PARIS—Satellite fleet operator Intelsat on Sept. 15 said it had filed a formal protest against the U.S. Defense Department’s award of a satellite services contract to the U.S. arm of London-based Inmarsat, saying its bid may have been improperly valued by the contracting agency.

“In our view our proposal provided the best value for the customer,” Intelsat Chief Executive Stephen Spengler said in an interview here during the World Satellite Business Week conference. “I don’t want to get into the specifics, but we don’t usually protest in these circumstances.”

Inmarsat Chief Executive Rupert Pearce said Sept. 15 that he would not comment on his company’s win until the protest period had ended.

Industry officials said Inmarsat delivered a bid that was more than $100 million less expensive for the Pentagon’s commercial bandwidth buying office, the Defense Information Systems Agency, than the two competing bids. One of the debates at the conference here the week of Sept. 14 was how the company could profitably do this.

DISA on Sept. 8 announced that Inmarsat had won the Commercial Broadband Satellite Program Satellite Service (CSSC) contract. The contract is guaranteed for at least one year, with up to four annual renewals, and carries a remarkably broad possible value of between $150,000 and $450 million, DISA said.

CSSC follows a similar award in 2010, called the Commercial Broadband Satellite Program (CBSP), which was valued at up to $543 million over five years.

Intelsat won that contract in association with several other satellite operators, notably SES of Luxembourg, by stitching together a mosaic of capacity.

The losing bidders for the CBSP contract protested that Intelsat was giving them unfair prices for capacity required by the contract but available only from Intelsat’s own fleet of satellites. The protest was rejected.

Since then, Intelsat, SES and the other winning team members have found that the CBSP delivered far less than it promised. Two industry officials said that it started slowly and never reached anywhere near the expected annual rate. Average annual payments were no more than $40 million.

For the CSSC contract, DISA asked bidders for specific amounts of bandwidth availability in numerous geographic locations in the C-, Ku-, Ka- and X-band frequencies.

Intelsat and SES again joined forces for a combined bid. Airbus Defence and Space, which has a large satellite-services business including X-band capacity for military customers, also bid. Industry officials said Airbus, while surprised at the DISA choice, would not protest.

The basics of the CSSC contract are no different from its CBSP predecessor: Each bidder must secure capacity and nail down price commitments from numerous third-party suppliers that presumably offer the same prices to all the bidders.

That is particularly true for Inmarsat, the largest moble satellite services provider, whose core portfolio is in L-band. The company is moving into Ka-band with its Global Xpress constellation of three satellites. But for the U.S. government market, Inmarsat must solicit third-party capacity in Ka-band from Boeing Space and Intelligence Systems of El Segundo, California.

Boeing signed a large take-or-pay contract for Global Xpress as a condition of winning the Global Xpress satellite construction business from Inmarsat. That contract grants Boeing exclusive rights to sell Global Xpress capacity to the U.S. government for five years following the start of service of the full constellation, which means to 2020 or 2021.

That being the case, Boeing would have been under pressure to offer the same prices for Global Xpress to Intelsat/SES, Airbus and Inmarsat – just as Airbus would have offered similar X-band pricing to Inmarsat and Intelsat/SES. In turn, Intelsat/SES would have done the same for their C- and Ku-band capacity.

The conclusion that these industry officials drew is that, for CSSC, Inmarsat is relying almost exclusively on third-party capacity – even for its own Global Xpress satellites.

“Intelsat/SES and Airbus were fairly close together in their bids, with Intelsat being a little higher,” said one industry official. “Inmarsat was extraordinarily low. Given how little flexibility they presumably had in pricing most of the bandwidth required, it’s hard to see how they were able to do it.”

Many of the CSSC contract specifications were publicly disclosed. Two industry officials said any of the bidders would have been tempted – especially given the low contract-order flow from the predecessor contract – to price some of these requirements at zero on the assumption that the U.S. Navy customer would never actually call for them.

“The least we can say now is that the U.S. taxpayer seems to have gotten a very, very good deal on this,” said an industry official. “Whether that is true for Inmarsat I guess time will tell.”

Peter B. de Selding was the Paris bureau chief for SpaceNews.