Space Force raises stakes in NSSL race for military launches

The US military is raising the stakes – and widening the field – in a high-profile competition for space force mission contracts.

The Space Force plans to buy even more rocket launches from companies in the coming years than previously expected, giving more companies a chance to secure billions in potential contracts.

“This is a huge deal,” Col. Doug Pentecost, deputy program manager for the US Space Force’s Space Systems Command, told reporters during a briefing this week.

Earlier this year, the Space Force began the process of buying five years of launches under a lucrative program known as National Security Space Launch (NSSL) Phase 3. Now it’s upping the ante.

The U.S. is seeing a growing push to improve its military capabilities in space, spurring the need to nearly triple the number of Phase 3 launches it bought in Phase 2 by 2020.

“It just blows my mind,” Pinsecost said. “We had only estimated 36 missions in phase 2. For phase 3 we estimate 90 missions.”

In February, Space Force outlined a “mutual fund” strategy to buy launches from companies. It divided the NSSL phase 3 into two groups. Lane 1 is the new approach with lower requirements and a more flexible bidding process that will allow companies to compete as rockets debut over the coming years. Lane 2 represents the existing approach, where the Space Force plans to select a certain number of companies for missions that meet the most demanding requirements.

Pentecost said the Space Force hosted an industry day in February to review the details of the program and had 22 companies show up. Since then, the Space Force made a number of adjustments to Phase 3. It has added more missions, introduced a price cap, expanded Orbit 2, and set an annual schedule for mission assignments.

The government weighs bids according to a company’s “Total Evaluated Price” per launch. It is divided into “Launch Service”, which means how much it costs to build and launch a rocket, and “Launch Service Support”, which covers special requirements the military may have for launch. The amount of Launch Service Support is limited to $100 million per year per Corporation.

“We implemented some cost containment tools so we don’t balloon. We don’t want (a situation where) everybody gets a mission — you get a mission, you get a mission, you get a mission — because then there’s no real competition,” Pentecost said.

“We think all of our industry partners want to be number one, so we think that will provide competitive pricing to keep our costs down,” Pentecost added.

While lane 1 is expected to draw the largest number of bids and award 30 missions, lane 2 is the big show.

With Orbit 2, the Space Force awards the most valuable contracts to launch national security satellites with the highest stakes.

“Those are the ones that are a $1 billion (satellite) payload that goes to unique orbits,” Pentecost said.

Not only has Lane 2 seen an increase in how many missions are up for grabs – currently estimated at 58 launches, up from 39 in February – but Space Force also made the decision to expand the available slots for eventual awards to three companies instead of limiting it to two.

Elon Musk’s SpaceX and United Launch Alliance, the joint venture of Boeing and Lockheed Martin, were thought to be the two leading candidates for orbit 2, but now there is a door open for another company like Jeff Bezos’ Blue Origin.

Space Force will award 60% and 40% of 51 missions respectively to the top two bidders, with the remaining seven launches going to third place.

Regardless of where a company ranks, it must demonstrate that it can meet all the Lane 2 requirements, which include having launch sites on both the East and West Coasts, and the ability to hit nine “reference” orbits with high accuracy, several of which are much further from Earth than the Low Earth Orbit requirement of Lane 1.

Asked by CNBC how many companies are developing rockets that can meet those requirements before the launch deadline, a Space Force spokesman declined to specify, saying the military is “tracking several” that are “expanding their launch capabilities to most of these orbits.”

“We’re hoping it’s not just ULA, SpaceX and Blue Origin competing for it, as there are others who have expressed interest in the past,” Col. Chad Melone, the chief of the Space Systems Command’s Launch Procurement and Integration division, said during the briefing.

The Space Force introduces an annual Oct. 1 deadline for awarding missions to companies that have won a contract.

Pentecost explained that the first missions are on the horizon for October 2025, but said contracts do not guarantee missions, protecting the Space Force from delays that companies may have in developing and flying rockets.

“You could have actually won the contract that you’ve got this amazing plan of how you’re going to fly by (fiscal year) 2027. But since you’re not flying yet and I have a satellite that’s going to fly in two years, we’re not going to give you that mission — we’re going to move it to the other guy,” Pentecost said.

The Space Force aims to complete its request for bidders by September and then have all the proposals by December, then award the contracts in October 2024.

Space Force officials said a big driver behind this push is to “guarantee capacity,” since there are “a host of other companies” trying to buy launches for satellites, and Space Force needs to lock in its orders.

“We wanted to make sure that we essentially hedged against the scarcity of launch that could happen, because if there’s a very high demand for launch and everyone is (buying), the prices can be very high,” Melone said.

But despite those fears, Pinsecost said 2026 “seems to be the sweet spot” when a number of companies’ rockets will be finished development and ready to fly. And companies that stay on track will have the upper hand in NSSL Phase 3.

“If you fly before that, or if your schedule shows that you’re going to fly before that, you’re going to get significant strengths that will put you in a better position to win best provider or second best in this competition,” Pentecost said.