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The Associated Press September 06, 2006

$5B Satellite Contract Open to All Feds

Army Picks Companies for $5B Satellite Contract Available to All Federal Agencies

WASHINGTON (AP) -- The Defense Department's use of commercial satellite-based systems to support various combat support operations has vastly increased since the global war on terror began in 2001, but until now the military lacked a coordinated, standardized way to quickly buy the technology it needed.

A new Army contract worth up to $5 billion will provide commercial satellite terminals and associated services to all federal agencies, including those handling domestic disaster relief and homeland security missions.

Industry analysts said military users have the most technical expertise in using satellite technology, which is typically associated in the commercial world with transmitting and receiving radio and television signals. But satellites also support Internet and telephone connections, ATM transactions, and have been crucial during disasters such as last year's hurricanes, when landline and cellular networks were overwhelmed or washed away. The technology has also proved essential in military operations.

"It's almost impossible to do commerce and war fighting without a satellite link," said Loren Thompson, a defense analyst with the Arlington, Va.-based Lexington Institute. "The U.S. military's global operations are increasingly held together by a satellite communications network."

The Army last week selected Boeing Co., General Dynamics Corp., and four small businesses to compete under the five-year World-Wide Satellite Systems contract, which requires each vendor to provide comprehensive turnkey solutions -- from satellite communications systems hardware to operations services to logistics support.

After the U.S.-led invasion of Iraq in 2003, Army logisticians and medics dramatically increased the use of satellite communications to transmit unclassified information in support operations.

"People liked it because they got bandwidth they never had before," said Kevin Carroll, the Army's program executive officer for enterprise information systems at Fort Belvoir, Va.

Outside experts agree about the government's increasing use of satellite technology. "Every time we go out to blow somebody up, it uses more bandwidth than it previously did," said John Pike, director of GlobalSecurity.org, a think tank based in Alexandria, Va.

The Army had been doing on-the-spot contracts to meet its users' needs, "but we didn't get the competition we wanted to have," said Carroll, whose office develops, acquires and deploys information technology systems and communications for the Army.

After recognizing that other Army offices also were exploring commercial satellite deals, the service established the government-wide contract vehicle to provide competition and standardization. The request for proposals was issued earlier this year and the deal covers static and portable satellite terminals and connections with actual satellite time supplied by the Defense Information Systems Agency, Carroll said.

The General Services Administration also offers a satellite communications contract, but the Army award is broader in scope and includes cryptographic provisions that would enable more secure communications, according to service officials.

The Army deal was awarded Aug. 29 and in addition to Boeing and General Dynamics, the four small business awardees are: DataPath Inc., in Duluth, Ga., DSCI of Eatontown, N.J., Globecomm Systems Inc. of Hauppauge, N.Y., and TeleCommunications Systems in Annapolis, Md.

Military industry analysts said both Boeing and General Dynamics could make $1 billion each or more in revenue as the military increases its reliance on satellite communications for commerce and war fighting.

"Potentially this could provide revenue of over $1 billion to both Boeing and General Dynamics," Thompson said. Because the award is an indefinite-delivery/indefinite-quantity contract, "there's an open-ended quality to it and either company could realize significantly more than $1 billion," he added.

Army officials said despite the $5 billion ceiling, delivery orders in that amount could be issued before the five-year term expires.

While Boeing has been a well-known player in the space arena for decades, General Dynamics quietly has been one of the biggest suppliers of the ground equipment and has increased its focus on the business since its 2004 acquisition of satellite-maker Spectrum Astro Inc., Thompson said.

"This is a breakthrough for them," he said. "A major new opportunity that puts them in the big leagues for space. Boeing was already there."

The total potential value of the program to General Dynamics "is impossible to predict at this point," according to a company spokesman, who added that the firm in 2004 also acquired TriPoint Global Communications Inc., which provides ground-based satellite and wireless communication equipment and integration services to both civilian and military markets.

A Boeing spokeswoman also declined to estimate the deal's potential value to the company.

Shares of Boeing, the world's largest aerospace company, fell 60 cents to $74.76 Wednesday afternoon, while General Dynamics lost 3 cents to $69.16, both on the New York Stock Exchange.

Copyright 2006, The Associated Press