The pace of technological innovation in the space business has long been dictated by government-funded programs of record. But as the private sector increasingly drives innovation, government buyers are trying to figure out their role in the new space era.
The implications of this shift are significant, particularly for the Defense Department. What’s happening in space today is similar to the transition that took place in the semiconductor industry where the U.S. government invested twice that of private industry 40 years ago but is now outspent by a factor of 23 to 1, says a report from the market research firm Quilty Analytics.
“While government spending still dominates the industry narrative today, private sector spending will inevitably become the industry’s driving force,” the study says.
Critical technologies for space systems such as optical crosslinks, electronically steered antennas and on-orbit satellite servicing, says Quilty Analytics, languished for decades as government-funded R&D projects but are on the cusp of entering mainstream adoption due to private investments.
DoD space buyers are responding to this changing environment with enthusiasm and are increasingly talking about acquiring satellite imagery, weather data and broadband from low-Earth-orbit constellations as services, rather than as traditional acquisitions.
“We need to leverage this kind of innovation,” says Shawn Barnes, deputy assistant secretary of the Air Force for space acquisition and integration. The “entrepreneurial spirit” in the space industry is a strategic advantage the United States has over adversaries, Barnes says.
Change won’t happen overnight but there is momentum in the U.S. Space Force to pivot to new procurement approaches, Barnes said during a panel discussion at the Navy League’s Sea-Air-Space conference earlier this month. “In general the Defense Department has not done a great job with that, but we’re moving in that direction, I think fairly rapidly.”
A marker to watch will be the organization of the new Space Systems Command that will oversee Space Force acquisitions. An existing office within the command is responsible for the acquisition of satellite communications services and there are plans underway to expand that office so it can acquire other types of space services.
The standup of a commercial services procurement office would be an important step, says Col. Eric Felt, who runs the Air Force Research Laboratory’s Space Vehicles Directorate.
“Money is flowing to companies with good ideas,” he told the National Security Space Association during a recent webinar.
Felt’s message to the space industry is that the Space Force is serious about buying commercial services but he suggests that companies should not become overly dependent on government contracts because that can dampen entrepreneurship.
“We need industry to keep innovating and keep pursuing commercial opportunities, not just government dollars,” Felt says. “That’s the model we need to evolve to in the future.”
A thriving space industry is good for national security, says Felt. “We want companies to be successful and stay in the U.S.” He would advise companies to pursue commercial customers, and if the product meets government needs and it’s priced competitively, the government will buy it.
“I would predict that a lot of our future dollars in the lab and in the Space Force are going to be going that route,” says Felt. For that reason, “the most important are not the opportunities we publish in [federal procurement website] sam.gov but commercial opportunities.”
Quilty Analytics, in its report, cautions that the commercial paradigm shift represents both an opportunity and a risk for DoD decision makers. The opportunity lies in the commercial sector’s ability to provide important capabilities for national security faster and cheaper than the government could.
But profit-seeking commercial efforts will not always align with DoD needs and priorities. So the calculus for government buyers is that if commercial products can meet 80% or more of requirements, it’s a deal that can’t be ignored.
“On National Security” appears in every issue of SpaceNews magazine. This column ran in the August 2021 issue.