Curt Blake, Seth Cowell and Peter Bratton

The U.S. Government—notably the Department of Defense—continues to increase space-related spending, with a focus on leveraging commercial solutions. In 2023, the U.S. Government spent approximately $73.2 billion on space programs, far exceeding China in second place at $14 billion. 

The process of selling to the U.S. government can be intimidating, as the federal procurement system is complex and reflects a dense interplay of laws, regulations, and policies (both national and agency-specific). Successfully navigating this system requires an understanding of the various contracting rules and compliance obligations by which government contractors need to abide.

This article provides a brief overview of the federal procurement system, including certain obligations that come with being a government contractor, in order to provide a basic introduction to the landscape. 

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The Basics of the U.S. Government’s Procurement System
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The U.S. Federal government is the world’s single largest consumer, spending hundreds of billions of dollars each year on a variety of goods and services. All procurement opportunities are publicly announced at www.sam.gov. Companies looking to work with the U.S. government can monitor this site for opportunities that match their offerings. 

The U.S. procurement system is highly regulated, with the goal of promoting both fairness and efficiency, while also (especially in the case of space-related procurements) protecting national security interests. 
At the core of the procurement system lies the Federal Acquisition Regulation (FAR), which sets forth guidelines for both contractors and government contracting officers, including hundreds of standardized contract clauses.

Adding to this, many agencies have their own supplements to the FAR, setting forth agency-specific procedures and requirements. Examples include the DoD’s “Defense Federal Acquisition Regulation Supplement (DFARS)” and the “NASA FAR Supplement (NFS).”

There are basic eligibility requirements for contracting with the U.S. government. For example, a company seeking to enter into contracts with the U.S. government is required to complete a registration at www.sam.gov—a process that requires the company to (among other things) explain its ownership and activities and to make a series of certifications regarding its operations and compliance with laws. 
Certain contracting actions will have additional requirements that may limit competition to companies of a certain size or with a minimum level of U.S. ownership. Where the activity will require a company to be exposed to classified information, the company must also first obtain the necessary clearances. 

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Strings Attached and Compliance Obligations 
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Being a government contractor means keeping up with certain compliance and reporting obligations, going beyond the core requirements to “just” deliver the contracted products or services. 
Companies must be prepared to meet these obligations, which can cover areas such as cybersecurity standards, accounting practices, supply chain requirements, environmental standards, wages, employment, labor, and hiring. Failure to comply with these compliance obligations can form the basis for the termination of a contract, and depending on the severity and frequency of violations, could even result in debarment from future federal contracts.

Where contracts require the delivery of physical goods, contractors will also need to ensure that such goods comply with either the “Buy American Act” or the “Trade Agreements Act,” which impacts the sourcing of materials and products used in federal contracts. For example, for a contract subject to the Buy American Act, the cost of U.S. components in the delivered item must be at least 65 percent.

Additionally, the government seeks to obtain rights in technology developed and data generated using government funding, which can make navigating intellectual property rights particularly challenging. 
Contractors must understand these government rights and must be careful when negotiating so as to protect their interests, while also granting the government the necessary rights.  These are just some examples of the obligations and other strings that attach to being a government contractor. Some obligations are largely uniform among contractors, but many are driven by the specific agency, the specific type of program, and the specific product or service that the government buys.

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A Shifting Approach?
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The U.S. Government’s strategy for space-related procurement continues to shift away from contracting for agency-specific, bespoke capabilities in favor of an increased reliance on commercial solutions. 
For example, in April of 2024, the DoD released its Commercial Space Integration Strategy and the U.S. Space Force released its Commercial Space Strategy. These strategies memorialize the government’s commitment to the commercial space—as the DoD strategy put it, “Given the expansion of the commercial space sector and the proliferation of space capabilities, the Department will benefit by making commercial solutions integral—not just supplementary—to national security space architectures.”

Along with this, certain agencies are moving away from traditional FAR-clause heavy contracts to more commercially friendly contracting vehicles, such as so-called “Other Transactions Agreements,” which are intended to be less burdensome than traditional government contracts.

Despite this important shift, potential contractors must remember that the Government is not a typical commercial customer and there will be substantial compliance obligations and requirements for meeting government standards, from cybersecurity to intellectual property rights to accounting and timekeeping requirements to supply chain requirements. 

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Conclusion
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Navigating the U.S. Federal procurement system remains challenging—it is not just about landing the contract and getting the core deliverables to the government. For this reason, working with experienced U.S. government contracts counsel is a must. In our next article in next month’s SatMagazine, we’ll look in particular at some specific considerations for foreign companies.

Curt Blake
Authors Curt Blake (Senior Columnist to SatNews Publishers), Seth Cowell and Peter Bratton are with Wilson Sonsini Goodrich & Rosati. Curt Blake, Senior of Counsel, is an attorney and senior executive with more than 25 years of experience leading organizations in high-growth industries— and more than 10 years as the CEO of Spaceflight, Inc.— at the forefront of the New Space revolution. Curt has extensive expertise in strategic planning, financial analysis, legal strategy, M&A, and space commercialization, with deep knowledge about the unique challenges of New Space growth and the roadmap to success in the that ecosystem.

The views expressed in this article reflect those of the author himself and do not necessarily reflect the views of his employer and its clients.