Satellite industry executive warns of coming shortage

The head of a major satellite operator said Thursday that the government could save money on satellite contracts if it could commit funding for longer periods of time.

"If you want to get the best price, you need to go long," said David Helfgott, president and chief executive of AMERICOM Government Services, at a luncheon organized by the Washington Space Business Roundtable, a group of space industry executives.

While acknowledging that the congressional appropriations process posed obstacles for long-term commitments to contractors, Helfgott said the rules should be changed for the government to get the best prices. He echoed comments made earlier this month by a federal acquisition official who expressed frustration with the acquisition funding process.

A one-year contract with 10 years of options is still considered to be short-term, because the contract is not guaranteed to be renewed, Helfgott said. Industry representatives often want longer contracts, but agency officials and watchdog groups warn that this would reduce competition, and they urge caution in protecting taxpayers' money.

In May, Defense issued a proposed rule that would further restrict the use of long-term contracts.

Helfgott suggested that the government adjust its buying process to keep up with its demand. He said rapid growth in satellite use by the government, particularly the Defense Department, as well as the commercial sector for television, radio and other outlets, could soon lead to a shortage of available satellites.

Helfgott described a situation in which a commercial company and a government agency both wanted to lease a satellite. If the commercial company could commit to a longer term contract, which he said companies such as Viacom, NBC and BBC already do by leasing use for the life of satellites, then his company would be forced to contract with the commercial company instead of the government agency.

"Help us help you," he said, quoting Tom Cruise in the movie Jerry McGuire.

Helfgott said the government currently purchases more than $600 million in satellite capacity and services annually and the rise in network-centric warfare will likely continue to place extra demands on satellites.

"That's what's causing this acceleration," he said.

AMERICOM currently operates 42 satellites, each of which can cost up to $250 million, and contracts with Defense, NASA, the Commerce Department's National Oceanic and Atmospheric Administration, among others. Satellites are used to transmit data, including NASA launch commands and NOAA weather information, as well as for communication.

In 2003, the Government Accountability Office recommended that the Pentagon's primary manager of contracts that lease satellite services, the Defense Information Systems Agency, improve its management and oversight of those contracts.

The agency also said Defense could save more money by planning its satellite needs further in advance. "[Defense] still buys its bandwidth on an as-needed basis, thereby missing significant opportunities to leverage its buying power and to achieve considerable savings as a result," the report (GAO-04-206) said.

GAO released a letter Friday detailing ongoing problems with satellite acquisition. The letter, in response to a request from Rep. C. W. Bill Young, R-Fla., said the Pentagon must improve oversight of contractors and better prioritize funding for projects.

Helfgott said satellite demand differs by government agency, and that Defense's and intelligence agencies' needs are growing most quickly while the State Department's demand for satellite services is more stable.

"You want to spread your bets out," he said, adding, "It's all growing."