Space Force Working Capital Fund to facilitate flexible funding for commercial services 

Announcement comes amidst broader reform push under the Acquisition Transformation Strategy 

This fall, Space Systems Command announced the United States Space Force will have access to a working capital fund to buy commercial space services on-demand. But the fund, which is authorized to spend up to $1.2 billion in a given fiscal year, is not actually new money appropriated by Congress to the service. Rather, it presents another flexible funding option to move money in response to emerging mission requirements. The announcement also coincides with the broader Acquisition Transformation Strategy initiative recently unveiled by Secretary of War Pete Hegseth. Together, these actions represent how the Space Force, and the Department of War as a whole, is actively reforming how it acquires commercial services from industry partners.  

“A working capital fund is almost like a checking account and a debit card: the account is there, but there’s no money in it unless somebody puts money into it,” said Mike Dickey, former Chief Architect of the Space Force and Founding Partner at Elara Nova. “But it’s important to understand that the working capital fund is not a new appropriation from the Congress. The military services have to take money from something else and put it into the working capital fund for it to become accessible.” 

In the traditional appropriations process, military services build out their budgets two years in advance of a given fiscal year. Those budgets are then reviewed and revised by the Department of War and the Office of Management and Budget, respectively, before going to Congress for approval. 

“Congress has the ultimate authority to decide how much money will be appropriated and what that money will be used for,” Dickey said. “But this means the services don’t have much flexibility in any given year to move money around as threats and capabilities change. So the working capital fund enables flexibility within the year of execution to take money that may have been appropriated for something else and move it to the working capital fund to meet emerging requirements.” 

The Evolution of the Working Capital Fund 

The Working Capital Fund concept itself is not new, but rather moves funding authority for space activities, originally housed within the Defense Information Systems Agency (DISA), to the Department of the Air Force’s Working Capital Fund.  

Under DISA, the Commercial Satellite Communications Office (CSCO) used the WCF to purchase satellite communication services. But now, the CSCO office resides within the Space Force and the funding authority has been moved into the Department of the Air Force’s WCF under an account called the Enterprise Space Activity Group (ESAG) under CSCO’s management.  

Like the DISA fund before it, CSCO will use the Space Force Working Capital Fund to buy commercial satellite communications. However, it’s largely expected that other space capabilities will be acquired through the fund in the years to come.  

“There’s a number of different space missions that can benefit from commercial services,” said Maj Gen (Ret) Roger Teague, Founding Partner at Elara Nova. “The Space Force could have on-demand access to commercial launch providers to rapidly reconstitute a constellation with small satellites. Another example would be space domain awareness: where you could have a subscription-based access to a commercial database for tracking, characterization and anomaly detection of space-based objects in geosynchronous orbit.” 

However, the working capital fund does not come without its limitations. 

One drawback is that a working capital fund is limited to the year of execution, so commercial companies cannot rely on guaranteed year-over-year income which they then can use to reinvest in their commercially-provided service. This challenge begets a second drawback, in that funding may not always be available to continue delivering a service the military has come to rely on. 

The FAR Foundation and Other Financial Pathways 

Acquisition is built on a legislative foundation known as the Federal Acquisition Regulations (FAR), which lays out how the government can legally buy or acquire a product or service. But even within the FAR, there are flexible pathways for acquisition like Other Transaction Authority (OTAs). 

“An OTA is a contracting mechanism for anything outside FAR Part 12 and FAR Part 15,” Dickey said. “The FAR Part 15 provides guidance for buying bespoke military equipment, like an aircraft carrier or a stealth fighter that is not a commercial product. But if there is a commercial market for a product, like a black Suburban the government might use, then the FAR Part 12 allows you to buy that Suburban off the commercial market. But even that might come with limitations, and that’s why OTA’s are an ‘everything else’ option.” 

OTAs offer a contracting mechanism that gives the government broad discretion to negotiate the terms and conditions of a purchase with the contractor. It also provides a direct pathway to involving more non-traditional contractors in the defense industrial base, those who may not have all of the unique accounting and compliance mechanisms in place for traditional defense contracting. 

Now, the working capital fund, like OTAs, presents another option for the government to acquire a product or service from the commercial market. Flexible pathways for acquisition are particularly important when buying commercial services, because the government’s motives for buying a service are inherently different compared to buying a product.  

“The U.S.  government’s approach to buying services and products is driven by acquisition strategies that intend to drive certain outcomes,” Teague said. “Buying a service is typically based on the availability of people and time, whereas products are often based on certain deliverables and specifications. Acquisition officials can use time and materials or a cost reimbursable contract mechanism for acquiring service, whereas product acquisition is more typically aligned under a firm fixed price or delivery-order contract. So, service-oriented acquisitions need to have more flexible funding options available.” 

The Acquisition Transformation Strategy 

The Space Force Working Capital Fund also comes at a time when acquisition reform measures are being implemented across the government. Toward this end, Secretary Hegseth unveiled a five-point Acquisition Transformation Strategy that aims to overhaul the acquisitions process: 

1. Rebuild the Defense Industrial Base 

2. Empower the Acquisition Workforce  

3. Maximize Acquisition Flexibility 

4. Develop High Performance Systems  

5. Improve Effective Lifecycle Risk Management 

One element of the broader reform effort is also renaming the title of acquisition officials, who were previously known as Portfolio Executive Officers. Now, they will go by ‘Portfolio Acquisition Executives.’ 

For General Teague, this is not just a simple renaming but reflects the broader changes happening in the acquisition community as capabilities and requirements evolve. 

“The Portfolio Acquisition Executive title emphasizes the fact that they are fielding a portfolio of capabilities designed to satisfy requirements across a particular mission area. There are a number of different traits that portfolio acquisition executives should be considering as they field a capability in response to a threat. But the Acquisition Transformation Strategy is going to provide a lot of flexibility and empower those PAE’s to make those decisions and trades within their programs and portfolios.” 

Broader Acquisition Reform Efforts 

Now, how effectively the Acquisition Transformation Strategy may be implemented will ultimately come down to Congress. But even there, other acquisition reform measures are being considered in the Senate with The FORGED Act and in the House with The SPEED Act, both of which are also aiming to overhaul how the military acquires capabilities.  

“The Acquisition Transformation Strategy is not a decision that the Department of War can unilaterally make because Congress appropriates the money,” Dickey said. “Now, there’s a reason to be optimistic about Congress expanding the guardrails for the acquirers within the authorization and the appropriations processes. But Congress typically likes to have a lot of control over how that money is spent, so it will take a whole-of-government approach to actualize this strategy.”  

With more flexible acquisition pathways like the OTAs and the Space Force Working Capital Fund, the government is exploring a variety of ways to empower their PAEs across the Department of War. 

“The working capital fund is an important step, but it is still only a tiny step in this broader transformation strategy,” Dickey said. “There are many reforms that the acquisition workforce and Congress have been wanting to make over the years, many of which have been outlined in the Acquisition Transformation Strategy. What the Secretary is trying to do is provide those program acquisition executives with the ability and accountability to make informed risk decisions and not be bound by layers of policy and rules.” 

For both traditional and nontraditional companies that are looking to contract with the government, Elara Nova is evolving to meet their needs in both understanding the evolving regulatory environment and unlocking financial resources to deliver capabilities the warfighter needs. That’s why Elara Nova has stood up the new Elara Nova Capital Advisory Services (ENCAS) to help companies and businesses navigate these challenges.   

“ENCAS is designed to bridge the gap between innovation and the capital markets,” Teague said. “ENCAS is not just a financial consultancy; it’s a mission-aligned capital catalyst that helps stakeholders across the space enterprise to deploy their capital with confidence and in a risk-adjusted manner. Whether it’s capital structuring, infrastructure or technical due diligence expertise, strategic advice for growth, or even policy and compliance insight, ENCAS is prepared to help industry navigate the regulatory domain that space companies operate within.” 

Elara Nova is a global consultancy and professional services firm focused on helping businesses and government agencies maximize the strategic advantages of the space and aeronautics domain. Learn more at https://elaranova.com/.