DoD's $39.2M satellite service contract with Artel LLC awarded in 2005 shows long-term reliance on a single provider

Contract Overview

Contract Amount: $39,253,137 ($39.3M)

Contractor: Artel LLC

Awarding Agency: Department of Defense

Start Date: 2005-10-20

End Date: 2011-02-15

Contract Duration: 1,944 days

Daily Burn Rate: $20.2K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 3

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: SATELLITE SERVICE

Place of Performance

Location: RESTON, FAIRFAX County, VIRGINIA, 20191

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $39.3 million to ARTEL LLC for work described as: SATELLITE SERVICE Key points: 1. Contract awarded under full and open competition, suggesting initial market availability. 2. Long contract duration (over 5 years) may indicate stable service needs or limited vendor churn. 3. Awarded to Artel LLC, a known entity in government telecommunications. 4. Fixed-price contract type aims to control costs, but long-term fixed prices can become misaligned with market rates. 5. The contract's value, while significant, needs to be benchmarked against similar satellite service procurements. 6. No small business set-aside indicates the primary contractor is likely a large business.

Value Assessment

Rating: fair

The total award value of $39.2 million over approximately 5 years averages to about $7.8 million annually. Benchmarking this against current market rates for satellite services is crucial, as pricing can fluctuate significantly. Without more granular data on the specific services rendered (e.g., bandwidth, satellite type, coverage), a precise value-for-money assessment is difficult. However, the fixed-price nature suggests an attempt to lock in costs, which could be advantageous if rates were favorable at the time of award.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under 'full and open competition,' indicating that all responsible sources were permitted to submit bids. The presence of 3 bidders suggests a moderate level of competition at the time of award. While this is better than a sole-source situation, a higher number of bidders typically leads to more competitive pricing and potentially better terms for the government.

Taxpayer Impact: A competitive award process, even with a limited number of bidders, generally benefits taxpayers by preventing excessive pricing that might occur in a sole-source scenario.

Public Impact

The Department of Defense (DoD) benefits from reliable satellite communication services essential for its operations. Services likely support command and control, intelligence, surveillance, and reconnaissance missions. Geographic impact is global, given the nature of satellite communications for military operations. Workforce implications are indirect, supporting military personnel and potentially civilian contractors reliant on these communication links.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price escalation over the contract's long duration if market rates have decreased.
Lack of transparency on specific service metrics makes performance evaluation challenging.
Reliance on a single awardee for a critical service could pose supply chain risks.

Positive Signals

Awarded through full and open competition, indicating initial market engagement.
Fixed-price contract type provides cost certainty for the government.
Long-term award suggests a stable and potentially reliable service provider relationship.

Sector Analysis

Satellite services are a critical component of the telecommunications sector, particularly for government and defense applications requiring global reach and resilience. The market includes providers offering various solutions from geostationary to low-earth orbit satellites. Spending in this area is driven by the need for secure, high-bandwidth communication for intelligence, surveillance, reconnaissance, and operational command and control. Comparable spending benchmarks would involve analyzing other large-scale satellite communication contracts awarded by defense agencies.

Small Business Impact

The data indicates this contract was not set aside for small businesses, and there is no explicit mention of subcontracting goals for small businesses. This suggests that the primary contract was awarded to a large business capable of fulfilling the extensive requirements for satellite services. The impact on the small business ecosystem is likely minimal unless the prime contractor actively engages small businesses for subcontracting opportunities, which is not detailed here.

Oversight & Accountability

Oversight for this contract would typically fall under the Defense Information Systems Agency (DISA) and the Department of Defense's contracting and financial management oversight bodies. Accountability measures are inherent in the firm fixed-price structure, requiring the contractor to deliver specified services within the agreed budget. Transparency is generally facilitated through contract award databases, though detailed performance reports may be less publicly accessible.

Related Government Programs

Defense Information Systems Agency (DISA) Contracts
Department of Defense Satellite Communications
Global Satellite Services
Secure Communication Networks

Risk Flags

Long contract duration
Potential for price misalignment with market rates over time
Limited number of bidders suggests moderate competition

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $39.3 million to ARTEL LLC. SATELLITE SERVICE

Who is the contractor on this award?

The obligated recipient is ARTEL LLC.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Information Systems Agency).

What is the total obligated amount?

The obligated amount is $39.3 million.

What is the period of performance?

Start: 2005-10-20. End: 2011-02-15.

What specific satellite services were included in this $39.2 million contract, and how did their scope evolve over the contract's duration?

The provided data identifies the contract as 'SATELLITE SERVICE' awarded to ARTEL LLC by the Department of Defense (DoD) via the Defense Information Systems Agency (DISA). However, it does not detail the specific types of satellite services rendered. These could range from dedicated bandwidth on specific satellites, ground station access, network management, or a combination thereof. The contract's duration of 1944 days (approximately 5.3 years) suggests a need for sustained service. Without access to the contract's statement of work (SOW) or subsequent modifications, it's impossible to ascertain the precise evolution of services. Typically, such long-term contracts might see adjustments in bandwidth requirements, technology upgrades, or shifts in coverage areas based on evolving military operational needs. The firm fixed-price nature implies that changes would likely require formal contract modifications, potentially impacting the total cost if scope changes significantly.

How does the average annual cost of approximately $7.8 million compare to market rates for similar satellite communication services during the contract period (2005-2011)?

Determining the precise market rate comparison for satellite services between 2005 and 2011 is challenging without specific service parameters (e.g., bandwidth, satellite type, orbital position, coverage area, service level agreements). However, the period saw significant advancements in satellite technology and increasing competition. Generally, the cost per megabit per second (Mbps) for satellite bandwidth has trended downwards over time due to technological improvements and increased capacity. An average annual expenditure of $7.8 million for a DoD satellite service contract could be considered reasonable if it encompassed extensive global coverage, high bandwidth, and stringent security requirements typical of military operations. To provide a definitive benchmark, one would need to compare this contract's specifics against contemporaneous contracts for similar services awarded by other government agencies or commercial entities, factoring in the unique demands of defense applications.

What was the track record of Artel LLC with government contracts prior to and during the period of this award?

Artel LLC, now part of Lumen Technologies, has a long history of providing telecommunications and satellite services to the U.S. government, particularly the Department of Defense. Prior to and during the 2005-2011 period of this specific contract, Artel was a significant player in the government contracting space, often winning large, complex network and satellite communication awards. Their track record generally involved supporting critical military and intelligence missions, requiring robust and secure communication infrastructure. Information available through federal procurement databases (like FPDS or SAM.gov) would show numerous other awards to Artel, demonstrating their established presence and capability. Assessing their performance on this specific $39.2 million contract would require reviewing performance evaluations and any contract disputes or awards, which are not detailed in the summary data.

Given the contract's duration (over 5 years), what are the potential risks associated with long-term reliance on a single provider for critical satellite services?

Long-term reliance on a single provider for critical satellite services, as seen with this Artel LLC contract, presents several potential risks. Firstly, there's the risk of vendor lock-in, where switching providers becomes technically difficult, costly, or operationally disruptive, potentially reducing leverage for future negotiations. Secondly, technological obsolescence is a concern; the provider's technology might lag behind market advancements, or the government might miss opportunities to adopt newer, more efficient solutions. Thirdly, pricing can become uncompetitive over time if market rates decrease significantly, yet the government remains bound by the original fixed-price agreement. Lastly, single-source dependency increases vulnerability to supply chain disruptions, financial instability of the provider, or geopolitical events affecting the provider's operations. Robust oversight, performance management, and contingency planning are essential to mitigate these risks.

How did the 'Firm Fixed Price' contract type influence cost management and potential for cost overruns compared to other contract types?

The 'Firm Fixed Price' (FFP) contract type is designed to provide the government with cost certainty and transfer most of the cost risk to the contractor. Under an FFP agreement, the contractor agrees to a total price for a well-defined scope of work, and is obligated to complete the work regardless of actual costs incurred. This structure incentivizes the contractor to manage costs efficiently and avoid overruns, as any excess costs reduce their profit margin. For the government, it means the final price is known upfront, simplifying budgeting and financial planning. However, FFP contracts are best suited for requirements that are clearly defined and unlikely to change significantly. If the scope of work proves to be poorly defined or requires substantial changes, the government might end up paying a premium for the contractor's assumption of risk, or face difficulties in scope adjustments. In this case, the $39.2 million award represents the ceiling price, and the contractor's profit depends on their ability to deliver within that budget.

What does the fact that this contract was awarded under 'Full and Open Competition' with 3 bidders imply about the market for satellite services at the time?

An award under 'Full and Open Competition' signifies that the solicitation was broadly advertised, allowing any responsible source to submit a bid. The presence of three bidders suggests a moderately competitive market for the specific satellite services required by the DoD at that time (2005). While three bidders indicate some level of choice and potential for price negotiation, it is not indicative of a highly saturated or intensely competitive market. A larger number of bidders (e.g., five or more) typically drives prices down more aggressively and offers a wider range of technical solutions. The fact that only three entities submitted proposals could imply that the barriers to entry (e.g., technical expertise, infrastructure investment, security clearances) were relatively high, or that the specific requirements of the contract were niche, limiting the pool of qualified and interested contractors.

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Offers Received: 3

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 1893 PRESTON WHITE DR, RESTON, VA, 11

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $39,253,137

Exercised Options: $39,253,137

Current Obligation: $39,253,137

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: DCA20001D5002

IDV Type: IDC

Timeline