02/24/94
   SUBJECT:  Leasing policies
             Defense contingency planning
             Defense procurement
             Defense communications operations
             Military satellites
             Defense cost control
             Systems architecture
             Communications equipment
             Equipment leases

             
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Cover
================================================================ COVER

Report to the Chairman, Subcommittee on Defense, Committee on
Appropriations, House of Representatives

February 1994

MILITARY SATELLITE COMMUNICATIONS
- DOD NEEDS TO REVIEW REQUIREMENTS
AND STRENGTHEN LEASING PRACTICES

GAO/NSIAD-94-48

Military Satellite Communications

Abbreviations
=============================================================== ABBREV

  DECCO - Defense Commercial Communications Office
  DOD - Department of Defense

Letter
=============================================================== LETTER

B-254391

February 24, 1994

The Honorable John P.  Murtha
Chairman, Subcommittee on Defense
Committee on Appropriations
House of Representatives

Dear Mr.  Chairman: 

In May 1992, at your request, we provided your Subcommittee a
statement for the record\1 that discussed the Department of Defense's
(DOD) projections for increased military satellite communication
requirements and DOD's expectations for greater use of commercial
satellite communications. 

This report is in response to your continuing interest in these
matters.  It discusses (1) a change in DOD's requirements that
reduces the potential for greater use of commercial satellite
communications and (2) inefficiencies in DOD's commercial satellite
leasing practices. 

--------------------
\1 Military Satellite Communications:  Potential for Greater Use of
Commercial Satellite Capabilities (GAO/T-NSIAD-92-39, May 22, 1992). 

   BACKGROUND
------------------------------------------------------------ Letter :1

During the past several years, the Congress has been critical of
DOD's management of military satellite communications--a primary
concern being high costs.  Congressional reports in 1989 and 1990
directed DOD to prepare a comprehensive, affordable architecture that
defined all satellite communication requirements and potential
solutions to satisfy the requirements. 

In November 1991, DOD published its military satellite communications
architecture study that identified several alternatives for
satisfying requirements, including the use of commercial
communication satellites.\2 Earlier, in February 1991, the White
House had established U.S.  commercial space policy guidelines
(National Space Policy
Directive 3) requiring U.S.  government agencies to use commercially
available space products and services to the fullest extent feasible. 
The policy was based on the presumption that potential large economic
benefits would result. 

The architecture study described two broad categories of
requirements--core and general purpose.  Core requirements (1) are
associated with critical communications for commanding and
controlling combatant forces in stressed environments;\3 (2)
generally call for satellites to be designed to military
specifications that would include an antijamming capability--a
costly, but essential, survivability feature; and (3) were relatively
small compared to the number of general purpose requirements. 
General purpose requirements (1) are associated with less critical or
less time-sensitive communications in unstressed environments that
involve, for example, transmissions of logistics, administrative, and
intelligence data and (2) do not call for highly jam-resistant
capabilities, making commercial communication satellites highly
suitable for satisfying such requirements. 

To explore greater use of commercial satellite communications, the
Congress provided DOD $15 million for fiscal year 1992.  The
rationale, as outlined in House Appropriations Committee Report
102-95, dated June 4, 1991, was that, excluding nuclear war, most DOD
communications take place in an unstressed environment and,
therefore, do not require special survivability features that are
provided by military satellites.  The report stated that advancements
in civilian communication satellite capacity, capability, and
reliability have made commercial satellites attractive and relatively
inexpensive.  The report also stated that, considering plans to
deploy the Milstar system for the most demanding military scenarios,
DOD must begin moving aggressively toward maximum use of commercial
satellite communication systems. 

DOD representatives informed us that in September 1992, the Office of
the Secretary of Defense awarded contracts to three companies to
study ways of increasing commercial satellite usage and to estimate
the related costs.  Subsequent indications from the contractors were
that commercial satellites are well-suited for satisfying general
purpose requirements.  DOD intends to use the study results in making
decisions on its communications architecture. 

Congressional concerns regarding high military satellite
communication costs may become even more important because in 1993,
DOD projected that its requirements for 1997 would be 75 percent
greater than it had projected in 1991.  Despite the decline in U.S. 
force levels, the Joint Staff stated that there is an increasing need
for information to be moved to, from, and around the battlefield
because of the (1) increased use of imagery and video
teleconferencing, (2) demands associated with high technology weapons
and sensors, and (3) importance of more timely data. 

--------------------
\2 We discussed DOD's architecture study and various alternatives in
a report entitled Military Satellite Communications:  Opportunity to
Save Billions of Dollars (GAO/NSIAD-93-216, July 9, 1993). 

\3 Stressed environments refer to the level of electronic jamming
that is expected or may be encountered. 

   RESULTS IN BRIEF
------------------------------------------------------------ Letter :2

Congressional directions and national policy emphasize greater use of
commercial satellite communications to reduce the cost of military
satellite communications.  In response to this guidance, DOD is
studying ways to increase its use of commercial satellite services. 
However, a new criterion used by DOD for establishing communication
requirements reduced general purpose requirements by over 40 percent. 
In addition, we noted, and DOD representatives acknowledged, that (1)
core requirements may be overstated because users may have favored
military communications that are provided at no direct cost to them
and (2) general purpose requirements may be understated because users
must pay for commercial services through their units' budgets.  These
factors reduce the potential for using commercial satellite
communication services. 

DOD's current approach to leasing commercial satellite communication
services is not centrally managed and does not take advantage of
economies of scale.  According to DOD, most of this leasing is
obtained on an ad hoc basis, reflecting the lack of an adequate plan
to obtain cost-effective services.  In addition, leasing individual
circuits is costly, compared with packaging them into larger
quantities and using full satellite transponders\4

that have the capacity to handle multiple circuits. 

--------------------
\4 The equipment, including receiver, transmitter, and antenna, on a
communications satellite that receives a signal from an earth
station, shifts the signal from the uplink to the downlink frequency,
and amplifies and retransmits the signal to another earth station or
stations. 

   REDUCED POTENTIAL FOR USING
   COMMERCIAL SATELLITES
------------------------------------------------------------ Letter :3

In 1991, DOD projected that its total 1997 satellite communication
requirements would be about 988 million bits per second\5 --850
million bits for general purpose and 138 million bits for core
requirements. 

In 1992, DOD began using additional criteria to define general
purpose and core requirements.  One new criterion involved users who
needed both antijam and non-antijam communications--referred to as
"collocated" requirements.  According to DOD representatives, many
users with these requirements can only operate and maintain one type
of communications terminal because of physical or affordability
reasons.  As a result, DOD presumed that terminals used to satisfy
collocated requirements needed to be antijam capable because at least
part of the terminals' operations might be in a jamming environment. 
DOD, therefore, defined all collocated requirements as core. 

In 1993, DOD projected its total 1997 requirements to be over 1.7
billion bits per second.  However, it reduced general purpose
requirements by over
40 percent from the 1991 projection of 850 million bits to 502
million bits while core requirements increased from 138 million bits
to 1,227 million bits.  A Defense Information Systems Agency analysis
estimated that about 300 million bits that would otherwise be general
purpose requirements were collocated with core requirements.  This
represented an additional amount that could be satisfied by
commercial satellites. 

Figure 1 compares the 1991 projection, which did not include
collocated requirements, to the 1993 projection, which did include
such requirements. 

   Figure 1:  DOD's 1991 and 1993
   Projections of 1997 Military
   Satellite Communication
   Requirements

   (See figure in printed
   edition.)

We discussed another factor with DOD representatives that could have
accounted for part of the changes in general purpose and core
requirements.  Military satellite communications are provided to
qualified users by service acquisition activities through central
accounts, at no direct charge, whereas commercial communication
services are leased and must be paid by the users through their
units' operations and maintenance accounts.  According to the DOD
representatives, the 1991 projection was made by Joint Staff and
combatant command staffs, but the 1993 projection was made based on
information from unit-level users.  Because these users have a vested
interest in their budgets, they may have favored military
communications when commercial services would have sufficed.  Thus,
for the 1993 projection, core requirements could be overstated and
general purpose requirements understated.  Joint Staff and Defense
Information Systems Agency representatives agreed that this situation
could have occurred. 

--------------------
\5 These requirements are measured in terms of throughput
capacity--the number of bits of information that can be passed
through the satellites per second. 

   INEFFICIENT COMMERCIAL
   SATELLITE LEASING PRACTICES
------------------------------------------------------------ Letter :4

DOD's approach to leasing commercial satellite communication services
is not centrally managed and does not take advantage of economies of
scale.  DOD recognizes that cost savings could be realized by
consolidating individual circuit leases into larger packages. 

Under DOD Directive 5105.19, the Defense Information Systems Agency
is responsible for acquiring commercial communication services for
DOD and other federal agencies, as directed.  The Agency does this
through its Defense Commercial Communications Office (DECCO)--an
industrial-funded activity that finances operations on a
fee-for-service basis.  In 1992, DECCO spent over $670 million on
more than 70,000 leases for all types of communication services. 
Although DECCO does not routinely identify what portion of annual
expenditures is for satellite services, the Agency estimated the
amount in 1991 to be $160 million. 

DECCO representatives informed us that despite the Agency's
responsibility under the DOD directive, it is not mandatory for all
DOD components to acquire commercial services through DECCO.  DOD
estimated that most commercial satellite services are obtained on an
ad hoc basis, bypassing DECCO, and are funded directly by the
activity acquiring the service.  An Agency study on the role of
commercial systems\6 stated that ad hoc leasing reflected the lack of
a coherent, consistent plan to obtain cost-efficient services and
recommended that a master plan be created for centralized system
engineering of DOD's acquisition and use of commercial satellite
communications. 

DECCO representatives also informed us that they have no way of
knowing or estimating the amount of satellite communication services
being leased directly by DOD components.  The Agency study stated
that although approximately 65 DOD circuits were routed on an
international satellite system, the U.S.  company associated with
this system believed that there were about 500 DOD circuits.  This
indicated that about 435 circuits were being acquired on an ad hoc
basis. 

Leasing circuits on an individual basis is costly, compared to
packaging them into large quantities.  According to the Agency study,
the markup on the cost of an individual circuit can be as much as 25
times the markup on the cost of an entire transponder, including the
necessary ground equipment.  The study recommended that commercial
circuit leases be more efficiently packaged to achieve cost savings
through bulk buying of transponder capacity.  Industry
representatives informed us that greater capacities and longer
leasing periods would result in significant savings--up to 30 percent
for a whole transponder that is leased for a year or more. 

--------------------
\6 Recommended Role For Commercial Satellite Communication Systems in
an Integrated Military Satellite Communications Architecture, Defense
Communications Agency (June 14, 1991).  On June 25, 1991, the Defense
Communications Agency's name was changed to the Defense Information
Systems Agency. 

   RECOMMENDATIONS
------------------------------------------------------------ Letter :5

We recommend that the Secretary of Defense review military satellite
communication requirements, considering the new criterion used for
making projections and the different means of paying for military and
commercial communications, to ensure that maximum consideration is
given to the use of commercial communication services. 

We also recommend that the Secretary of Defense strengthen commercial
satellite communication leasing practices by (1) identifying the
extent of commercial services being leased on an ad hoc basis by DOD
components; (2) establishing firm policy and procedures for DOD
components to coordinate their needs for these services through a
central organization, such as the Defense Commercial Communications
Office; and (3) directing that requests for commercial services be
consolidated into economical packages and long-term leases, to the
extent practical. 

   SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :6

We reviewed information associated with DOD's military satellite
communications, including the 1991 architecture study, requirements
data, directives, and correspondence.  In addition, we interviewed
several DOD representatives responsible for military satellite
communications at the Office of the Secretary of Defense, Joint
Staff, and the Defense Information Systems Agency.  We also
interviewed representatives at selected contractors' plants. 

As requested, we did not obtain written agency comments.  However, we
discussed the contents of this report with representatives from the
Office of the Assistant Secretary of Defense for Command, Control,
Communications, and Intelligence; Joint Staff; Department of the
Army; Department of the Navy; and Defense Information Systems Agency. 
The representatives agreed that (1) commercial satellites could
satisfy most of the general purpose requirements; (2) DOD's approach
to leasing commercial services could be more efficient, which could
result in lower costs; and (3) centrally managed leasing should be
emphasized. 

The representatives disagreed with our views concerning the reduced
potential for using commercial satellites, stating that our
requirements data was incorrect.  They agreed to provide additional
information to explain the matter.  However, based on the information
subsequently provided, our conclusion did not change.  This was
because our analysis showed that DOD had changed its definitions of
core and general purpose requirements in 1992.  Despite these
definition changes, a comparison of 1991 and 1993 requirements data
still showed the reduced potential. 

We performed our review between June 1992 and September 1993 in
accordance with generally accepted government auditing standards. 

---------------------------------------------------------- Letter :6.1

We are sending copies of this report to the Secretary of Defense; the
Director, Office of Management and Budget; and other interested
congressional committees.  We will also make copies available to
others upon request. 

This report was prepared under the direction of Thomas J.  Schulz,
Associate Director, Systems Development and Production Issues, who
may be reached on (202) 512-4841 if you have any questions about this
report.  Other major contributors to this report are Homer H. 
Thomson, Assistant Director; Pierre F.  Crosetto,
Evaluator-in-Charge; and
Brian J.  Lipman, Evaluator. 

Sincerely yours,

Louis J.  Rodrigues
Director, Systems Development
 and Production Issues

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