The Pentagon, for decades, has spent the bulk of its massive space budget on traditional geostationary satellites.

The four-year-old Space Development Agency (SDA) is working to break the mold with an ambitious plan to build a low-Earth orbit constellation by relying on a broad base of suppliers for commercially produced small satellites and laser communications terminals.

“The move to proliferated LEO is highly disruptive to how the government procures satellites,” said James Faist, industry consultant and former U.S. Defense Department director of defense research and engineering for advanced capabilities.

SDA calls its layered network of satellites the Proliferated Warfighter Space Architecture. It includes a Transport Layer of interconnected communications satellites and a Tracking Layer of missile-detection and early-warning sensor satellites.

Under the traditional defense contracting model, SDA’s constellation would have been awarded to one or two prime contractors. But in order to leverage the commercial satellite market, the agency is ordering satellites from multiple vendors and requiring manufacturers to make their spacecraft interoperable via optical links that adhere to common standards.

“The architecture needs to be such that many providers can plug into it,” said Faist. “And that’s basically the SDA mantra.”

To date, SDA has ordered 62 satellites from York Space Systems, four from SpaceX, 56 from Northrop Grumman, 52 from Lockheed Martin, 20 from L3Harris Technologies, seven from Raytheon Technologies and 10 from Ball Aerospace. York so far has delivered 10 satellites, eight of which launched to orbit April 2, along with two from SpaceX.

Defense contractors Lockheed Martin, Northrop Grumman and L3Harris are building SDA’s satellites using commercial buses from Terran Orbital, Airbus U.S. Space and Defense and Maxar Technologies, respectively. SpaceX, Raytheon Technologies and Ball Aerospace, in contrast, are using in-house designs.

Disruptive approach

“What SDA is doing is entirely a departure from how the DoD has historically acquired hardware,” said Chris Quilty, industry analyst and founder of the market research firm Quilty Space.

“When I think about the implications, if you have a Transport Layer that’s effective and resilient, high throughput and low latency, what becomes the need for some of the traditional geostationary satellite programs that are the bread and butter of the primes?” he asked.

The large geostationary satellites, to be sure, will not go away, Quilty added, because the government wants a hybrid architecture. “But I think this is the reason why the Lockheeds and Northrops have been so aggressive in chasing SDA programs. It’s because it’s going to cannibalize a lot of what they used to do.”

Despite being a relatively small agency with about 200 people, SDA has had an outsize impact on the military space market. It is buying satellites under fixed-price contracts and recompeting Transport Layer and Tracking Layer spacecraft procurements every two years.

This commercial-like model allows SDA to incrementally add new technologies as they become available, in contrast to DoD’s traditional method of funding one large acquisition over many years.

“SDA will be key to rapidly delivering space capability to our warfighters,” said the Space Force’s senior acquisition executive Frank Calvelli. “I fully support their strategy, and we will maintain their structure and culture to let them continue to move fast and do what they do best.”

By deploying the constellation in tranches of satellites every two years, said Quilty, “they are essentially implementing a spiral development process of getting to ‘good enough,’” instead of spending a decade developing technologies that may be outdated by the time they are fielded.

Following DoD’s usual procurement process, it can take 10 years to field a satellite, SDA Director Derek Tournear said recently at the Potomac Officers Club’s Air Force Summit. At that pace, he said, the nation is looking at fighting a war with outdated technology.

“You have to get the capabilities up there. You aren’t going to get the perfect capability on day one,” said Tournear. “You’re not even going to get everything that everyone wants on day one. The whole idea is that you have something up there and then continue to grow from there.”

Hundreds of satellites

Originally established in 2019 with a mandate to enhance the military’s space capabilities, SDA initially faced staunch opposition from Air Force leaders and skepticism on Capitol Hill. The agency was part of the Office of the Undersecretary of Defense for Research and Engineering until last October when it was realigned under the U.S. Space Force.

Many in the space industry expected SDA’s proliferated LEO plan to get derailed by the DoD bureaucracy, Quilty said. “And lo and behold, they’ve actually relatively held their schedule in terms of the tranche contract awards. It’s pretty impressive.”

A SpaceX Falcon 9 rocket on April 2 launched SDA’s first 10 satellites of the Tranche 0 portion of the constellation. Another Falcon 9 had been scheduled to launch 13 more Tranche 0 satellites in June — 10 made by Lockheed Martin and three by York Space — but the mission has been delayed to late August. This batch initially included 17 satellites but was reduced to 13 because L3Harris’ four satellites are behind schedule. SDA expects to launch them at a future date.

The Tranche 0 satellites are what SDA calls a “warfighter immersion tranche” that will allow military users to experiment with the technology and better understand the capabilities of LEO satellites for missile tracking and data relay.

Tranche 1 satellites are forecasted to launch in 2024 and 2025, including 126 satellites for the Transport Layer, and 35 for the Tracking Layer.

There are currently open solicitations for 172 satellites for Tranche 2 of the Transport Layer and 54 for Tranche 2 of the Tracking Layer.

Proposals for 72 Transport Layer Tranche 2 ‘Beta’ satellites were due May 23, and proposals for 100 Transport Layer Tranche 2 ‘Alpha’ satellites were due July 28. SDA also issued a draft solicitation for 54 Tracking Layer Tranche 2 satellites, and comments were due July 20. SDA plans to award Transport Layer Tranche 2 contracts later this year and Tracking Layer Tranche 2 contracts in 2024.

“SDA capitalizes on a business model that values speed and lowers costs by harnessing commercial development to achieve a proliferated architecture and enhance resilience,” Tournear said.

Congressional backing

With strong DoD and congressional backing, SDA’s budget has soared from $125 million in its first year to about $4.6 billion in the Pentagon’s 2024 funding request, with an additional $23 billion projected from fiscal years 2025 through 2028.

The agency has benefited from the Pentagon’s pivot to low-orbit missile warning and tracking systems to diversify the space architecture and increase resiliency, said analyst Sam Wilson of the Aerospace Corporation’s Center for Space Policy and Strategy.

“The plans for next-generation missile warning programs represent a fundamental shift for the department,” Wilson wrote in an Aerospace report in June.

“For several decades, DoD has used a small number of systems in high orbit for missile warning,” said Wilson. The next-generation systems in lower orbits account for nearly 15 percent of the entire Space Force budget request in 2024.

The Congressional Budget Office, in a report published in May, validated DoD’s adoption of a LEO architecture.

“A potential advantage for constellations with many satellites is that their coverage and functionality might degrade more gradually compared with smaller constellations,” said CBO. “Further, damaged satellites could be replaced fairly quickly.”

Tournear acknowledged that despite aggressive schedule targets, not everything has gone smoothly. The deployment of Tranche 0 satellites, initially targeted for late 2022, suffered setbacks due to supply chain problems and vendor performance issues.

But he is nevertheless confident that SDA will be able to launch Tranche 1 satellites on a monthly cadence starting in the fall of 2024.

The goal is to achieve global coverage, which SDA estimates will happen starting in 2026 when Tranche 2 satellites are in orbit.

The Tracking Layer, said Tournear, will have “enough satellites to provide coverage for missile warning and missile tracking, and be able to provide updates and cues for radar systems, other overhead systems and weapons systems that are needed to engage incoming missiles.”

The Transport Layer, meanwhile, will provide “backbone connectivity.” Data on incoming missiles would be transmitted across space via optical links and then to the ground via tactical data links, Tournear said at a National Security Space Association forum.

“We will be able to pass a lot of situational awareness and other data that historically does not get transferred out of the theater [of operations] because there’s no tactical way to move that data in real time.”

Impact on laser comms industry

DoD’s LEO constellation also has created market demand for laser communications terminals. Each satellite will have anywhere from three to five optical links so they can talk to other satellites, airplanes, ships and ground stations.

By requiring suppliers of laser terminals to comply with a common set of standards, SDA expects all its satellites to be interoperable. “This is a smart way for SDA to leverage this nascent industry,” Quilty said.

During a recent visit to laser communications supplier Mynaric, Quilty witnessed how the company was testing one of its terminals to make sure it could pass data to terminals made by competitors Tesat and Skyloom. “They were validating that they actually work together, which is kind of cool to see.”

The concept of using multiple satellite vendors to build an optical mesh network is innovative, although it has yet to be proven, said Quilty. “I think folks are finding out it is not easy. And they’ll eventually work through the issues.”

“Everyone today is working under the assumption that everything in space will be optically linked, and eventually we’ll get there,” said Quilty.

Another development to watch is whether laser terminal vendors can ramp up production quickly enough to meet SDA’s schedule, noted Andrew Penn, industry analyst and principal at the consulting firm Oliver Wyman.

“None of the companies who are signing up to build these terminals have ever manufactured at this scale,” he said. “They’ve done one-off prototypes. The most established manufacturers have delivered over a dozen terminals, but with SDA we’re talking about hundreds, if not thousands.”

SDA has set aggressive pricing goals, which can only be achieved if manufacturers can effectively produce satellites and optical terminals at a high rate, Penn said.

The agency said it wants to pay at most $15 million per Transport Layer satellite, and $45 million to $50 million for each Tracking Layer satellite.

Although these satellites cost less per unit than traditional military spacecraft, SDA will be under pressure to keep pricing as low as possible to offset the large number of satellites it needs to launch, not just to build the constellation but to recapitalize it, Penn pointed out.

“The individual satellite price is cheap, but you need hundreds,” he said. “They’re quickly approaching the total price points of some of the constellations of larger satellites that they are trying to augment or replace.”

If SDA meets its objectives, it will indeed be a disruptive force in military satellite procurements, Penn added.

“If you can meet the same mission objective by giving one company $1 billion, or 10 companies $100 million each, I’ve got to think the latter is better for the broader industrial base,” he said. “When I look at the whole picture, it certainly seems like they are bringing a lot of good to the industry.”

Under scrutiny

The Government Accountability Office in its annual report of DoD major programs published in June said SDA’s approach “will enable competition for new tranches and a stable market for sustainment.”

But before it can realize these potential benefits, GAO said, SDA faces challenges with integrating a complex system of multiple vendors and segments into a proliferated constellation of hundreds of satellites.

Penn said SDA “will continue to get scrutiny until we have functioning operational constellations, because at this point in time, the jury is still out.”

“You can evaluate contracting methods, you can evaluate the impact on the industrial base. But at the end of the day, they have to deliver a mission. We don’t have that yet,” he added. Based on what SDA has done to date, “I am cautiously optimistic on what they’re looking to accomplish.”

As with any large defense program, cost overruns are always a looming threat. “But I think it’s perfectly reasonable to expect that they will come close, if not meet their price targets, when industry starts mass producing, assuming requirements don’t change meaningfully from tranche to tranche, and that they are truly taking commodity buses off the line with minimal modifications.”

Penn said SDA has every incentive to expand its pool of suppliers, drive competition among incumbent suppliers and provide “as much opportunity as possible for new companies.”

“I think SDA’s expectation is that there will be new companies, and that is the only way they achieve the ecosystem they need,” he added.

Tournear has insisted that SDA wants to attract new vendors and avoid becoming dependent on a small number of incumbent providers.

There are companies in the small-satellite market that analysts are watching as potential competitors for future SDA awards. These include Boeing’s Millennium Space Systems, and startups like LeoStella and Apex.

“If I were one of those guys, I absolutely would be chasing an SDA contract,” said Quilty.

‘We want a healthy market’

SDA is banking on increased commoditization and advancements in technology to enhance its constellation and keep prices down, Tournear said. “We look at it kind of like the iPhone model, where they pick a price that they think the market will bear, and they just keep adding capabilities as the technology matures.”

With regard to the satellite market, “I have fears and hopes,” he said.

“The fear is that I don’t want to see it get consolidated down to one or two commodity bus providers. I want to see a healthy market, which is why we open competition with every tranche and every layer.”

His hope is that SDA can continue to buy satellites at stable price points but “add more capability.”

Going forward, said Tournear, “we will be open and honest about what our plans are” so industry can invest accordingly if they want to win a portion of the architecture. “We need industry to watch what we’re doing.”

His advice to new entrants to the SDA market: “Don’t ignore our schedules and the target prices that we’re putting out there. We’re pretty serious about that when we do our selections.”

This article originally appeared in the August 2023 issue of SpaceNews magazine.

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