Evaluating and purchasing a communications satellite system
From INVESaTWIKI
Contents |
Conducting an effective evaluation
The satellite system buyer must, first and foremost,
know what he wants to procure. The evaluation of the
technical design of the satellite will vary depending on
the company’s market needs and requirements. It is one
thing to procure a replacement satellite to maintain
existing service. It is entirely different if the intention is
to grow the service by providing additional satellite
capabilities.
Under all circumstances the evaluation team must be
cross-functional and capable of analyzing vendors from
multiple perspectives: business, technical (hardware
and software) financial and ongoing operational. This
cross-functional balance is critical to understanding
and clearly defining the requirements and costs of the
new system.
The best evaluation teams represent all
critical areas of a satellite operator. Everyone at the
table must have an individual stake in helping to make
the best possible decision. A crucial first step is
generating a set of tight market-driven requirements,
which may involve input and dialogue with the
customers. Employing engineering professionals who
can analyze technical requirements is not enough.
Buyers must also include their technical operations,
sales, marketing, finance and other key business units
in the evaluation process.
Request for Information (RFI)
It is always worthwhile to generate a formal Request for
Information (RFI). A comprehensive RFI brings a high
degree of rationality and market place reality into the
procurement process. It enables the prime contractor
time to study and understand the requirements.
Satellite vendors should be encouraged to critique the
RFI and suggest additions and modifications. These
‘suggestions’ may strive to bias the RFP toward a
particular manufacturer’s capabilities, but the
contribution can be helpful. The buyer’s team that will
draft the RFP must be knowledgeable enough to extract
quality information from the sales suggestions. In the
past, the most expensive and time consuming mistakes
made in satellite procurement have been in issuing an
RFP with faulty assumptions.
Manufacturers of communication satellites are well
known and have long and public records of
achievement. The RFI should be issued to select
manufacturers who, in the judgment of the business
buyer, have the hardware and software technical
capability to satisfy requirements while having the
financial strength and available resources to be applied
to this procurement.
Developing the RFP
In the process of
drafting the RFP,
every one – sales,
marketing, finance,
strategy, engineering,
software and ground
operations – should
sign off on every
aspect of the RFP.
Once issued, change
must be avoided.
Changes made during
the procurement
process result in time
delays and skyrocketing costs. Functions within a
satellite system are extremely interdependent. A change
in one subsystem cascades into others. The true
impact of this cascading is hard for the manufacturer to
accurately evaluate. Since time is always a critical
component, changes during the manufacturing process
force the prime or sub-contractor senior management to
focus on costs, not technical consequences.
To assure that the quality of the manufacturing process
is not compromised, the buyer should insist on access
to subcontractors by the technical staff. According to
Jim Wehri, president of PSI Group, interest among
satellite buyers in visiting subcontractors reflects a
trend in which prime contractors increasingly are
outsourcing critical activities that can directly impact
reliability and schedules. In responding to the RFP, a
manufacturer should be permitted to offer options that
he may have elected not to reveal in responding to the
RFI, but which may better address the final
specifications in the RFP.
Evaluation process
The proposal evaluation process is facilitated and quantified by developing a bidder ‘score card’. Listing all the requisite technical and financial criteria, the scorecard can allow each vendor to be scored by its history and performance in these specific areas. For each RFP criterion, the team should assign a ‘weight’ of importance that will help in adding up each vendor’s score at evaluation time and minimize subjective arguments among team members. The more heavily a criterion is weighted, the more important it is for a vendor to receive a high score in that particular area.
Total Cost of Ownership (TCO)
In addition to an objective technical evaluation of the RFP, the business buyers must analyze the total estimated costs for the new system over the expected lifetime. This analysis is typically referred to as the Total Cost of Ownership (TCO). It is comprised of three key areas: [1]
References
[1] Satmagazine.com - January 2004
Satellite System Acquisition: A Fresh Approach to Evaluating and Purchasing a Communications Satellite System
