CBO: Buying circuits could save DISA billions

CBO Analysis of DATS Alternatives

The Defense Information Systems Agency could save billions of dollars by changing the way it acquires circuits to connect bases and posts to the Global Information Grid (GIG), the Congressional Budget Office (CBO) suggested in a report for Sen. John Warner (R-Va.), chairman of the Senate Armed Services Committee.

DISA could achieve substantial savings on the broadband circuits it plans to acquire under its pending Defense Information Systems Network (DISN) Access Transport Services (DATS) procurement by acquiring them under Indefensible Rights of Use (IRU) rather than under three-year leases with seven one-year options, which is how DISA currently plans to acquire them under DATS, states the CBO report. R. Derek Trunkey, an analyst at the office, prepared the document.

CBO issued its report at the committee’s direction in the 2006 Defense Authorization Act, which states that DISA is acquiring additional circuits under DATS without a complete analysis of the costs and capabilities of alternative approaches. The committee also said it was concerned the agency was proceeding with DATS without determining whether it would be cheaper to purchase broadband fiber connections.

DISA launched the DATS procurement in June 2005 to acquire about 5,000 circuits to connect to GIG. An award was originally scheduled to happen by the end of 2005. DISA plans four DATS awards with circuits split among four geographic regions.

Since last year, the agency has fine-tuned the buy through a series of amendments. Responses from the latest batch are due by the end of this month, and the award is now anticipated this year.

CBO said it conducted a complex analysis of 4,681 circuits likely to end up on DATS to determine whether an IRU purchase made more fiscal sense than a lease. The analysis included the bandwidth and the distance each circuit covered, circuit turnover and anticipated increases in bandwidth requirements.

CBO said it also considered the cost of circuits acquired under the AT&T DISN Transmission Services-Continental U.S. (DTS-C) contract.

The office said it analyzed DTS-C 2005 circuit lease prices, which were “unusually good and unlikely to be repeated.” DISA also provided CBO with 2005 competitive bid pricing for circuits acquired through the Defense Information Technology Contracting Organization’s electronic bulletin board.

But CBO was unable to obtain the same type of price information for IRUs, the report adds. DISA could provide only one example of an IRU purchase, while telecommunications carriers were generally unwilling or unable to provide such information, the report states.

CBO initially determined that DISA would save money by buying rather than leasing 23 to 276 of the high-bandwidth -- OC12 or 622 megabits/sec or higher -- circuits covered by the DATS buy, the report states. But the substantial growth in bandwidth requirements could make IRUs cheaper than leases, it adds.

If bandwidth requirements grew by 35 percent annually, most DATS circuits would have to be upgraded to high-bandwidth capacity after 20 years.

In that case, CBO estimated, using some 20-year IRUs could save $6 billion. If bandwidth demand grew 60 percent over 20 years, DISA could save $45 billion by using IRUs rather than leases.

CBO said this analysis is based on several caveats, including a lack of specific pricing information on IRUs, the historical downward trend in circuit prices and DISA’s need to use procurement funds to buy IRUs rather than operation and maintenance funds to lease circuits.

The DATS contract and purchase of IRUs are not mutually exclusive, the report states. DISA could use the contract to replace expiring contracts while taking IRU bids for some circuits.

Neither DISA nor DATS bidders, including AT&T, Qwest and Verizon, returned calls for comment on the CBO report by deadline.

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