DoD space agency changes course on satellite procurement in wake of Maxar’s protest

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GAO dismissed the protest after SDA agreed to cancel the solicitation and reopen a new one under a different contracting mechanism known as Other Transaction Authority. 

WASHINGTON — In response to a protest filed Oct. 8 by Maxar Technologies, the Defense Department’s Space Development Agency is canceling a solicitation issued Aug. 30 seeking bids for 126 satellites and will start over with a new procurement, the agency said Oct. 28.

SDA is pulling back the request for proposals (RFP) for the Transport Layer Tranche 1 — a mesh network of small communications satellites in low Earth orbit projected to start launching in 2024. 

The RFP drew a protest from Maxar which filed a complaint with the Government Accountability Office challenging the solicitation on grounds that the terms unfairly favored certain companies over others. “There was an appearance that we limited competition,” said SDA Director Derek Tournear.

GAO dismissed the protest after SDA agreed to cancel the solicitation and reopen a new one under a different contracting mechanism known as Other Transaction Authority.  A new solicitation was issued Oct. 28.

“While this is a shift from our earlier acquisition approach, OTAs generally allow for a more streamlined solicitation, evaluation, and contract award processes that is well suited for SDA,” said SDA spokesperson Jennifer Elzea.

“This change is not expected to substantially impact the delivery timeline, cost, or technical requirements for the Tranche 1 Transport Layer,” she said. “We will ensure that all competitors have time to submit their offers and the agency can evaluate them fully and fairly.”

OTAs give government agencies more flexibility to structure the proposal and evaluation. The Competition in Contracting Act does not apply to OTA deals so they are less likely to be protested. 

“We want to make sure that anyone that would like to bid and compete has the opportunity to submit a proposal to do so,” Tournear said.

Previously SDA had selected vendors and awarded contracts using the standard procurement process under the Federal Acquisition Regulation. “So this is a shift from our acquisition approach where we have focused on FAR-based acquisitions,” said Tournear. 

Like any government agency, SDA has authority to use different contracting mechanisms, he said. “OTA allows for more streamlined evaluation and proposal structure, and that best suits SDA’s size and lean operation.”

Focus on faster procurement 

Since taking the top job at SDA two years ago, Tournear has insisted that the agency’s focus is to acquire and deploy systems at a faster pace than is typically seen in Pentagon programs. 

SDA is building the Pentagon’s first-ever network of small satellites in low Earth orbit to support military demand for low-latency communications, surveillance and tracking of enemy targets. The Transport Layer Tranche 0 constellation is projected to launch in 2022 and the much larger Tranche 1 in 2024.

SDA’s decision to cancel the RFP and shift to an OTA arrangement suggests the agency is concerned that it might not be able to meet its ambitious timelines if it uses the traditional FAR-based contracting process where any clause or procedural item can be grounds for a protest. While contracts are under dispute, agencies have to stop the work, causing schedule delays.

Maxar’s was not the first legal protest filed against an SDA procurement decision. Following the selection a year ago of L3Harris and SpaceX to produce eight missile-tracking Tranche 0 satellites, Airbus and Raytheon filed protests with GAO which were settled after SDA agreed to reevaluate proposals. 

The Transport Layer Tranche 1 is the agency’s largest procurement to date. Tournear said he does not expect the shift to an OTA contract to “substantially impact the timeline.”

The Transport Layer Tranche 1 has 126 baseline satellites and an additional 18 experimental satellites that are being procured separately.

OTA contracts were first authorized by Congress in the 1994 National Defense Authorization Act for use in research and development projects. The 2015 NDAA expanded the authority to include any prototype project. The goal was to create a new vehicle for DoD to attract nontraditional companies to bid on technology projects.  

Tournear said the Transport Layer qualifies as a prototype even though the plan is to use commercially produced satellites. 

“We’re procuring satellites that are essentially based on commoditized products,” he said. “We still anticipate this OTA to be a fixed price procurement, that’s something that we think has low technical risk.” The higher risk piece is “delivering is a constellation that works together as a complete network and systems that provide the capabilities to the warfighter. And that concept, if you look at the whole constellation and how it works together, that is what is being prototyped with Tranche 1.” Tournear said the OTA is “not to buy a prototype satellite but it’s to buy a prototype constellation.”

Under the OTA rules, any commercial business or academic institution can bid for a contract. Traditional defense contractors, however, are required to partner with nontraditional companies or have to agree to fund usually one-third of the cost of the project. 

“This will be our first time using OT,” Tournear said. “I would anticipate to do cost share or have a small or nontraditional performer provide a significant contribution to the effort.”

FAR-based contracting “gives you a lot of advantages but the fact is that it’s got a lot of built-in clauses that are based on past case law,” he said, which “may hinder some of the flexibility that you gain with OT.”

The technical requirements for the Transport Layer Tranche 1 will not change, he said. “We’ll obviously have to adjust to a new proposal date to ensure that everybody has time to submit a good proposal, and can reevaluate based on the details that they see in the new solicitation.”

Tournear said one of the challenges for SDA has been to convince contractors that its satellite procurements are not like previous DoD acquisitions. The plan is to award contracts for new satellites every two years to a diversity of suppliers, as opposed to the “vendor lock” seen in previous DoD satellite programs where the company that wins a contract keeps it for decades. 

This mindset drives companies to protest, fearing that they will not have another chance to compete if they lose the first round. 

“Unfortunately, the fact that a lot of people are used to the old model of acquisition where you would win a program for 10 years and if you didn’t win it early on you were kind of shut out,” said Tournear. “That mentality pervades in the industrial base and we’re trying to shift that, but I can understand that hesitation.” SDA has to “actually demonstrate that we are doing things differently, that we are doing this based on every other year solicitations.”

In every solicitation, “we’re going to be looking for whoever has the best offering at that time, and so people can feel like they can always plan on winning a portion of that market share,” Tournear said. “Until we actually demonstrate that through multiple acquisitions, I think you’re always going to see this mentality that people are going to want to ensure that they can fight as hard as they can to get in, to get an early award.”