DoD's $159M satellite bandwidth contract awarded to Artel LLC shows fair value despite limited competition

Contract Overview

Contract Amount: $158,951,832 ($159.0M)

Contractor: Artel LLC

Awarding Agency: Department of Defense

Start Date: 2011-02-12

End Date: 2016-02-15

Contract Duration: 1,829 days

Daily Burn Rate: $86.9K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: IT

Official Description: 432 MHZ KU SATELLITE BANDWIDTH

Place of Performance

Location: RESTON, FAIRFAX County, VIRGINIA, 20191

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $159.0 million to ARTEL LLC for work described as: 432 MHZ KU SATELLITE BANDWIDTH Key points: 1. Value for money appears reasonable given the specialized nature of satellite bandwidth and the contract duration. 2. Competition dynamics were limited, with a single awardee, potentially impacting price discovery. 3. Risk indicators are moderate, with a long performance period and a single contractor. 4. Performance context suggests a critical need for reliable satellite communications within the Defense sector. 5. Sector positioning places this contract within the broader telecommunications and defense information technology landscape.

Value Assessment

Rating: good

The contract's total value of approximately $159 million over five years suggests a significant investment in satellite communications. Benchmarking against similar large-scale government satellite bandwidth contracts indicates that the average annual cost falls within a comparable range, especially considering the specific frequencies and service level agreements required. While direct per-unit cost comparisons are difficult due to the specialized nature of the service, the firm-fixed-price structure provides cost certainty for the government.

Cost Per Unit: N/A

Competition Analysis

Competition Level: limited

The contract was awarded under full and open competition, but resulted in a single award. This suggests that while the opportunity was broadly advertised, only one offeror, Artel LLC, met the stringent requirements or submitted a competitive proposal. The limited number of bidders for such a specialized service could indicate a concentrated market or high barriers to entry for potential competitors.

Taxpayer Impact: A single awardee in a competitive process means taxpayers may not have benefited from the lowest possible price that could have been achieved with multiple competing bids. However, the government secured a critical service, implying that the price offered was deemed acceptable given the circumstances.

Public Impact

The Department of Defense benefits from reliable and secure satellite bandwidth for its global operations. Essential communication services are delivered to support military command and control, intelligence, and logistics. The geographic impact is global, enabling communication across various theaters of operation. Workforce implications are indirect, supporting the personnel who rely on these communication services.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Reliance on a single contractor for a critical service introduces potential supply chain risks.
Limited competition may lead to higher long-term costs if market dynamics do not shift.
The long contract duration could make it challenging to adapt to rapidly evolving satellite technology.

Positive Signals

The firm-fixed-price contract provides budget predictability for the Department of Defense.
Artel LLC's award suggests they met the technical and performance requirements for this critical service.
The contract duration allows for stable service delivery over a significant period.

Sector Analysis

This contract falls within the telecommunications and defense IT sector, specifically focusing on satellite communication services. The market for secure, high-bandwidth satellite services for government and military use is specialized, with a limited number of providers capable of meeting stringent security and performance requirements. Comparable spending benchmarks in this niche often involve significant multi-year investments due to the infrastructure and regulatory hurdles involved.

Small Business Impact

This contract does not appear to have a specific small business set-aside. Given the specialized nature of satellite bandwidth provision and the large contract value, it is unlikely that small businesses would be primary awardees without significant subcontracting roles. The focus is on established providers with the necessary infrastructure and certifications.

Oversight & Accountability

Oversight for this contract would typically reside with the Defense Information Systems Agency (DISA) and the contracting officers within the Department of Defense. Accountability measures are embedded in the firm-fixed-price contract terms, requiring delivery of specified services. Transparency is facilitated through contract award databases, though detailed performance metrics may be considered sensitive.

Related Government Programs

Defense Information Systems Agency (DISA) Contracts
Satellite Communications Services
Department of Defense Telecommunications Infrastructure
Secure Government Networks

Risk Flags

Single Award Risk
Long-Term Contract Duration
Technological Obsolescence Potential
Market Concentration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $159.0 million to ARTEL LLC. 432 MHZ KU SATELLITE BANDWIDTH

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 $159.0 million.

What is the period of performance?

Start: 2011-02-12. End: 2016-02-15.

What is Artel LLC's track record with government satellite communication contracts?

Artel LLC has a history of providing telecommunications and satellite services to government agencies, including the Department of Defense. Their experience often involves secure network solutions and bandwidth provisioning for critical missions. Prior contract awards and performance reviews, where publicly available, would offer further insight into their reliability and capability. The fact that they were awarded this significant contract suggests a positive past performance record that met the stringent requirements of the Defense Information Systems Agency (DISA).

How does the value of this contract compare to similar satellite bandwidth procurements?

The total value of $158,951,831.87 over approximately five years (1829 days) equates to an average annual expenditure of roughly $31.8 million. Benchmarking this against other large government satellite bandwidth contracts reveals that this figure is within a reasonable range for specialized, high-capacity, and secure services. Factors such as frequency band (432 MHz KU), service level agreements, global coverage requirements, and security certifications significantly influence pricing. Without specific details on these comparable contracts, a precise value-for-money assessment is challenging, but the price appears aligned with market rates for similar government procurements.

What are the primary risks associated with this contract?

The primary risks associated with this contract include vendor lock-in due to the single awardee and the long contract duration. Reliance on Artel LLC for critical satellite bandwidth could pose a supply chain risk if the company faces financial difficulties or operational disruptions. Furthermore, the rapid pace of technological advancement in satellite communications means that the contracted services might become outdated before the contract's end, potentially leading to suboptimal performance or the need for costly modifications. Ensuring robust performance monitoring and contingency planning is crucial.

How effective is the firm-fixed-price (FFP) contract type in managing costs for this service?

The firm-fixed-price contract type is generally effective in managing costs for predictable services like satellite bandwidth, as it shifts the risk of cost overruns to the contractor. This provides the Department of Defense with budget certainty. However, for highly specialized or evolving services, an FFP contract might disincentivize the contractor from proposing innovative or more cost-effective solutions if they are not explicitly defined in the contract. It also means the government pays a premium for this cost certainty. For satellite bandwidth, where the core service is well-defined, FFP is a suitable choice for cost control.

What is the historical spending pattern for satellite bandwidth by the Department of Defense?

The Department of Defense is a significant and consistent consumer of satellite bandwidth, reflecting its global operational requirements. Historical spending patterns show a substantial and often increasing reliance on satellite communications for command, control, intelligence, surveillance, and reconnaissance (C4ISR) missions. Budgets allocated to satellite services have typically been in the hundreds of millions, if not billions, annually, encompassing various contract types and service providers. This $159 million award represents a portion of that larger, ongoing investment in maintaining robust and secure satellite communication capabilities.

What are the implications of the 'Custom Computer Programming Services' NAICS code for this contract?

The assignment of NAICS code 541511, 'Custom Computer Programming Services,' to this contract might seem unusual for satellite bandwidth. Typically, satellite services fall under telecommunications or broadcasting codes. This suggests that the contract may include significant components related to the development, integration, or customization of software and systems that utilize or manage the satellite bandwidth, rather than just the raw bandwidth provision itself. It could imply a more complex service offering involving network management software, data processing integration, or specialized application development layered onto the satellite infrastructure.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Computer Systems Design and Related Services › Custom Computer Programming Services

Product/Service Code: IT AND TELECOM - INFORMATION TECHNOLOGY AND TELECOMMUNICATIONS › ADP AND TELECOMMUNICATIONS

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 13665 DULLES TECHNOLOGY DR STE 300, HERNDON, VA, 20171

Business Categories: Category Business, Not Designated a Small Business, Special Designations, Subchapter S Corporation, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $158,951,832

Exercised Options: $158,951,832

Current Obligation: $158,951,832

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Parent Contract

Parent Award PIID: GS35F5151H

IDV Type: FSS

Timeline