The Intelsat VI Proposal—Dick Brandes

My recollection is that Jerry Dutcher was the proposal manager, or maybe the technical proposal manager. Steve Pilcher was heavily involved, as was Bill Pomeranz who ran the cost proposal. Cost was the principal driver, including Shuttle launch cost. That factor favored the Hughes spinner design which occupied a shorter bay length than a 3-axis design. The Intelsat technical team wanted Ford to win, so they gave short shrift to this advantage. They determined Ford to have the better technical design, based on two or three relatively minor technical points, e.g. Hughes proposed NiH2 batteries based on Air Force funded developments rather than Comsat lab technology.

On the cost side, Hughes had the better price. When Intelsat requested the bidders to resubmit pricing, Hughes management objected. Wheelon had extracted a promise from the Intelsat Director-General that the competition would not be a repeat of the Intelsat V auction where numerous rebids occurred until then manager, Comsat, got the result they wanted; i.e. Ford. In a rather dramatic meeting in Washington between the DG and Wheelon accompanied by Hughes General Counsel Dick Alden, he made clear that Hughes would take legal action if rebids were solicited. The DG backed off, but required Hughes to make all changes required by the technical staff. The resulting changes added significant cost, most of which Hughes had to eat to avoid exceeding Ford’s price.

Hughes had made an aggressive bid, counting on future orders to make the product line profitable. No such orders materialized. Whether that was due to lingering hostility from Intelsat, or because they decided to add capacity with smaller satellites, e.g. Intelsat V size, as they professed, I don’t know. We do know that the losses on Intelsat VI were enormous, exceeding our worst predictions.

The following comment was added by Steve Dorfman

Sometime later as head of Hughes Communications I met with Goldstien, Intelsat DG, in Washington who had the audacity to chastise me for Hughes becoming a service provider potentially competing with Intelsat. I respectfully pointed out to him that Hughes had lost significant money in Intelsat VI, which he knew, and had made significant money as a service provider using its own satellites and that we planned to continue on that path while still competing in the manufacturing side of the business. Hughes never won another contract from Intelsat though we tried.

There is no question in my mind that the Comsat/Intelsat bureaucracies enjoyed working the satellite manufacturers off against each other and the international intrigue that accompanied the competitions. Unfortunately they got away with it though at least one Intelsat executive went to jail.

Ironically Intelsat eventfully went public, Hughes Communications merged with PanAmSat and both companies were merged into Intelsat. A significant amount of profit was extracted by hedge funds in a number of transactions involving Intelsat which is now the biggest global satellite company along with SES. Both Intelsat and SES got their start using Hughes technology.

 

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