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Defense Science Board Offers Commercial Pathway to Integrated Deterrence
Study Recognizes the Value of Commercial Space Systems in Military Requirements
In November of 2022, the Under Secretary of Defense for Research and Engineering commissioned the Defense Science Board (DSB) to study commercial space systems and how they can be leveraged in support of Department of Defense (DOD) objectives. As the Federal Advisory Committee to the Office of the Secretary of Defense, the DSB engaged government and space industry stakeholders to assess the opportunities and challenges to integrating commercial space systems into military requirements. The study’s resulting document, “Final Report on Commercial Space System Access and Integrity,” was published nearly two years later with five recommendations toward what the DSB called its bottom line objective: “Integrated Deterrence Requires Integrated Operations.”
“The bottom line of ‘Integrated Deterrence Requires Integrated Operations,’ means we must budget and plan in advance to provide maximum capability to the warfighter,” said Dr. Brad Tousley, partner at Elara Nova: The Space Consultancy and a member of the Defense Science Board. “Economic power is a critical element to our military power. If commercial space capabilities exist that can support DOD objectives, they should be integrated into warfighter training now.”
Dual-Use Technologies in Space
The Defense Science Board’s findings come as an emerging commercial space market is increasingly developing “dual-use technologies,” or commercial space capabilities that can also be applied toward DOD objectives.
“Commercial space systems bring the collection and distribution of information to the fight,” said Mike Dickey, Founding Partner at Elara Nova. “For example, the military needs satellite communications to transmit orders from commanders to troops in the field, ships at sea and airplanes in the air, which is the same technology that puts the World Series in every home. Further, commercial satellite images that support economic monitoring of crude oil movement through ports around the world can also find Russian convoys in Ukraine.”
Commercial space systems have demonstrated their military value since the onset of Russia’s invasion of Ukraine in February of 2022. However, the Ukrainian military’s reliance on commercial space systems was not planned in advance, but rather came as a result of the inherent responsiveness of commercial space technologies.
Understanding Commercial Space
Now, the DOD is looking to understand how the commercial space industry – and the institutional investors financially backing it – can similarly be factored into their own warfighting plans today.
“Prior to the pandemic, commercial investment in space technologies peaked at about $15 billion a year, which was essentially the same as the Space Force’s budget in Fiscal Year 2021,” Dickey said. “Leveraging that commercial investment becomes a huge opportunity for the Department to double its financial resources toward space capabilities for military operations.”
The Defense Science Board defined “commercial space,” across four elements: innovation, development, products and services. But the report prioritized the two elements that can provide immediate value to a modern or future conflict: commercial products and commercial services.
“From a near-term standpoint, the Defense Science Board’s goal was to offer a set of recommendations for applying commercial solutions to immediate DOD needs,” Dr. Tousley said. “There are a variety of commercial space products or services the DOD can buy now, as demonstrated by the use of commercial space systems in Ukraine.”
Planning for Commercial Integration
To this end, the Defense Science Board offered five recommendations toward facilitating the growth of commercial space markets in ways that also align to fulfilling DOD objectives.
The first recommendation calls on the government to “implement an end-to-end framework to better integrate existing and planned commercial capabilities into national security architectures.”
This recommendation stems from opportunities to utilize commercial space technologies that have already matured, much like the commercial satellite communication (SATCOM) networks that exist today.
“United States Space Command has a Commercial Integration Cell that sits at Vandenberg Space Force Base primarily supporting satellite communications,” Dickey said. “By sitting with Space Command, those satellite communication providers are aware of ongoing operations and threats to their commercial systems, so they can translate those potential issues into enhancements, upgrades or defensive cyber operations to guarantee resiliency against the threat before a crisis emerges.”
While the Commercial Integration Cell at Vandenberg is an example of integrating a mature commercial space capability at the operational level, not all commercial space markets have reached the same level of maturity that makes this collaboration possible. However, the DOD can apply the same financial strategies it uses to buy services from the SATCOM market to support the growth of other emerging capabilities, too.
Budgeting and PPBE Flexibility
One of the significant advantages of a mature commercial space services market is the ability to respond to the ebbs and flows of supply and demand. Long-term budgeting for these variations, however, is difficult to predict. In the SATCOM market, the government has solved this by making use of a Defense Working Capital Fund as a funding tool.
“The working capital fund basically creates a checkbook that the government can use each year in the commercial market to support a certain requirement,” Dickey said. “DOD users can transfer money into that checkbook and have the purchases made on their behalf. With a multi-year funding process and the working capital fund, the DOD can get better market pricing that will drive the cost down for a service, while providing transparency to companies and their investors about the government’s buying habits.”
The Defense Science Board further addressed challenges in the DOD’s budgeting process directly in its second recommendation: “integrate evaluation of and provision for commercial space services into institutional processes.”
The DOD currently develops its budget through an institutional process known as Planning, Programming, Budgeting and Evaluation (PPBE). But the long-established PPBE process lacks the flexibility needed to keep pace with the rapid developments of commercial space technologies.
As such, the Defense Science Board advocates for more flexible funding measures within the PPBE process. In addition to the working capital fund model found in their first recommendation, the DSB also supports the flexible reallocation of operations and management (O&M) funds that were similarly recommended by a Congressionally mandated Commission on PPBE Reform earlier this year.
“Program executive officers need flexibility to move funds between program elements year-to-year, because sometimes one program might under-spend on a service or product, while another might have a greater need,” Dr. Tousley said. “So if the government can adopt a multi-year acquisition reform and leverage working capital fund-like models, the commercial market will have clarity on market demand. Then as long as Congress can review a multi-year appropriation in the appropriations process, their equities are served.”
Guaranteeing Resilience of Commercial Space Systems
A greater reliance on commercial space systems, however, presents its own set of risks for the DOD’s military requirements. These risks influenced the Defense Science Board’s third recommendation: “incentivize trust and build resilience in commercial providers.”
“The government can include resilience of a commercial space capability as a quality-of-service requirement, while acknowledging that quality assurance is going to cost more,” Dr. Tousley said. “But as long as the additional price is factored in as part of the economic model, then the vendors know what they have to do to ensure resiliency, and the government can rely on the enhanced capability as a function of the increased pricing.”
Commercially available space technologies also present the risk of adversaries leveraging them against the United States and its Allies. The Defense Science Board acknowledges this likelihood in its fourth recommendation: “develop suite of capabilities to monitor, assess and respond to adversary use of commercial space capabilities.”
“Commercial partners and the government have to acknowledge that adversaries will want to use the same commercial capabilities that we would want to use,” Dr. Tousley said. “So commercial vendors must ensure the U.S. government’s interest is best protected in a way that does not damage the commercial industry’s international growth.”
Government as Regulator, Investor and Customer
Navigating the complexities of the commercial space market may be a challenging endeavor, but the state of each market can inform how the DOD develops its policy. This dynamic created the Defense Science Board’s fifth recommendation: “account for maturity of the commercial market when making decisions on how it regulates, invests and buys commercial space services.”
The Defense Science Board proposes the DOD do this by avoiding over-regulation, while investing for “market creation, not market monopolization.” As an example, Dr. Tousley points to how the DOD actively relies on the GEO commercial satellite communications market today, while understanding the more nascent proliferated Low-Earth Orbit (pLEO) and cislunar markets will require a more calculated investment to facilitate their growth.
“Over-regulation can restrict a robust domestic market, while inhibiting commercial competition internationally,” Dr. Tousley said. “Competition in the commercial space market serves the DOD’s best interest in the long term with more competitive pricing, so the government must account for market maturity when it evaluates how it’s going to regulate, invest and buy these commercial space services.”
This final recommendation highlights the key challenge for the DOD as it looks to engage the more nascent industries within the commercial space market.
As an “anchor tenant,” the DOD can provide critical, early-stage funding for emerging space companies to grow their capability into a total addressable market. But the government’s influence can also inadvertently prevent other competitors from entering the market by creating “vendor lock” with a single provider, thereby also reducing the resiliency for a given military requirement.
“There are ways to navigate the government’s role as an anchor tenant while avoiding vendor lock,” Dickey said. “The government can put down the first investment in an emerging space technology as its first and majority customer, but the government also needs to mitigate the risk of vendor lock by creating on-ramps for other providers into the market and off-ramps for those who fall short of mutually agreed expectations.”
Achieving Integrated Deterrence
With each of these recommendations realized, the DOD can apply the lessons learned in Ukraine to achieve “integrated deterrence.”
“‘Integrated deterrence’ means the United States must integrate commercial capabilities into its military operations upfront,” Dr. Tousley said. “What happened in Ukraine demonstrates the agility and responsiveness of the commercial space market, but we must remember that wasn’t planned in advance. The government needs to plan for integrated operations now by developing contracts with the commercial space sector, because the DOD can’t just hope that a commercial space company is going to be there in an emergency.”
Now, partners at Elara Nova: The Space Consultancy, are positioned to provide their expertise to stakeholders similarly exploring solutions at the cross-section of military requirements and commercial space capabilities.
“Elara Nova lives at the intersection of the government, industry and the investment market,” Dickey said. “Elara Nova partners have direct experience in each of these sectors of the space economy, so we offer a unique opportunity to support the implementation of the Defense Science Board’s recommendations.”
Elara Nova is a global consultancy and professional services firm focused on helping businesses and government agencies maximize the strategic advantages of the space domain. Learn more at https://elaranova.com/.