Better-buying Initiative for Satcom Capacity Struggles for Traction

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WASHINGTON — More than three months after being directed by Congress to explore new ways of procuring commercial satellite capacity using an unusual and specially authorized funding account, the U.S. Defense Department is struggling to make headway on the initiative.

In the 2015 National Defense Authorization Act, Congress directed the Pentagon to look for new and more cost-effective ways to buy commercial satellite services. The bill instructed the department to provide incentives for industry to participate in a pilot program to explore ideas such as keeping commercial surge capacity available to respond to military contingencies.

To fund the initiative, Congress authorized the department to create a so-called working capital fund built on contributions from the military services. The services were authorized to collectively shift as much as $50 million per year into the working capital fund through fiscal year 2020.

Commercial satellite operators viewed the congressional initiative as a small victory in their long-running battle to change the way the Defense Department buys bandwidth. But officials with these companies now say that since the bill became law in December, they’ve heard little about the program.

The problem is two-fold, sources say. First, the Defense Department is struggling to make sense of how to structure a program that would use the working capital fund, which is an unusual account for technology acquisition. That fund would effectively draw resources from other priorities within the services.

Second, there are questions on the Hill and among industry about how the effort fits with other ongoing telecom acquisition reform efforts. The U.S. Air Force and the Defense Information Systems Agency (DISA), which procures commercial satellite capacity on behalf of the services and other Defense Department organizations, already have satellite communication reform efforts underway. In addition, the Air Force program, in particular, is not currently funded in the fiscal year 2016 budget.

“Unfortunately because of the way the pilot is constructed and the way working capital funds work, the match isn’t 100 percent perfect,” Doug Loverro, deputy assistant secretary of defense for space policy, told lawmakers March 26. “That is a very difficult match to make. We’re trying to work through it. … I think we’re anxious to get started.”

Jim Bridenstine
U.S. Rep. Jim Bridenstine. (R-Okla.) Credit: State Chamber of Oklahoma

Loverro was testifying during a hearing of the House Armed Services strategic forces subcommittee. He was specifically asked by Rep. Jim Bridenstine (R-Okla.), who has pushed hard for both civil government and defense agencies to make wider use of commercial space capabilities, for a program update and whether there was anything Congress could do to move things along.

Part of the problem, according to sources familiar with the military’s thinking, is that working capital funds tend to be filled by contributions from operations and maintenance accounts, which the military services say are already strained. The Air Force in particular, these sources say, would prefer to pursue its own commercial satellite pathfinder program, which was unveiled early last year and would more likely draw from research and development accounts.

In its first of five planned pathfinder projects, the Air Force leased the entire capacity of an aging commercial satellite owned by operator SES of Luxembourg and covering Africa and surrounding regions.

Funding for the second pathfinder, in which the Air Force would secure capacity on a commercial satellite prior to its launch, is still in question, but likely would not be an appropriate use of the working capital fund approach, sources said.

The law called for the U.S. secretary of defense to submit an initial report to Congress in March on whether acquiring satellite bandwidth through a working capital fund is effective or efficient. If not, the law calls on the Pentagon to explain how it plans to improve acquisition without the pilot program.

Loverro said work is underway for the initial report.