Funding for space programs and commercial space stations: A guide for companies in the space sector

The world of Washington, D.C. politics and the federal budget may seem daunting, but companies in the commercial space sector should monitor Department of Defense (DoD), Space Force, and National Aeronautics and Space Administration (NASA) funding to increase their likelihood of winning contracts or obtaining grants for new projects. Companies should familiarize themselves with the annual legislative cycle that sets objectives and allows agency initiatives to move forward. This becomes increasingly important as Congress ramps up spending and agencies aim to leverage commercial space solutions. For their part, DoD and the Space Force have announced a "Commercial Space Strategy." NASA also has long partnered with private industry through contracts and Space Act Agreements, and recently has funded commercial efforts to create new private space stations.

Authorizations and Appropriations. The federal budget process follows a schedule established by the Congressional Budget Act of 1974. Each February, the president submits a budget request to Congress for the following fiscal year. Congress then prepares authorization bills to determine policy by defining programs, activities, goals, and limitations on the use of appropriated funds. Appropriations bills then provide the funding to carry out what has been authorized. DoD activities, including the Space Force, are addressed in the National Defense Authorization Act (NDAA) and defense appropriations bill. NASA is funded through separate authorization and appropriations bills.

Congress seeks to complete the DoD and NASA appropriations bills by June 30, so they can be passed by the beginning of the fiscal year (Oct. 1). The House of Representatives typically advances appropriations legislation through both committee and House floor consideration prior to leaving for the August recess, but at the time of this writing, the bills are still pending, and Congress is in recess. In recent years, the Senate has similarly sought to complete appropriations legislation prior to the August recess. These deliberations often go sideways with politics and elections, meaning Congressional action will continue for months after the fiscal year begins. Starting a new fiscal year without enactment of appropriations risks a government shutdown; however, it is common for Congress to pass interim funding bills referred to as "continuing resolutions," which permit the government to operate on a short-term basis.

For the upcoming fiscal year (FY 2025), on June 13, 2024, the House Appropriations Committee (HAC) advanced a DoD Appropriations bill totaling $833 billion. The bill allocates $28.7 billion for the Space Force, whose priorities include enhanced missile warning and tracking capabilities, protection of low-earth-orbit (LEO) satellites, and the National Security Space Launch program. This legislation (H.R. 8774) subsequently was passed by the House on June 28, 2024. The HAC will examine specific programs in detail, such as a Space Force initiative to develop a "Resilient GPS" (R-GPS) utilizing smaller and less expensive commercial satellites. Although the need for reliable sources of position, navigation, and timing (PNT) information remains important, the HAC first wants a report on whether R-GPS is the best alternative before it decides whether to fully fund this initiative.

The Senate Appropriations Committee (SAC) is no less active on space issues. The SAC recognizes the importance of investing in infrastructure to support national security launches in the coming years and is directing the Space Force to submit a report identifying "Spaceport Infrastructure" shortfalls, including an identification of military construction projects deemed "essential to accommodating increased launch cadence." Currently there are 20 spaceports with varying capabilities located in 10 states, including two (Vandenberg and Mojave) in California. Congressional interest in spaceports comes as government space activity represents a growing source of launch demand and provides opportunities to take advantage of decreasing per-kilogram payload costs.

NASA is funded through a separate appropriations bill (H.R. 9026), which was introduced in the House on July 7, 2024. The current version appropriates $25.2 billion to NASA to address priorities including lunar exploration, space industry technology development, and the transition to commercial space stations. Like DoD's budget requests, NASA's budget is not exempt from congressional scrutiny. The current House bill provides $200 million less than NASA's request. The Mars Sample Return (MSR), led by the Jet Propulsion Laboratory (JPL) in Pasadena, California, has seen reduced funding, but the SAC may seek an increase to protect the Artemis lunar exploration effort.

Another unique opportunity to work with the government may be found in the NDAA's proposed Commercial Augmentation Space Reserve (CASR), through which companies will provide products or services to DoD for national security purposes. Companies operating in space, including those with terrestrial ground and network systems that could be used to support a military function, may have the possibility of pre-negotiating contracts which would be activated in times of crisis or conflict. So far, the Space Force has not provided any details on how the government will address insurance and risk assessment in a crisis or wartime environment.

R-GPS, Spaceport Infrastructure, MSR, and CASR, are just four of many programs making their way through the funding process, each of which involves many contractors, subcontractors, suppliers, and often state and local government support. Although Congress has met its deadline to pass all required appropriations measures prior to the Oct. 1 start of the fiscal year only four times (1977, 1989, 1995, and 1997), the system inexorably moves forward year after year. Understanding how and where to provide meaningful input for the committees, subcommittees, and their reports is key to achieving funding for important programs.

Contract Awards and Protests. Most federal government contracts are awarded through a competitive process, including those in the space arena. If, after significant investment in a proposal, a contractor believes that a government agency did not allow for fair competition, review is available through bid protests to the procuring agency or, more commonly, the Government Accountability Office (GAO), or the U.S. Court of Federal Claims (COFC). Protest grounds can include arguments that solicitation terms are too restrictive, or that proposals were incorrectly or unequally evaluated. Potential conflicts of interest are sometimes a concern. Unlike most legal actions, protests move quickly. This means that a protester needs to identify when and how to raise an issue (e.g., before proposals are due, or after award), and awardees should be prepared to intervene in a protest to protect their contracts.

Because of its relative efficiency, GAO receives the majority of bid protest filings. By statute, GAO must resolve bid protests within 100 days, and in FY 2023, GAO handled over 1,900 protests, with approximately half closed out in the protester's favor after an agency either took voluntary corrective action or a GAO decision. GAO will not direct that an award go to a specific contractor, and "winning" a protest usually amounts to continuing in a competition.

Still, protesting to GAO can bring meaningful results. For example, even before submitting a proposal, Blue Origin (B-417839) successfully argued that the unorthodox terms of an Air Force solicitation for launch services would not permit an evaluation of the respective strengths and weaknesses of competing offers. GAO agreed, and the Air Force revised its solicitation and reimbursed protest costs.

So far in 2024, the Space Force and NASA have had success defending space-related acquisitions. The Space Force fended off a protest (B-422285) alleging that it conducted misleading discussions for a research and development contract competition, failed to understand the contractor's "cross-utilization" strategy, and applied "unstated evaluation criteria." NASA recently convinced GAO to reject a protest (B-422331) by an incumbent information technology contractor that was excluded from the competitive range for discussions after receiving low ratings on its proposal.

The COFC also hears a significant number of protests, disposing of 152 in FY 2023. Frequently, protests beginning at GAO will end up at the COFC. For example, a company not selected by NASA for the Geostationary Extended Observation Sounder (GeoXO) program filed a protest with GAO based on an apparent impropriety or conflict of interest. NASA had hired the awardee's former vice president in charge of satellite business shortly before awarding the GeoXO contract. GAO denied the protest because NASA had kept a careful evaluation record comparing the competing proposals, while also taking steps to avoid or mitigate any potential conflict of interest. The protester took the case to the COFC, a federal court in Washington, D.C. with government contracting expertise, but the COFC came to the same conclusion on the alleged conflict of interest and denied other arguments challenging NASA's evaluation of the proposals. All this transpired within approximately six months.

NASA Space Act Agreements and DoD "Other Transactions" (OTs) generally are exempt from bid protests. Despite the lack of a clear path for protests at GAO or the COFC, OT proposers have continued to pursue protest actions where business interests are sufficiently important, and in 2024, the COFC (No. 24-160) signaled a willingness to take jurisdiction over OT competitions that contemplate follow-on production contracts.

The Rapidly Expanding New Space Economy. Overall, the global space economy totaled $570 billion in 2023. In FY 2023, NASA obligated over $22 billion in contracts and other agreements, and Space Force contracting is projected to hit $18 billion in FY 2024. Government spending on space activities is expected to show continued growth.

The Space Force (Los Angeles AFB) manages the National Security Space Launch program (NSSL). The NSSL Phase 2 program covers launch services at Vandenberg AFB, CA and Cape Canaveral, FL provided by United Launch Alliance and SpaceX. In June 2024, the Space Force added Blue Origin for the $5.6 billion NSSL Phase 3, with a projected 90 rocket launches from 2025-2029. In addition to undertaking its most demanding missions with these three major contractors, NSSL Phase 3 provides for separate task orders beginning in late 2024 for lower-risk payloads launching to commercial orbits. This will allow NSSL to take advantage of the growing commercial launch market, including California companies with medium-lift rockets. NASA's Commercial Lunar Payload Services (CLPS), which includes several California-based lander services participants, is one more example of ambitious government investment in the new space economy.

Contractors will need to choose teaming partners, subcontractors, and corporate acquisitions carefully. Classified work requires mitigation of foreign ownership, control, or interest. Foreign investment in unclassified work can still trigger notifications to the U.S. Committee on Foreign Investment in the United States (CFIUS) and disqualify companies even if foreign investors hold only a minority interest. Adequate review is essential to confirm identities, locations, and beneficial ownership.

While engineering may lead the way, companies seeking successful outcomes with federally funded projects will need to take measures to comply with government-unique rules that require accounting for government funding, counterfeit parts detection, domestic sourcing, and socioeconomic requirements. No less important is understanding the government's approach to intellectual property rights, which is key to preserving the value of innovative technologies in the commercial space industry.