U.S. Space Force – Potential Federal Market Implications
Published: August 10, 2018
President Trump’s pursuit of a new U. S. Space Force could drive even more contracted spending within this multi-billion-dollar market.
The new National Defense Strategy released in January highlighted the importance of space to the future of U.S. defense and national security. The Department of Defense (DoD) has been actively studying a path forward and next steps.
Building on that momentum, in his remarks at a meeting of the National Space Council on June 18, 2018, the President directed the Department of Defense (DoD) and Pentagon to immediately begin the process necessary to establish a Space Force as the sixth branch of the Armed Forces.
This week the DoD released the results of their exploration and a framework for action in their Final Report on Organizational and Management Structure for the National Security Space Components of the Department of Defense.
Establishing a U.S. Space Force
Establishing a sixth branch of the Armed Forces will require an Act of Congress. In the meantime, the DoD will use existing authorities to immediately pursue establishing four components of the Space Force.
- Space Development Agency – A joint organization charged with rapidly developing and fielding next-generation capabilities.
- Space Operations Force – Career space experts from all Military Services who are trained, promoted and retained as space warfighting professionals and who form a space community of engineers, scientists, intelligence experts, operators, strategists and more.
- Services and Support – Structures to provide support functions for the Space Force in an affordable and efficient operating structure and with accountable civilian oversight.
- U.S. Space Command – A new unified combatant command to improve and evolve space warfighting, including integrating innovative force designs, concepts of operation, doctrines, tactics, techniques and procedures. The DoD will examine U.S. Special Operations Command (USSOCOM) and U.S. Cyber Command (USCYBERCOM) to develop a lean, flat structure for U.S. Space Command.
In addition, the DOD is directed to immediately accelerate space technology and anchor development initiatives to the modernization priorities outlined in the National Defense Strategy.
From Air Force Space and Missile Systems Center to Space Development Agency
In the section on creating the Space Development Agency (SDA) the report noted that currently the Air Force Space and Missile Systems Center (SMC) executes 85 percent of the DoD’s military space procurement budget, delivering broad capabilities including missile warning; positioning, navigation, and timing; satellite communications; and space situational awareness. A review of the reported prime contract obligations across the most relevant contracting categories from FY 2015 through FY 2017 provides a glimpse into the magnitude of current spending levels. (See table below.)
The DoD report also noted that in preparations for the restructuring that would come with the new SDA the SMC has assessed and redesigned its organization and processes, which they’re calling SMC 2.0. The changes are aimed at driving innovation, speed, and affordability, with a focus on game-changing technologies, simplified decision making and leveraging commercial partnerships for rapid prototyping and experimentation. As the SDA is established, resources will shift from service space acquisition organizations to the new agency.
Space Spending in the FY 2019 Defense Budget Request
Taking a quick look at the FY 2019 DoD Procurement (P1) and Research, Development, Test and Evaluation (RDT&E, R1) budgets for space-related programs and funding request shows that vast majority of space efforts and activities fall within the Air Force, as we would expect. However, there is a handful of programs at the Army, Navy and Defense Agencies that include references to “space” in their title designations, so I included them in the list. The Procurement programs and RDT&E programs listed account for nearly $2.7 billion and $2.8 billion in budget dollars respectively. It will be interesting to see how these programs will be affected in the FY 2020 budget, assuming we continue to have visibility into them. (See tables below.)
The National Defense Strategy places significant focus on space as a warfighting domain and a modernization priority. Central to its space vision the DoD is seeking to “usher in a new age of space technology and field new multi-domain systems” to protect the country. One affect will be to “unlock growth in the U.S. industrial base, expand the commercial space economy, and strengthen cooperation with our allies and partners.” DoD will pursue “a blend of commercial and government technology, rapid prototyping, experimentation, collaboration with key allies and partners, and enhanced government-commercial relationships.”
Recognizing that the latest report is focused on policy priorities and Congress will have its questions about operational implications, the market impacts of DoD’s vision are not necessarily overstated. Many of the methods by which the DoD wants to accelerate space technology are being adopted currently.
We have seen the DoD already seeking various ways to increase the speed of fielding new capabilities and reduce the risk of experimentation as well as shorten acquisition cycles. Fielding capabilities examples include the Air Force Rapid Capabilities Office (AFRCO), the DoD Strategic Capabilities Office (SCO), the Defense Innovation Unit (DIU), and others. Acquisition examples include Other Transaction Agreements (OTAs) and Commercial Solution Openings (CSOs). Granted, there is still progress to be made in the implementation of these methods, and some pitfalls must be mitigated, but these efforts and others provide a potential swim lane for the development and fielding of new space innovations and related technologies.
The Path Forward
The White House says that a legislative proposal with detailed authorities necessary to fully establish the Space Force as its own military branch will be submitted with the President’s FY 2020 Budget to support Congressional consideration in the FY 2020 National Defense Authorization Act (NDAA). Congress has previously included space-related provisions in that legislation. The FY 2018 NDAA signed in December 2017 authorized the creation of a Space Corps within the Department of the Air Force by January 1, 2019. The Trump Administration is seeking to take it to the next level.