Space sector efficiencies may help DOD save money, executives say

As the Defense Department faces budget cuts for many systems and operations, developing smart, money-saving ways to procure commercial satellite services is becoming a major priority for the U.S. government. A panel of space industry officials discussed a variety of satellite leasing and cost options available to the DOD at the Satellite 2012 conference in Washington on March 13.

Alternate procurement methods can provide the DOD with both efficient and cost effective solutions for leasing satellite capability, said Richard DalBello, vice president for legal and government affairs at Intelsat General. The DOD currently conducts only short-term leasing of spacecraft. One alternative would be to lease all or part of a satellite for its operational life, he said.

These types of leasing arrangements are easy to implement, but they aren’t being done by the DOD because there is a continuing debate in the department about what is the best approach, DalBello said. Another option would be to fully embrace the use of hosted payloads with either the government building the payload and flying it on a commercial spacecraft or putting up commercial payloads on government satellites. “The gridlock has been largely in the decision-making processes,” he said.

One of the operational questions facing the DOD is how to achieve its missions more effectively, said James Simpson, vice president of business development at Boeing Satellite Systems. Can the current economics of satellite leasing be modified to meet need differently, he asked.

There are three possible approaches to procurement:

• Commercial-style government procurements, which are streamlined versions of traditional DOD procurement methods.
• Commercial/government hybrid procurements that share costs and payloads between both industry and government.
• A commercial services model for leasing satellite bandwidth.

The U.S. government has a number of options available to it, and the government potentially can choose from any of these options, Simpson said. The challenge will be selecting the most appropriate process to meet user needs, he added.

A variety of opportunities are available for the government to lease spacecraft, either through hybrid leasing methods or dedicated federal operations, said Eric Spittle, vice president for U.S. government strategic development at Loral Space Systems. Although the performance of military and commercial satellites is often similar, there are substantial differences in how they are priced, he said.

The military often sets contract goals at a  high level and relies on often unproven technology, which leads to development negotiations after the contract has been signed, he said. And after a platform has been acquired, the military will keep building the same type of spacecraft without the constant upgrades found in commercial systems, which leads to early obsolescence, he said.

One way the government can save time and money is to use commercially built and financed space services, said Craig Weston, CEO of U.S. Space. A fully commercial approach is best for use with low-risk, proven technologies such as weather satellites, he said.

For satellite services, the DOD pays for use, but it does not own the commercial platforms. While it does this through short-term leases, the government does not pursue long-term leasing options, Weston said. But there are a variety of leasing plans that would benefit the DOD, including cost sharing and deploying purpose-built payloads on either commercial spacecraft or commercial payloads on military platforms. There also are options that would allow the DOD to manage a commercial satellite as one of its own spacecraft, he said.

The advantage of these arrangements is that the DOD does not have to make a large initial investment in a spacecraft or payload and it can stretch out payments over multiple years through the use of operations and maintenance money, Weston said. A commercial approach also guarantees that launch schedules are maintained. The government also would not have to worry about cost overruns and schedule slips because the contracts are fixed price, he said.