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The Pentagon is putting $13 billion behind its talk of embracing commercial space, committing serious money to low-Earth orbit satellite services.
This marks a dramatic increase in spending on commercial satellite services, with the so-called PLEO (Proliferated Low Earth Orbit) contract jumping from $900 million to $13 billion over a decade. Unlike the military’s typical procurement approach, the PLEO contract gives vendors greater flexibility to tailor services to customer needs rather than following rigid government specifications.
Companies across the industry are eager to see this model expand to other military space programs. But entrenched procurement habits die hard, and while integration of commercial space capabilities is progressing, practical challenges remain.
Across the space sector, executives continue to lament a persistent gap between the military’s stated commitment to commercial technology and the procurement practices that undermine it.
“Constant requirements creep”
In late 2022, Assistant Secretary of the Air Force for Space Acquisitions Frank Calvelli called for streamlined procurement through fixed-price contracts and standardized commercial production lines. In practice, however, DoD buyers still request customized satellite configurations — even for fixed-price contracts, said executives at the recent MilSat Symposium in Mountain View, California.
“What we see is a constant requirements creep” that undermines the very efficiencies DoD seeks, said Debra Facktor, head of Airbus U.S. Space Systems. The result is delayed deliveries and financial burdens, as change requests under fixed-price deals force suppliers to absorb the costs.
Jonny Dyer, CEO of the satellite startup Muon Space, highlighted a cultural divide between the defense sector’s risk-averse procurement mindset and the commercial space industry’s iterative approach. Government buyers often assume companies favor cost-plus contracts for stable profit margins and flexibility.
But truly commercial firms prefer to sell to the government under fixed-price agreements, just like any other customer, says Dyer. “Cost-plus drives a completely different mindset” that does not promote speed and efficiency. The regulatory burdens and incentives of traditional contracting models, he said, actively work against the Pentagon’s stated goal of tapping into commercial innovation.
More specific wish lists
Another problem companies encounter is understanding the military’s demand signals.
While DoD and the Space Force have published high-level strategy documents for commercial space integration, they lack the specific guidance companies need to confidently align their development roadmaps. Without clearer guidance, commercial firms struggle to develop dual-use technologies that serve both military and civilian markets, leaving private investors uncertain about the long-term potential.
Retired Space Force Gen. David “DT” Thompson, former Vice Chief of Space Operations, stressed the need for “clear statements and more definitive plans about where we’re going in the future — and how we’re going to use certain things.” Without this alignment, he told SpaceNews, the commercial space industry will hesitate to commit the resources required to meet evolving military needs.
Recognizing these challenges, Space Force officials have started fresh discussions with venture capitalists to better understand private sector concerns. Meanwhile, the Defense Innovation Unit (DIU), established nearly a decade ago to bridge the commercial-military divide, is stepping up efforts to push commercial solutions in defense programs.
One proposed path forward is the “anchor tenancy” strategy suggested by policy analyst Sam Wilson of the Aerospace Corporation. By committing as a primary customer for a company’s product or service, the Pentagon could guide development while still leveraging commercial efficiencies — a middle ground allowing the military to tap into private-sector innovation without losing operational control.
Ultimately, the Pentagon must be willing to evolve its longstanding procurement habits. The PLEO contract is an important step, but entrenched cultural biases remain. In a domain as competitive and critical as space, the U.S. can’t afford to let innovation slip through bureaucratic fingers.
This article first appeared in the November 2024 issue of the ‘On National Security’ commentary feature in SpaceNews Magazine.
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