Defense Satellite Communications: DOD Needs Additional Information to Improve Procurements
Published: 2015-07-17T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: DOD depends on commercial SATCOM to support a variety of critical mission needs, from unmanned aerial vehicles and intelligence to voice and data for military personnel. In fiscal year 2011, the most recent information available, DOD spent over $1 billion leasing commercial SATCOM. In prior work, GAO found that some major DOD users of commercial satellite bandwidth were dissatisfied with DISA's acquisition process seeing it as too costly and lengthy. These users also indicated that the contracts used were too inflexible.
The Senate Armed Services Committee's report accompanying the National Defense Authorization Act for Fiscal Year 2014 included a provision for DOD to report on the future mix of military and commercial SATCOM and for GAO to review DOD's report, issued in August 2014. This report (1) assesses the extent to which DOD efficiently procures bandwidth, (2) analyzes the extent to which DOD has identified its future SATCOM requirements using DOD and commercial satellite services, as well as how those requirements will be met, and (3) identifies the steps DOD is taking to improve its procurements of commercial SATCOM.
To conduct this work, GAO reviewed DOD's reports, DOD SATCOM procurement guidance, prior GAO reports, and interviewed DOD officials.
section_title: What GAO Found
paragraphs: The Department of Defense's (DOD) procurement of commercial satellite communications (SATCOM), or bandwidth, is fragmented and inefficient. Historically, commercial SATCOM was used to augment military capability, but DOD has become increasingly reliant on commercial SATCOM to support ongoing U.S. military operations. DOD policy requires all of its components to procure commercial SATCOM through the Defense Information Systems Agency (DISA), but GAO found that some components are independently procuring SATCOM to meet their individual needs. DOD's most recent SATCOM usage report estimates that over 30 percent of commercial SATCOM is bought independently by DOD components, even though DOD found the average cost of commercial SATCOM bought through DISA is about 16 percent lower than independently bought commercial SATCOM. Fragmentation limits opportunities for DOD to bundle purchases, share services, and streamline its procurement of commercial SATCOM.
DOD recently completed two studies aimed at identifying the appropriate future mix of military and commercial SATCOM and predicting future SATCOM needs, however, the reports are partially based on incomplete data. First, the 2014 Satellite Communications Strategy Report did not identify the appropriate future mix of military and commercial SATCOM; rather, it outlined a plan that, if successful, may allow DOD to do so at a later time. Second, the 2014 Mix of Media Report based its predictions of future SATCOM requirements and demand on DOD's SATCOM Database, which DOD officials acknowledge lacks comprehensive usage and demand data.
DOD is taking steps to improve its SATCOM procurement and address challenges through “pathfinder” efforts aimed at identifying short- and long-term options. For example, DOD intends to study the potential benefits of using innovative contracting approaches as it procures military and commercial SATCOM, and refine its understanding of DOD's global SATCOM requirements. However, it may be several years before DOD is able to evaluate the results of its pathfinder efforts. For example, all of the 10 pathfinders planned or already underway are expected to be completed in or beyond fiscal year 2017. DOD's efforts to improve its procurement of military and commercial SATCOM will also be hampered by two long-standing challenges—lack of knowledge of what DOD is spending on commercial SATCOM and resistance to centralized management of SATCOM procurement—both of which GAO reported on and made recommendations to improve in 2003—regarding commercial SATCOM. Specifically, GAO recommended that DOD strengthen its capacity to provide accurate and complete analyses of commercial bandwidth spending and implement a strategic management framework for improving the acquisition of commercial bandwidth. DOD generally concurred with GAO's 2003 recommendations and developed a plan to address them, but none of DOD's corrective actions was carried out as intended. These challenges are commonly faced by organizations seeking to strategically source procurements of services, but they can be overcome by employing best practices, which include conducting detailed spend analyses and centralized management of service procurements to identify procurement inefficiencies and opportunities.
section_title: What GAO Recommends
paragraphs: GAO recommends that DOD (1) enforce current policy requiring DISA to acquire all commercial SATCOM; (2) conduct a spend analysis identifying procurement inefficiencies and opportunities; and (3) assess whether further centralization of commercial SATCOM procurement could be beneficial. DOD concurred.

section_title: Letter
paragraphs: The Department of Defense (DOD) leases commercial satellite  communications (SATCOM) to support a variety of critical mission needs,  such as surveillance being performed by unmanned aerial vehicles and  communications between commanders and field units. DOD currently  meets these needs through a mix of military and commercial SATCOM to  support land, sea, air, and space operations. Historically, DOD leased  commercial SATCOM services to augment military capacity; however,  DOD has become increasingly reliant upon commercial SATCOM to  support ongoing U.S. military operations. Commercial SATCOM services  now represent a significant portion of the DOD SATCOM architecture. For  fiscal year 2011, DOD reported it spent over $1 billion to lease SATCOM  services from commercial providers.
The Senate Armed Services Committee, in its report accompanying S.  1197, a bill for the National Defense Authorization Act (NDAA) for Fiscal  Year 2014, directed the Secretary of Defense to provide a report detailing  a 5-, 10-, and 25-year strategy for using a mix of DOD and commercial  satellite bandwidth. The committee’s report also directed DOD to investigate alternative methods for procuring commercially supplied  bandwidth. The department issued its report in August 2014.
Additionally, the committee’s report included a provision for GAO to  review and report on DOD’s acquisition strategy. As discussed with your  staff, we included in our review recent DOD actions to identify a mix of  satellite services. The scope of our work also includes follow up on prior  reviews which identified inefficiencies and customer dissatisfaction in  procurements of satellite communications bandwidth. assessed the extent to which DOD efficiently procures bandwidth, (2)  analyzed the extent to which DOD has identified its future SATCOM  requirements, as well as how those requirements will be met using DOD  and commercial satellite services, (3) identified the steps, if any, DOD is  taking to improve its procurements of commercial SATCOM.
Specifically, we (1)
To assess the extent to which DOD efficiently procures bandwidth and  assess the extent to which DOD has identified its future SATCOM  requirements, we reviewed DOD guidance and recent DOD studies and  reports to identify criteria for procuring commercial satellite services as  well as for evidence DOD has identified its future SATCOM requirements.  Specifically, we reviewed Chairman of the Joint Chiefs of Staff Instruction  (CJCSI) 6250.01E which provides high-level operational policy, guidance,  and procedures for the acquisition, planning, management, and use of  satellite communications for DOD. Defense Information Systems Agency (DISA), the U.S. Strategic  Command, DOD’s Chief Information Officer, Joint Staff, Combatant  Commands, and the military services to obtain, from their perspective,   Additionally, we reviewed recent DOD  how DOD procures bandwidth.
GAO, Satellite Communications: Strategic Approach Needed for DOD’s Procurement of  Commercial Satellite Bandwidth, GAO-04-206 (Washington, D.C.: Dec. 10, 2003); and  Department of Defense Actions to Modify its Commercial Communications Satellite  Services Procurement Process, GAO-06-480R (Washington, D.C.: Apr. 17, 2006).
Chairman of the Joint Chiefs of Staff Instruction, Subject: Satellite Communications  CJCSI 6250.01E (Mar.14, 2013). studies and reports, such as its August 2014 Satellite Communications  Strategy Report (Strategy Report), the Fiscal Year 2011 Commercial  Satellite Communications Usage Report (Usage Report), as well as  DISA’s April 2013 Commercial Satellite Communications Analysis of  Alternatives Final Report, in which past and current acquisition strategies  are described. We then compared these acquisition strategies to the  prescribed CJCSI procurement policy. Additionally, we reviewed DISA’s  DOD Satellite Communications Mix of Media Study, which examined the  planned mix of DOD and commercial SATCOM to support user  requirements for the 2018 through 2030 time frame, to ascertain whether  or not DOD had identified its future SATCOM requirements, as well as  how those requirements will be met using DOD and commercial  SATCOM. Further, we reviewed our prior reports on DOD’s procurement  of commercial SATCOM to provide an update. To assess the reliability of  the data presented in DOD’s Strategy Report, Usage Report, and Mix of  Media Report used to identify future SATCOM requirements, we  interviewed agency officials about data quality control procedures and  reviewed relevant documentation. We noted that there may be limitations  in the data in terms of its completeness. However, we determined that the  data are sufficiently reliable to identify a portion of the SATCOM DOD  procures.
GAO, Best Practices: Taking a Strategic Approach Could Improve DOD’s Acquisition of  Services, GAO-02-230 (Washington, D.C: Jan. 18, 2002); Strategic Sourcing: Improved  and Expanded Use Could Save Billions in Annual Procurement Costs, GAO-12-919  (Washington, D.C: Sept. 20, 2012); and Strategic Sourcing: Leading Commercial  Practices Can Help Federal Agencies Increase Savings When Acquiring Services,  GAO-13-417 (Washington, D.C: Apr. 15, 2013).
Final Report, in which DOD commercial SATCOM reform initiatives and  procurement alternatives are described. We interviewed representatives  from the offices of the Undersecretary of Defense for Acquisition,  Technology, and Logistics; DOD’s Chief Information Officer; Joint Chiefs  of Staff; office of the Secretary of Defense, Cost Assessment and  Program Evaluation; the Defense Information Systems Agency; and the  office of the Executive Agent for Space, to obtain, from their perspective,  initiatives DOD is undertaking to improve the acquisition and  management of commercial SATCOM and the associated challenges. We  then compared these efforts to leading commercial companies’ strategic  sourcing best practices for acquiring services.
We conducted this performance audit from March 2014 to July 2015 in  accordance with generally accepted government audit standards. These  standards require that we plan and perform the audit to obtain sufficient,  appropriate evidence to provide a reasonable basis for our findings and  conclusions based on our audit objectives. We believe that the evidence  obtained provides a reasonable basis for our findings and conclusions  based on our objectives.
subsections: section_title: Background
paragraphs: DOD currently uses both military and commercial SATCOM to meet its  global communications requirements. DOD leases commercial SATCOM  to meet outstanding military SATCOM requirements, to satisfy users who  need a disproportionate share of military satellite resources, and to  continue to provide capability to the military services using commercial- band-only equipment.
The military SATCOM architecture consists of three segments: a  protected segment that provides secure, jam resistant communications; a  wideband segment, which supports Army mobile ground terminals and  Navy ships and submarines, among other things; and a narrowband  segment, which provides complementary capability to the other  segments, such as beyond line-of-sight secure tactical communications  capabilities. In comparison, the commercial SATCOM architecture  consists of two segments—fixed and mobile satellite services—which  provide functions similar to the military wideband and narrowband  segments, respectively. There is no commercial counterpart to the military  protected segment.
DOD leases commercial SATCOM primarily though the Defense  Information Systems Agency. DISA does not procure commercial  SATCOM directly from satellite service providers; instead it buys  commercial SATCOM through several competitively selected vendors,  which in turn compete for work among individual service providers.
Before September 11, 2001, the majority of DOD’s SATCOM capacity  was provided by the Defense Satellite Communications System Phase III  (DSCS III) program, a five-satellite military constellation. DSCS III  capability was augmented by commercial SATCOM in support of US  military operations abroad, such as Operation Desert Storm, and  humanitarian relief efforts. The Wideband Global SATCOM (WGS)  satellite system began replacing DSCS III in 2007, and each satellite  provides about 10 times the capacity of its predecessor.
subsections: section_title: Prior GAO Findings on Procurements of Commercial Satellite Bandwidth Services
paragraphs: In 2003, we found that while the process for acquiring commercial  satellite bandwidth is fair to DOD’s vendors and their subcontractors,  some major DOD users of commercial satellite bandwidth services were   They viewed the process as being too  dissatisfied with DISA’s process.lengthy, particularly for time-critical military operations, and they believed  that the cost was too high. They also indicated that the contracts resulting  from the process were often too inflexible. As a result, some users were  bypassing the DISA process, either by formally obtaining a waiver or by  procuring services without a waiver. By allowing users to bypass the  DISA waiver process, DOD was hampering its ability to ensure that its  communications networks were interoperable and to minimize  redundancies.
We also reported that DOD did not know exactly how much it was  spending on commercial satellite bandwidth services, nor did it know  much about its service providers or whether customer needs were really  being satisfied. Without this knowledge, DOD could not take steps to  leverage its buying power, even though it was the largest customer for  commercial satellite bandwidth. Moreover, neither DOD nor DISA were  making a concerted effort to collect forecasts of bandwidth needs from  users and ensuring those needs could be met by the commercial sector.  These are also important steps toward optimizing DOD’s spending.
We concluded that if DISA was to remain as DOD’s primary agent to  acquire satellite bandwidth, it must implement a more strategic  management approach—one that ensured that services could be  acquired in a fair, timely, and cost-effective way that met users’ needs.  Doing so would be a considerable challenge, however, given the  environment at that time and the potential resistance within DISA and  from its users. Commitment was needed from senior leaders within DISA  and DOD to overcome challenges associated with implementing a  strategic approach.
Thus, we specifically recommended DOD implement a strategic  management framework for improving the acquisition of commercial  bandwidth, that, among other things, inventories current and potential  users of commercial bandwidth to determine their existing and long-term  requirements; identifies and exploits opportunities to consolidate  bandwidth requirements of combatant commanders, the military services,  and defense agencies; and adopt commonly used commercial practices,  such as conducting spend analyses and negotiating pricing discounts  based on overall DOD volume, to strengthen DOD’s position to acquire  bandwidth; and finally, improve the current funding structure by  considering new funding approaches such as centralized funding of  commercial bandwidth, and seeking legislative authority for multi-year  procurements.
Our recommendations were based on practices of organizations that  have successfully applied strategic sourcing techniques to their  procurements of services. 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.
Since our 2003 review, we have updated this work and found that leading  companies still adhered to principles such as centralized management for  procurements of services but also have been able to obtain considerable  savings in their purchases of services by intensely analyzing their  spending patterns and tailoring their procurement tactics to fit a particular  service, depending on its complexity and the number of available  suppliers. For a service such as commercial bandwidth, for example,  companies typically leverage scale and volume across their  organizations, use fixed price contracts, identify market trends to target  savings opportunities, develop procurement catalogs with pre-negotiated  prices for some services, and vary bidding parameters such as volume,  scale, different contract lengths in order to find new ways to reduce costs.
At the time of our 2003 review, DOD generally agreed with our  recommendations. As part of our 2006 review, we found that DOD had  taken several actions to develop a new approach for procuring   For example, it developed an approach to  commercial satellite services. embrace strategic sourcing techniques; it analyzed the costs and benefits  of different procurement options; it made changes to its requirements and  provisioning processes to improve responsiveness and aggregate  bandwidth and it began seeking feedback from industry on different  contracting approaches. Additional actions DOD has taken since our  2003 and 2006 reports, and the status of these actions, are discussed  later in this report.
section_title: DOD Procurement of Commercial Satellite Bandwidth Is a Fragmented, Inefficient Process
paragraphs: Though actions were taken in response to our earlier reviews of  procurements of commercial SATCOM and DOD has embraced the need  to be more strategic in its procurements of bandwidth, DOD is still  challenged by a fragmented and inefficient process, similar to our 2003  findings, as the process has been overwhelmed by the demands of recent  military operations, among other factors.
DOD has an agency-wide acquisition policy that requires DISA to procure  all commercial SATCOM. DOD has not enforced this policy, however,  which has resulted in a procurement approach that is largely fragmented.  That is, some DOD components independently procure commercial  SATCOM to meet their individual needs, rather than relying on DISA. A  recent Air Force Space Command study found that despite DOD’s high  dependency on commercial SATCOM to fill significant capability gaps for  its warfighters, the department continues to procure commercial  SATCOM inefficiently—purchasing commercial SATCOM on the spot  market by various DOD components and managed in isolation from one  another.  This has resulted in commanders having limited situational  awareness, control, and oversight of the commercial SATCOM resources.  Additionally, these procurements limit opportunities for sharing  commercial SATCOM among components and for creating savings by  streamlining purchases.
More specifically, guidance from the Joint Chiefs of Staff (Joint Chiefs)  states DISA is to procure commercial SATCOM for all DOD customers.  Once procured, U.S. Strategic Command (Strategic Command), the DOD  agency responsible for providing satellite capability for military operations,  assumes operational responsibility of the commercial SATCOM. Although  this policy sets the foundation for a centralized commercial SATCOM  acquisition and management approach, according to DISA and Strategic  Command officials, neither entity has enforcement power to ensure the  combatant commands and military services adhere to it. According to  DOD officials, some combatant commands and military services believe  they can acquire commercial SATCOM faster, better, and cheaper than  DISA.
When DOD components procure commercial SATCOM outside of the  DISA process, the department ends up paying more than needed for  commercial SATCOM. For example, DOD reported in its most recent  commercial SATCOM usage report that the average cost for commercial  capacity leased though DISA was 16 percent lower than comparable  services not acquired through DISA.report, approximately $280 million or about 32 percent of fixed satellite  commercial SATCOM services was procured outside of DISA, in conflict  with current DOD policy. As shown in figure 1 below, a significant portion   Additionally, according to the same  of commercial SATCOM is procured independently by DOD components,  and not through DISA, as DOD policy requires. This fragmented approach  to acquiring commercial SATCOM places DOD at risk of not leveraging its  own buying power through efficiencies, such as bundling acquisitions.
Although adherence to the Joint Chiefs guidance to procure commercial  SATCOM through DISA has improved in recent years, as shown in figure  1, according to DOD officials, some DOD users still view the requirement  as cumbersome and bureaucratic.
Since 2001, four specific events have contributed to fragmentation in  DOD’s commercial SATCOM acquisitions.
First, following September 11, 2001, the U.S. military experienced a  dramatic increase in forces supporting U.S. military Operation  Enduring Freedom in Afghanistan and Iraqi Freedom in Iraq. To  support these efforts, DOD needed significantly more SATCOM  capability to support military operations. From 2000 to 2011, DOD  reported that its reliance on commercial SATCOM rose by over 800  percent.
Second, prior to the first Wideband Global SATCOM satellite launch in  2007, DOD had limited SATCOM capacity through DSCS III in the  Middle East region. The buildup in forces in Afghanistan and Iraq,  combined with the lack of on-orbit WGS capability, resulted in several  combatant commands and military services investing in commercial- band-only end user equipment to support ongoing military operations.
Third, DOD deployed new weapon systems, such as unmanned aerial  vehicles and other intelligence, surveillance, and reconnaissance  platforms that were originally designed to work with commercial  systems. Because these platforms consume large amounts of  bandwidth, support high-priority missions, and will only operate with  commercial band services, commercial SATCOM procurement was  further fragmented.
Finally, the Congress made supplemental funds available to the  combatant commands and military services in an effort to offset the  cost of increased military operations, which resulted in those  commands and military services procuring commercial SATCOM on a  piecemeal basis.
With few exceptions, DOD does not currently budget funds to acquire  commercial SATCOM. Instead, it is the responsibility of the military  services to plan, arrange, and fund commercial SATCOM acquisitions— typically utilizing supplemental funds. According to DOD officials, when  using supplemental funds to purchase commercial bandwidth during  times of conflict, efficiency is not the primary concern. While we recognize  DOD is often confronted with addressing immediate needs to ensure  mission effectiveness, particularly in times of conflict, utilizing a central  point of contact could better position DOD to not only meet mission needs  but to do so both effectively and efficiently. Supplemental funding allows  DOD components the flexibility to acquire commercial SATCOM at their  discretion, but it also impedes centralized, multi-year acquisitions, and  hinders DOD’s ability to manage military and commercial SATCOM as a  whole. DOD’s most recent commercial SATCOM usage report stated that  the costs of the known DOD contracts for fixed satellite services during  the reporting period totaled about $875 million. Of this, an estimated 70  percent was paid for with supplemental funds, for a total of about $613  million.
Over the past decade, several entities have recommended that DOD  move toward a more strategic approach for commercial SATCOM  procurement. In addition to our 2003 work, for example, the Defense  Business Board found in 2013 that DOD’s strategy and management  structure for procuring bandwidth was not optimized and recommended  that DOD designate a single lead organization for overall satellite   Specifically, the report recommended that  communication strategy. DOD designate and resource a single organization, possibly DISA, to  acquire and manage all SATCOM assets under a managed service type  approach in the same manner that the Defense Logistics Agency is a  one-stop shop for the military services common logistical commodities.  Under this construct, all commercial SATCOM acquisition and  management would be handled in a managed service type approach, with  the designated organization maintaining an inventory of available  resources, ensure their disciplined use, and procure SATCOM resources  in manner to obtain the best value. Additionally, in 2013, executives from  five leading commercial satellite operators co-authored a paper that  reiterated the findings of our prior work—that one single focal point would  be better positioned to determine how to best meet the overall demand  for SATCOM.
section_title: DOD Studies on SATCOM Requirements Provide Data That Can Help Improve Procurements, but There Are Shortcomings
paragraphs: DOD’s recent studies on SATCOM requirements provide data that are  important to understanding where DOD is headed in terms of its demand  for SATCOM and how much it should rely on purchases of commercial  SATCOM as opposed to military communications satellites. But there are  shortcomings in these studies that limit DOD’s understanding of its  requirements. Specifically, in its congressionally mandated 2014 Satellite  Communication Strategy Report (Strategy Report), DOD did not identify a  specific mix of military and commercial SATCOM to meet its needs, but it  was able to outline a strategy that may allow DOD to project the  appropriate military/commercial mix in the future. Additionally, the  Strategy Report determined that DOD should continue to maximize the  use of its military satellites and supplement with commercial SATCOM  only when military SATCOM is unavailable. At the request of the Strategic  Command, DISA also conducted a study looking into the optimal mix of  military and commercial SATCOM—its 2014 Mix of Media Report (Media  Report)—which indicated DOD demand for SATCOM is growing, but  expected capacity will remain flat, suggesting military capability will need  to be significantly supplemented with commercial SATCOM in the  future. The Media Report also indicated that DOD collects information to  assist in predictions about future commercial SATCOM needs, but the  database on which it bases these predictions is incomplete.
subsections: section_title: DOD’s 2014 Strategy Report Outlines Plans to Determine Optimal Mix of Military and Commercial Satellite Communications
paragraphs: DOD prepared its 2014 Strategy Report in response to committee  direction that DOD provide a 5-, 10-, and 25-year strategy for using an  appropriate mix of military and commercial SATCOM. Due to shortfalls in  DOD’s current processes, including demand prediction, funding, and  resource utilization, DOD did not identify a specific mix of military and  commercial SATCOM to meet its needs, though it did determine that  given the lower cost of military over commercial SATCOM, that military  SATCOM should be maximized. The Strategy Report also presented  plans which, if implemented, may enable DOD to determine the optimal  mix of military and commercial SATCOM in the future. For example,  DOD’s 5-year strategy calls for improving forecasting demand tools to  enable better predictions; monitoring the impact of diminishing  supplemental funding on commercial SATCOM leases; identifying stable  requirements; and refining or developing tools to compare predicted  versus actual SATCOM use. DOD’s 10-year strategy is to continue to  refine the demand prediction methods, and evaluate the successes and  failures of the 5-year strategy. DOD contends that due to uncertainties in  future SATCOM demand and funding, a 25-year strategy is not practical.
Historically, DOD’s preference for military over commercial SATCOM was  driven by military SATCOM’s superior technology and capabilities. After  the September 11, 2001, terrorist attacks, however, DOD’s operations  supporting overseas contingency missions triggered a dramatic growth in  commercial SATCOM demand. As military demand for commercial  SATCOM grew, DOD decision makers struggled to define the appropriate  mix of military and commercial SATCOM based on capability and cost. In  its 2014 Strategy Report, DOD determined its best strategy is to  maximize the use of military satellites. DOD identified, however, three  conditions under which it would use commercial services: when military  satellite bandwidth is unavailable, when user demand exceeds military  satellite capability, or when end user ground terminals will only operate  with commercial satellites.
DOD’s determination to rely on military SATCOM as much as possible is  based on several factors, including a military versus commercial cost  comparison, protection and resiliency features of military satellites, and  guidance provided in Senate Report 133-44. DOD calculated the cost of  military SATCOM by including associated costs in addition to actual  satellites costs; for example, the military SATCOM cost included  acquisition and launch costs, in addition to those costs of military satellite  operations. DOD then compared this value to the average cost of leasing  commercial bandwidth, and determined that acquiring military bandwidth  is less expensive than leasing commercial services, concluding that it  would continue to use military SATCOM to the greatest extent possible.  DOD compared the average Wideband Global SATCOM (WGS) costs to  an average commercial lease value. We did not evaluate DOD’s cost  analysis, but commercial SATCOM providers have been critical of  previous analyses because they believe the cost of commercial services  is overstated. For example, in 2013, executives from five leading  commercial satellite providers authored a white paper on the ways to  make DOD a better buyer of commercial SATCOM. According to this  paper, DOD leases commercial SATCOM using high cost, short-term  contracts, thereby overstating the costs of commercial services. The  paper further noted that if DOD procured commercial SATCOM using a  long-term baseline approach, the costs would be substantially lower. In  addition to the cost comparison results, DOD reported that commercial  SATCOM is not all designed for military use and some do not include the  same capabilities as military SATCOM, such as encryption and jamming  protection. DOD’s plan to use military SATCOM to the greatest extent  possible is consistent with Senate Report 133-44 guidance that  alternative procurement arrangements, such as leasing commercial  services, should only be pursued when military or other government  satellites are unavailable or commercial SATCOM cost less.
section_title: DOD Study Aimed at Identifying SATCOM Needs Was Partially Based on Incomplete Information
paragraphs: In September 2014, DISA completed its Media Report, which was  intended to provide a representation of future SATCOM demand and  capacity in a planning scenario, but the data on which the SATCOM  demand predictions in that study were based were incomplete. At the  request of the Strategic Command, DISA conducted a study to predict  demand and capacity at three future time frames; 2018, 2025, and 2030.  The Media Report predicted increasing SATCOM demand with relatively  little increase in capacity, resulting in a shortage of military bandwidth at  all three future timeframes. The report derived baseline capabilities from  current programs of record, and used DOD’s SATCOM Database   DOD then  (Database) to identify requirements for those programs.applied a force structure scenario to those requirements to estimate  future SATCOM needs.
DOD collects information on both military and commercial SATCOM  requirements, but some information on the commercial side is lacking  since some DOD users bypass DISA’s process because, according to  DOD officials, they view it as cumbersome and bureaucratic. As stated  previously, DOD’s most recent commercial SATCOM usage report  indicates that roughly 32 percent of fixed satellite services are procured  outside of DISA. According to DOD officials, some users who procure  commercial SATCOM outside of DISA do not enter commercial  requirements into the Database. These officials said that it is not known  how often this occurs, and therefore, it is not known to what extent  information is being excluded from DOD’s Database. DOD uses the  Database to predict future commercial SATCOM demand, so complete  data is important to ensuring realistic prediction. Moreover, standards for  internal control in the federal government state that program managers  need operational data to determine whether they are making effective and  efficient use of resources, among other things. Missing data can skew  DOD predictions of SATCOM demand, leading to SATCOM procurement  decisions that are based on flawed information. Enforcing DOD’s agency- wide acquisition policy that requires DISA to procure all commercial  SATCOM could better position DOD to capture all SATCOM requirements  in its database and thus, be better informed in making predictions of  demand and procurement spending decisions.
section_title: Other Steps Being Taken to Improve Commercial SATCOM Procurement, but Challenges Remain
paragraphs: DOD is taking other actions to better understand its commercial and  military SATCOM needs and improve management, but as DOD moves  forward with its plans to reform its commercial SATCOM acquisition and  management processes, the department faces challenges, the most  prominent being a lack of critical data and resistance to centralizing  procurements.
DOD has recently initiated a number of small scale approaches, known  as pathfinders, to address fiscal, operational, and policy challenges that  could potentially improve commercial SATCOM acquisition and  management. DOD has separated the pathfinders into two primary  categories: DISA acquisition and Air Force pathfinders. The DISA  acquisition pathfinders are intended to help DOD understand its global  commercial SATCOM requirements and analyze alternative commercial  leases in the short-term. The Air Force pathfinders are intended to  investigate better ways to buy commercial SATCOM in the long term.  Currently, DOD and DISA have 10 pathfinder projects in various stages,  as illustrated by table 1 below.
The pathfinders are intended to identify various opportunities to improve  DOD procurement of commercial and military SATCOM, but it will be  several years before DOD gains enough information and experience from  its pathfinder efforts to determine what, if any, changes to make to its  acquisition approach. None of the five DISA pathfinder initiatives is  expected to be completed until fiscal year 2017 and only one of the Air  Force pathfinder initiatives is currently under way—with an expected  completion date sometime in fiscal year 2019. The remaining Air Force  pathfinders are expected to be initiated on a phased implementation  approach, ranging from fiscal years 2016 through 2019.
In addition to the pathfinder efforts, in April 2013, DOD’s Chief Information  Officer and DISA produced an analysis of alternatives identifying six  alternatives for acquiring commercial SATCOM for the region with the  largest share of commercial SATCOM expenditures. DOD currently  uses costly small scale, short duration commercial SATCOM leases. The  analysis of alternatives examined opportunities for DOD to save on  commercial SATCOM leases through longer-term contracts on existing  commercial satellites, capital lease or purchase of commercial high  capacity satellites, and procurement of additional military satellites. The  focus of the analysis was on life-cycle costs, comparing the current  leasing practice, or baseline, with these and other alternatives that could  result in savings to DOD. For example, according to DOD, the use of  longer duration, higher capacity operating leases could save about $1.5  billion compared to the current baseline. DISA also estimated that if DOD  used a capital lease or purchase of a single band satellite based on  commercially available technology, the department could avoid costs of  about $4.5 billion over 15 years compared to the current baseline. This  was the lowest cost alternative identified by the analysis.
Lastly, DOD is planning to conduct an additional analysis of alternatives  to determine the replenishment strategy for its wideband military  SATCOM, the WGS satellite. The WGS analysis is not expected to begin  until fiscal year 2017, but DOD officials are optimistic that the resulting  investments could mitigate DOD’s future reliance on commercial  SATCOM, and could also help the department maximize its military  SATCOM capability and usage.
While DOD’s recent actions represent good steps, two long-standing  challenges will make it difficult to make meaningful changes. First, DOD  still does not know what it spends annually on either military or  commercial SATCOM. Without this knowledge, DOD cannot effectively  manage and plan for its SATCOM procurement. The studies performed to  date are based on incomplete and older data. More importantly, even  when combined with the pathfinder initiatives focused on requirements  and utilization, the studies represent just a portion of what leading  companies typically analyze when seeking to make their procurements of  services more efficient. On a broad level, for instance, our body of work  on acquisitions has found that leading companies conduct spend  analyses of all their services procurements each year to review how much  their company has spent each year, what was bought, from whom it was  bought, and who was purchasing it. The analyses identify where  numerous suppliers are providing similar goods and services—often at  varying prices—and where purchasing costs can be reduced and  performance improved by better leveraging buying power and reducing  the number of suppliers. These analyses are subjected to an extensive  review for accuracy and consistency, and steps are taken to standardize  the data in the same format, which involves creation of uniform  purchasing codes. For specific categories of spending, companies assess  such factors as current and projected requirements, volume, cyclicality of  demand, risk, the services that the market is able to provide, supplier  base competition trends, the company’s relative buying power, and  market price trends.
Second, centralized management of service procurements is a leading  practice that DOD has already embraced. But it has not been able to  enforce it for a variety of reasons, notably increasing demand for  bandwidth to conduct military operations, resistance to using the  centralized process, and the fact that the military services have the  authority to fund their own procurements.  While DISA is responsible for  acquiring all commercial SATCOM services for DOD, it does not have  oversight or control over commercial SATCOM procured outside DISA.  Thus, at present, there is no single person or organization responsible for  balancing needs with wants and ensuring coordination among the many  organizations involved with the military and commercial SATCOM  acquisition process. Strategic Command officials stated they support a  centrally managed commercial SATCOM procurement approach;  however, the Strategic Command lacks the enforcement ability, funding,  and situational awareness to centrally manage.
The leading organizations we have studied similarly encountered  resistance to centralizing procurements of services. But without  centralizing, companies ran the risk that different parts of the organization  could be unwittingly buying the same item or service. They relied on  clearly defined and communicated policies to ensure users did not  engage suppliers without procurement organization involvement as well  as tools that could enable cost data to be shared globally. Some  companies focused more on centralizing knowledge on procurements or  ensuring an approved contract was used than on creating a centralized  organization.
If these hurdles can be overcome and the pathfinders prove successful,  adopting additional practices could better position DOD to optimize its  procurements. Our studies of leading organizations have found that in  addition to maintaining spend visibility and centralizing procurements,  companies found it was necessary to tailor buying tactics to specific  categories of services. They also regularly reviewed strategies and tactics  to adapt to market trends. In addition, they focused on total cost of  ownership—making a holistic purchase decision by considering factors  other than price, for instance, risk to the company’s mission, innovation,  operational performance, and demand management. For the long term,  the Defense Business Board also suggested establishing a governance  and usage plan for both military satellites and commercial satellites and  facilitating future governance by designating a single DOD point for  procuring all military and commercial SATCOM assets and services.
section_title: Conclusions
paragraphs: DOD’s use of SATCOM is critical to military operations worldwide and its  dependency is expected to increase over the next decade. DOD’s long- standing history of supplementing military communications with  commercial SATCOM has led to a fragmented and individualized  approach to contracting for commercial satellite services across the  military services and combatant commands. This approach is inefficient  and costly. Fragmentation has remained problematic since our earlier  reviews partly due to pressing demands and the availability of  supplemental funds. While DISA and the Air Force are taking steps to  transform the commercial SATCOM management and acquisition  process, these efforts will be hampered by the lack of complete spending  and usage data as well as resistance from DOD entities that prefer the  current acquisition process so they can individually control their own  SATCOM. Utilizing strategic sourcing best practices for DOD’s use of  commercial and military satellite bandwidth, beginning with robust  analyses of spending and better enforcement of centralized management,  would increase chances of success for DOD’s improvement efforts.
section_title: Recommendations for Executive Action
paragraphs: In order to improve DOD’s procurement of SATCOM, we are making the  following three recommendations. To address DOD’s fragmented  procurement of commercial SATCOM, to better position DOD to identify  needs, manage and acquire commercial SATCOM, and to address the  incomplete data on commercial SATCOM spending and demand, we  recommend that the Secretary of Defense, in coordination with the Joint  Chiefs, U.S. Strategic Command, combatant commands, military  services, and DISA, enforce current policy requiring DISA to acquire all  commercial SATCOM for DOD.
To better leverage DOD’s buying power and help DOD understand its  military and commercial SATCOM spending, and enable DOD to reform  its commercial SATCOM acquisition and management processes, we  recommend that the Secretary of Defense, in conjunction with the Air  Force and DISA, complement the pathfinder efforts by conducting the  following:
A spend analysis that identifies procurement inefficiencies and  opportunities to consolidate purchases. Specifically, the analysis  should identify how much is being spent for which services, who the  buyers are, who the suppliers are, duplicative contracts and  opportunities to aggregate demand, and where the opportunities are  for leveraged buying and other tactics to save money and improve  performance.
An assessment of whether further centralization of military and  commercial SATCOM procurement, such as the identification of a  single focal point within DOD to decide how to meet the overall  demand or a central procurement knowledge focal point, could further  save money and improve performance.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to DOD for comment. In its written  comments, DOD concurred with all three of our recommendations to  improve the department’s procurement of SATCOM. The comments are  reprinted in appendix I.
In concurring with our first recommendation, DOD stated that enforcing  current policy requiring DISA to procure all commercial SATCOM for DOD  makes the best use of taxpayer dollars and supports acquisitions that are  fully compliant with applicable laws and regulations. DOD also stated that  recently the Army, Air Force, and Navy have been working with DISA on  their follow-on commercial SATCOM contracts and once these contracts  are awarded, the department expects the percentage of total commercial  SATCOM acquired by DISA to be approximately 90 percent. Finally, the  department is currently reviewing and updating policy related to  commercial SATCOM acquisition with more specific language concerning  combatant command SATCOM procurements; updating and reinforcing  current policy in a DOD Instruction on SATCOM, which is expected to be  in effect in 2015; and is finalizing a Joint Concept of Operations intended  to improve the effectiveness and efficiency of DOD SATCOM operational  management.
In concurring with our second recommendation, DOD agreed that  complementing the pathfinder efforts with a spend analysis could help the  department understand its military and commercial SATCOM spending  and leverage its buying power. Specifically, DOD noted that it intends to  augment its pathfinder program and commercial SATCOM utilization  reporting to include the recommended spend analysis that identifies  procurement inefficiencies and opportunities to consolidate purchases.
In concurring with our third recommendation, DOD agreed that  undertaking an assessment of whether further centralization of military  and commercial SATCOM procurement would assist in enabling the  department to reform its commercial SATCOM acquisition and  management processes. The department noted that it intends to conduct  an analysis of alternatives for future wideband SATCOM in the fiscal year  2017 timeframe, considering both military and commercial SATCOM  components, to provide a thorough evaluation of cost and effectiveness  prior to any significant action changing how DOD procures wideband  SATCOM. DOD also stated that it will continue to gather data and  conduct analysis to improve commercial SATCOM acquisition.
We are sending copies of this report to the appropriate congressional  committees, the Secretary of Defense, the Secretary of the Air Force, the  Commander, U.S. Strategic Command, the Director, Defense Information  Systems Agency, and other interested parties. In addition, the report will  be available at no charge on the GAO website at http://www.gao.gov.
If you or your staff have any questions concerning this report, please  contact me at (202) 512-4841 or chaplainc@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this report. Key contributors to this report are listed in  appendix II.
section_title: Appendix I: Comments from the Department of Defense
section_title: Appendix II: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Art Gallegos, Assistant Director;  William Allbritton; Claire Buck; James Haynes; John Krump; Katherine  Lenane; Jay Tallon; and Gwyneth Woolwine made key contributions to  this report.