Satellite Vendors Adapt to the DoD’s New Spiral Acquisition Model

Two decades ago, few in the U.S. defense community considered using commercial satellite services for national security missions. Nor did they envision a future where thousands of small systems in Low-Earth Orbit (LEO) would power telecommunications, provide missile tracking capabilities, and rapidly transmit space-based imagery.

Over the past half decade, the tune at the Pentagon, along with its space procurement processes, have changed. After the Space Force was stood up in 2018 with its own budget authority, a handful of smaller offices dedicated to building new proliferated smallsat constellations have been established, and enabling closer partnerships with commercial satellite providers.

The first couple of years largely consisted of reorganizing offices and setting up the business and procurement plans for new ventures, like the Space Development Agency’s (SDA) forthcoming proliferated LEO constellation. Starting in 2021, the U.S. military brought in new leaders with fresh takes on space system acquisition, such as Frank Calvelli, former deputy director of the National Reconnaissance Office.

Now, those programs are in full swing, and space system providers – both longtime national security veterans and commercial vendors – are adjusting to the new DoD satellite acquisition model, which favors a spiral development timeline fielding new capabilities in roughly two-year cycles, over the traditional tiered, siloed processes.

The recent trend of rapid prototyping and fielding in the DoD satellite acquisition world “all goes back to the threats” that the U.S. military is facing, says Jason Kim, CEO of Millennium Space Systems. Millennium was created in 2001 as a national security-focused smallsat company, founded shortly after 9/11, and was acquired by Boeing as a non-fully integrated subsidiary in 2018.

“Twenty years ago, small satellites were not at the forefront of customers’ minds,” Kim tells Via Satellite. Now, the need to move fast and deploy proliferated small satellite constellations is a common talking point among DoD officials, he continues. “The overarching directive is rapid acquisitions of these small satellites.”

The poster child for rapid space acquisition is the SDA’s Proliferated Warfighter Space Architecture (PWSA), in which hundreds of sensors in LEO will eventually provide data communications, track hypersonic and cruise missiles, and provide enhanced battle management, navigation, ground support, and deterrence from space. The SDA has awarded billions of dollars in contracts over the past few years to build capabilities for this constellation, which have rippled through the space industrial base through subcontracts.

As of this article’s writing, the first satellites for the PWSA’s Tranche 0 transport and tracking layers are scheduled for launch at the end of March. These birds, built by Lockheed Martin and York Space Systems for the data communications transport layer, and by L3Harris Technologies and SpaceX for an advanced missile tracking layer, were delivered just over 26 months after the contracts were approved.

Adjusting to a Faster Schedule

Satellite providers are meeting those timeframes, but still adjusting to the enhanced pace.

Offices like the SDA are giving “very, very short times to complete the programs,” says Marc Bell, co-founder, chairman, and CEO of Terran Orbital, which is partnering with Lockheed Martin on the PWSA Tranche 0 and 1 Transport layer.

Bell notes that the PWSA program has been a learning process for both the government and industry partners. The satellites due to launch in March were originally scheduled for last fall.

“Everybody is learning that a little bit more time is probably better,” he says.

The SDA had a stretch goal to “try and get out of the gate” with its initial launch within two years, but the supply chain issues that emerged during the pandemic – specifically the unavailability of certain microelectronics – hindered that goal, says Derek Tournear, SDA director.

Even with that missed post, “we hit what we think is needed to show that the whole [SDA acquisition] model works,” he tells Via Satellite. “The lesson learned is actually positive. We do think that this is the speed at which industry can produce.”

For the end users – such as service members deployed in the field who are relying on space-based data and imagery – the increased speed at which commercial data can be retrieved is palpable from over a decade ago, says Eric Traupe, president of Capella Federal, a recently established subsidiary of synthetic aperture radar (SAR) provider Capella Space.

In the past, if a military combatant command or an intelligence agency needed to collect a specific image, it could be weeks before that data was provided, depending on where that agency or command’s mission was racked and stacked via the traditional tiered acquisition process, Traupe, a 20-plus year veteran of the Central Intelligence Agency (CIA) and a former Marine, says.

End users were also typically strapped by the fact that the DoD often went with the highest-resolution option for data collection, acquired via government-owned systems. That led to lower-priority requests being pushed further down the chain than more critical missions, he notes.

The developments in the commercial sensing world have shown the U.S. government that it can utilize options that are lower cost with often lower resolution than its own systems, but that can easily and quickly fill these requirements. “DoD is being forced, in a good way, by consumers, to consider new options that are useful and lower cost,” Traupe says.

With commercial service contracts in place, commanders can now collect data within several hours of requesting the task order, depending on where the satellite is positioned at the time, he notes. Capella Space had an existing contract in place with the NRO prior to Russia’s invasion of Ukraine in February 2022, which allowed the company to quickly retrieve data from its systems when the United States sought fresh imagery soon after the war began, per Traupe.

Commercial Goes Federal

A recent boom in space companies standing up new federal and national security-based divisions indicates that commercial providers see the business opportunities coming out of the SDA, and other offices such as the Space Force’s Space Systems Command (SSC) and the Rapid Space Capabilities Office (RCO), as a long-term investment.

Remote sensing company Planet Labs saw the writing on the wall half a decade ago, when it created Planet Federal in 2018 after acquiring geospatial software provider Boundless Spatial, to focus on the U.S. military, intelligence, and government civilian missions. More recently, New Zealand-based launch startup Rocket Lab in December 2022 announced a new subsidiary dubbed Rocket Lab National Security to focus on the defense market. Loft Orbital, a space infrastructure startup, launched Loft Federal in February 2023, while One Web acquired TrustComm in 2021 and rebranded it as its federally-oriented service provider OneWeb Technologies.

This past January, California-based Capella Space created Capella Federal as a new subsidiary dedicated to government and national security missions. While the larger company had previously catered to smaller government contracts from the NRO and other offices, Capella Federal was created to provide more niche expertise, by hiring former government and aerospace industry veterans with the network and clearances to work on more classified projects, and to be based in Washington, D.C. “geographically located where the [policy] movers and shakers are located,” says Traupe.

A Diverse Contracting World

New contracting mechanisms have expanded since the Space Force and other space-based offices were created, and the acquisition offices are trending away from the traditional cost-plus contracts that could often lead to schedule creep, and toward firm-fixed price contracts that incentivize providers to deliver on time, and on cost.

The Defense Department as a whole has recently increased its use of Middle-Tier Acquisition (MTA) programs, intended to help the department support and develop critical capabilities within five years. The MTA rapid prototyping and rapid fielding pathways are more fluid and streamlined than traditional processes, giving officials the option to speed up the procurement of an emerging technology or commercial solution.

After operating just 35 such programs in 2019, the number of MTA programs in the department jumped to over 100 in 2022, according to a recent report by the Government Accountability Office.

Millennium received the Space Force’s first-ever Space Enterprise Consortium (SPeC) project award in 2018, using an Other Transaction Authority (OTA) contract to develop and field its Tetra-1 small satellite to conduct missions in and around Geostationary Orbit (GEO), all within 15 months.

The OTA model helps non-traditional companies like Millennium to ramp up their capabilities and take on more complex, high-value-type contracts, that then can translate to company growth, providers note. Kim says the company had about 250 personnel when it received the Tetra-1 contract in 2018; by winter 2023, it had more than doubled its size, with over 600 personnel.

For small startups like Capella Federal, firm-fixed price contracts have worked well thus far, and larger government organizations haven’t shown great interest in offering up cost-plus contracts, Traupe says.

But government contractors hope to get some relief on firm-fixed price contracts due to inflation issues, analysts at the marketing and research firm Forecast International tell Via Satellite. As prices for many materials and components have gone up over the past several years, vendors are not seeing those inflation rates reflected in their contracts.

That issue could result in fewer fixed price contracts in the future, which would reduce the risk of a contractor losing money because their costs skyrocket due to inflation, says Shaun McDougall, a military market and budget analyst at Forecast International.

While the firm-fixed price model is preferential for the government, smaller businesses like Terran need to keep their finances healthy, Bell says.

“We’re one-sixth of the price of what a prime used to charge for the same exact bus,” he notes. “But they have to realize that there has to be enough money at the end of the day to make sure people like us become profitable."

Strategies for Rapid Manufacturing

The Space Force is taking steps to ensure its satellite providers are ready to meet the production needs associated with building much larger constellations, its leaders say.

Speaking before a Senate Armed Services Committee hearing last February, Vice Chief of Space Operations Gen. David “DT” Thompson said the industrial base is “probably as ready as it has been in the last several decades” to support the production of smallsat constellations, citing the expansion of commercial space investment as a key factor.

“A vast majority of the operating techniques and the subsystems used would apply both to commercial investment and to military national security investment as well,” Thompson said at the hearing. “While there are some very specific niche capabilities that we have pursued, I think the investment we're seeing in commercial space has served all of us, while creating a more robust and more capable industrial base to address our space capabilities.”

Since the SDA was stood up, the agency has been careful to prioritize a diverse supplier base across its source selections and contract awards, to avoid common mode failure issues, says Tournear.

But that hasn’t always been avoidable. The forthcoming PWSA Tranche 1 cycle will have some pinch points in terms of suppliers, such as for propulsion thrusters used by a majority of vendors, he notes. IP-based encryptors that are National Security Administration-approved have also proven difficult to source, since commercial providers don’t require that approval for their own systems.

That’s an “unintended consequence of doing firm fixed-price contracts with schedule above all,” he acknowledges. “If I'm a prime, I'm certainly going to pick the performer that I know has components on the shelf that I can rely on. And if there's only one of those that is in that category, then all of the primes will pick that component.”

Providers are building more components in house to avoid such pinch points. Millennium began vertically integrating its production facilities in 2015. With that model, “we are able to prioritize the delivery of those products, and we control the performance, as well as the quality of those products,” says Kim.

By 2018, the company offered 22 diverse in-house products, and currently builds about 80 percent of its spacecraft components. The 20 percent of outsourced components include solar cells – which Millennium can source from fellow Boeing subsidiary Spectrolab – and propulsion tanks and thrusters.

Terran Orbital currently builds about 85 percent of its satellite bus components in-house, including flight computers, reaction wheels, and batteries, using Terran-designed robots to perform automated manufacturing, says Bell. Within two years, he expects the company to build 100 percent of the components for a standard bus in-house, and be capable of delivering that bus to a customer within 30 days of order.

The Future of DoD Space Acquisition

Four years after the Defense Department formally launched its new space acquisition agenda, some corners of the DoD space apparatus are still in a “wait-and-see” mode, or are hesitant to give up full ownership of space-based sensor data, Bell notes.

“Even though they’re interested in commercial data as a service, they can’t guarantee the chain of custody from beginning to end, and they don’t know if the data has been manipulated,” he says.

Even so, the rapid prototyping and fielding model has caught on, perhaps faster than its proponents even imagined. The SDA officially folded into the Space Force last October, in an “exceptionally smooth” process, Tournear says. He was previously apprehensive about the transfer timeline, advocating for the entities to stay separate until fiscal year 2025. He credited Calvelli’s strong backing with assuaging his doubts, noting, “His tenants line up exactly with what SDA is doing – essentially, use firm fixed price, go with smaller satellites, faster contracts and get capabilities delivered.”

For the time being, a hybrid acquisition strategy of both rapid spiral development, a la SDA, for smallsat programs, and the traditional siloed programs for larger, exquisite, GEO-based systems, is likely to remain in place, Tournear says. VS

Correction: A previous version of this story misstated the year Boeing acquired Millennium Space Systems. The story has been updated.

Vivienne Machi is an award- winning reporter based in Stuttgart, Germany