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Public Contract Law Journal

Public Contract Law Journal Vol. 51, No. 3

To the Moon: Application of an Alternative Funding Policy for the U.S. Space Force

Liam Bowers


  • Argues for the use of advance appropriations in Space Force purchasing as a means to handle austere economic environments and benefit from volume or block purchases.
  • Describes three types of funding scheme the government has or can use: full funding, incremental funding and advance funding for future space force procurements.
To the Moon: Application of an Alternative Funding Policy for the U.S. Space Force
Aaron Whitaker Photography via Getty Images

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In the final days of 2019, the National Defense Authorization Act for Fiscal Year 2020 was passed and with it came the Space Force. In addition to creating the Space Force, Congress requested a report from the Air Force that would contemplate an alternative acquisition system. In the following months, the Air Force released then subsequently retracted a report suggesting nine alterations to traditional contracting that would benefit space acquisitions. While Congress never officially received the report, a report from the Air Force on an alternative acquisition system for Space Force in the National Defense Authorization Act for Fiscal Year 2021 has once again been requested. This Note proposes the use of advance appropriations in an alternative acquisition system. Currently, most large Department of Defense procurement projects use the full funding policy. While the Department of Defense has used incremental funding for very large procurements, like satellites and Navy ships, there are no instances of the use of advance appropriations in defense procurement. This Note argues for the use of advance appropriations in Space Force purchasing, as it will allow the Space Force to partake in buying strategies such as block buys. The attributes of advance appropriations could also be beneficial during more austere budget conditions.

I. Introduction

In late 2019, the United States Space Force (Space Force) was officially funded, and the long process of creating a new branch of the military began. Congress created the Space Force with the National Defense Authorization Act for Fiscal Year 2020 (FY20 NDAA) and called for a report on the implementation of an “Alternate Acquisition System” for the Space Force. Following the enactment of the FY20 NDAA, an initial version of that report was sent to Congress. The report, Alternative Acquisition System for the United States Space Force (the “Air Force Report”), made multiple suggestions to develop a totally new acquisition system for the Space Force.

There are two major reasons for implementing a new space acquisition system. First, there has been increased worry about other countries’ space capabilities. Recent reports from the Center for Strategic and International Studies indicate that more nations, specifically China and Russia, are developing capabilities to destroy U.S. satellites. China has focused on the development of its non-kinetic weapons, such as lasers, which would blind U.S. satellites. These weapons are either already operational, or their operational status is likely imminent. They may even have been used already. China is also increasing its so-called “jamming” and “spoofing” capabilities and may be using these to conceal illegal activity in the South China Sea. Simultaneously, Russia seems to be developing anti-satellite missiles, which can either be launched from the air or from the ground. Within the last few years, Russia has also become excellent at jamming and spoofing communications satellite signals. Since 2018, Russia has clearly taken a renewed focus on space-directed weapons.

Second, there seems to be an increased understanding of the inefficiencies within the current space procurement system. Many of the large space systems procured by the federal government have gone over budget. For example, the Government Accountability Office (GAO) has indicated that two satellite programs, the Advanced Extremely High Frequency satellite program and the Space Based Infrared System satellite program, have overshot their budgets by 118% and 300% respectively. High costs and blown budgets seem to be the rule, not the exception, when it comes to space procurement.

In addition, the COVID-19 pandemic has introduced additional challenges for space procurement. While it is still unclear what the final effects of the pandemic will be on the U.S. economy, COVID-19 has already led to severe contraction. The COVID-19 relief packages have increased the U.S. debt by almost ten percent, which will likely put defense and other outlays under pressure. It is suggested that cuts similar to the ones that occurred due to the Budget Control Act of 2011 will likely occur solely because of a decrease in gross domestic product. Thus, the total Department of Defense (DoD) cuts could be similar to a second sequestration. It is still unclear when budget cuts will come; however, based on trends, cuts seem likely.

Congress is not backing down from the idea that space acquisitions need to change. This resolve leads to the question: how should space procurement change? Previously, the Air Force Report suggested nine changes, which addressed different aspects of the space procurement process. Those recommendations ranged from changing who could sign off on the advancement of programs to how the procurement programs would be funded. This Note will focus on how space procurement programs should be funded, along with the concerns and challenges surrounding that issue. How space procurement programs are funded is a significant issue and policy choices could have a substantial effect on the efficiency of space acquisitions.

This Note examines both the legal and policy backgrounds of funding space procurements within the DoD. It specifically looks at the policies of full funding, incremental funding, and incremental funding with advance appropriations. This Note compares and contrasts all three policies’ benefits and short falls. This Note then argues that Congress should codify use of advanced appropriations as a method of funding the Space Force satellite acquisitions because of its specific properties, which allow for stable funding and increased production of satellites. As this Note explains, this policy will allow the Space Force to mitigate costly production halts and take advantage of block buys.

Part II of this Note gives a brief background on the Space Force and its origins. Part II goes on to discuss the federal budgeting process and examine the three funding policies that could be used to fund Space Force acquisitions. Part III discusses past issues and problems with space procurement as well as current international issues. Part IV suggests that incremental funding with advance appropriations should be used to fund procurement for the Space Force then discusses the pros and cons of advance appropriations and why they are beneficial in the space context.

II. Background

A. The History of the United States Space Force

The United States Space Force was formally created by the FY20 NDAA. The FY20 NDAA morphed what was previously the Air Force Space Command into the Space Force. The mission of the Space Force is to train and equip space forces to enhance the United States’ and its allies’ combat capabilities. The Space Force is commanded by the Chief of Space Operations, who is nominated by the President and confirmed by the Senate.

The Space Force is the newest military branch and represents the first time since 1947 that Congress has authorized the creation of a new service. The idea behind the Space Force, however, dates back to the Rumsfeld Commission in 2001. The Rumsfeld Commission was created because of Congress’s increased concern with how the DoD and the intelligence community were managing space assets. The Rumsfeld report suggested that a “Space Corps,” which was supposed to be similar to the Army Air Corps or the Marine Corps, would be a service within a service. The Rumsfeld Commission argued that this would be a relevant stepping stone if a full space department were ever appealing. In 2018, the House Armed Services Strategic Forces Subcommittee also included a provision for a “Space Corps” within a draft of the National Defense Authorization Act for Fiscal Year 2018 (FY18 NDAA), but the language never made it to the final bill. Nonetheless, the idea for a “Space Force” is long-standing and was suggested well before the Trump administration.

The Space Force is not the only new space related military command; there is also the United States Space Command, and the two should not be conflated. The United States Space Command is a unified combatant command that was created in 2019. A unified combatant command is a command that has a broad and continuing mission with forces from multiple military departments and services supporting the command. In contrast, the Space Force is a single service within the Air Force and has a relationship similar to the Marine Corps within the Navy. The U.S. Space Command and the Space Force have a relationship, and the Space Force could provide the resources that the U.S. Space Command uses to conduct operations.

The United States Space Command is also not a new concept. The original version was created in 1985; after 9/11, however, the United States Space Command was enveloped into the United States Strategic Command. Similar to the Space Force, the creation of a U.S. Space Command came from a desire to have a combatant command directly focused on space. While the two have similar names and similar missions, they are indeed different. Congress designated the Space Force as a new service, suggesting that the Space Force take a different approach to buying space systems.

B. Funding Policies Within the DoD and How They Work

1. The Budgeting Process

Article I of the Constitution grants Congress with the power to fund the government through the appropriations process. Such power allows Congress to set limits on how much the government spends. Congress takes full advantage of the appropriations power by implementing laws to fund programs in specific ways. Congress has implemented laws and rules that give a framework to funding the federal government. These general principles of fiscal law have been codified into permanent statutes.

One important principle of fiscal law comes from the Anti-Deficiency Act (ADA). The ADA was passed in response to issues with budget authority and allowed Congress to gain a greater handle over federal appropriations. Congress passed the ADA after numerous examples of executive officials entering into obligations that were not supported by appropriations. The ADA’s primary focus is to prevent agencies from entering into financial obligations that exceed appropriations and to prevent agencies from entering into an obligation before an appropriation is available.

The ADA is also supported by the Adequacy of Appropriations Act, which does not allow an agency to enter into a contract unless there is an appropriation to cover the contract or the contract is authorized by law. Both of these laws are bolstered by the “Bona Fide Needs Rule,” that does not allow for spending the current year’s money for requirements that do not currently exist. This limitation creates a basic landscape in which an expenditure can only be made if it is for an authorized purpose, is within the timeframe of the appropriation, and is within the amount established. These laws are just the tip of the iceberg when it comes to fiscal requirements. For purposes of this Note however, one only needs to have a basic understanding of these laws as they apply to acquisitions.

Before delving into the different policies and ways that acquisition programs can be funded, a brief overview of how the budgeting and funding system works is required. The federal government funds defense acquisition projects in four basic steps. First, Congress authorizes a project to begin in a specific year. Authorization acts are generally passed annually by Congress and will authorize funds for programs. Next, Congress will appropriate funds for the project, which allows the entity overseeing the project to obligate those funds. Appropriation acts are known as “budget authority,” and these acts give statutory authority to agencies to obligate the funds. Despite this process, agencies are limited on how they spend those funds based on purpose, time, and amount. Third, an agency, via a Contracting Officer, will contract with a private entity like a corporation and thus obligate those funds to the contract. Finally, the funds are then distributed to the private entity per the terms of the contract. This is the basic skeletal structure that describes how a contract is funded, but the structure can be used in multiple ways, which the remainder of this subsection will discuss.

Satellites and other complex space systems can take years to develop; for example, the Air Force moved to procure its new Next-Generation Overhead Persistent Infrared constellation in 2017, but it will not be delivered until 2025. Therefore, an issue arises in how an agency should procure these large and time-consuming projects. This issue can be broken down into two specific concerns: (1) which funding approach should be used, and (2) which contracting mechanism should be used for such procurements. Two main funding policies could be used to fund a multiyear procurement: (1) full-funding, or (2) incremental funding. In the full-funding model, the full amount of the purchase must be funded in the year that it is procured, while, in the incremental funding process, Congress can technically appropriate funds during the current fiscal year, or it can use both current fiscal year appropriations and advance appropriations.

These funding mechanisms can then be contracted through three contracting mechanisms: (1) annual contracting, (2) multiyear procurement, or (3) block buy contracting. Most items and weapons within the DoD are procured through the full funding policy and use annual contracting. However, there are instances where large procurements like Navy ships and satellites use incremental funding. The funding method and the contracting mechanism used are independent of each other, and therefore the DoD can use a number of different combinations to fund a procurement. This Note focuses on the funding aspect of this question; the remainder of the background section will discuss the three funding policies.

2. The Full-Funding Policy

As previously referenced, a full funding policy requires that the full cost of a DoD weapon or item be funded in the year that the item was procured. The GAO defines full funding as “[t]he provision of budgetary resources to cover the total estimated cost of a program or project at the time it is undertaken (regardless of when the funds will actually be obligated).” A simple analogy is “[o]ne decision for one pot of money.” The policy has been described in the Office of Management and Budget’s (OMB) Circular A-11 as appropriations that “are enacted that are sufficient in total to complete a useful segment of a capital project . . . before any obligations may be incurred for that segment.” The OMB went on to explain that the “[b]udget authority sufficient to complete a useful segment of a capital project . . . or the entire capital project, if it is not divisible into useful segments, must be appropriated before any obligations for the useful segment . . . may be incurred.” This policy means that the DoD cannot usually contract for new weapon systems or equipment until the total cost of the weapon or equipment has been sanctioned by Congress. This applies because most of the time a DoD weapon system or piece of equipment is considered a usable “end item” that encompasses the whole system, whether that be a tank, ship, or satellite.

The full funding policy was applied to DoD in the 1950s to increase transparency in DoD weapon system procurement. The DoD Financial Management Regulation (FMR) currently regulates the funding policy for the DoD. The DoD FMR states that “the total cost of a complete military usable end item or construction project must be fully funded in the year it is procured.” The use of full funding became widespread in the 1950s after incremental funding fell out of favor. Congress has shown general favor of full funding in the past because it allows for the total cost of a procurement to be seen at the time that funds are appropriated. Full funding also requires Congress to make tradeoffs on which programs to fund at the initial time of funding, thereby promoting good oversight.

Failing to abide by the full funding requirement is not a per se violation of the ADA. However, the importance placed on this requirement is seen throughout the regulations used to support contracting with the DoD. For example, the Defense Federal Acquisition Regulation Supplement (DFARS) requires that any fixed price contract be fully funded as a default, and, in general, most DoD procurements use full funding. Many of the procurements that do not use full funding are Navy ships, such as aircraft carriers and submarines. Generally, this option is used because the large cost of a ship could cause a budget spike that could offset the funding of procurement accounts if the ship were funded all at once. In addition to policies that explicitly state when full funding should be used, there are also clear statements that limit the use of incremental funding. For example, the DFARS allows use of incremental funding for fixed-price contracts if certain requirements are met or if the contract uses funds from two or more fiscal years and Congress has otherwise allowed it.

But full funding has some disadvantages. For example, changes in programs that deal with large usable end items, like ships or satellites, require changes to be made in large chunks because each change indicates an item. This change can lead to year-to-year irregularities in budgeting. The use of full funding may also lead to bias in the procurement of large weapon systems because the large upfront cost could overshadow the long-term use of the weapon system. Full funding, however, allows for transparent funding of DoD procurements because the total cost of the program is funded up front; Congress, the DoD, and the GAO have all supported the full funding policy.

3. Incremental Funding of Capital Assets

Incremental funding allows the acquisition cost of a large procurement to be divided into separate payments, which are similar to installment payments to the contractor while the weapon system is being built. Congress then approves each of the installment payments when it acts on that year’s budget. This funding method can most accurately be thought of as “multiple decisions for multiple pots of money.” If the funding policies are on a spectrum of budget visibility from least to greatest, the full funding policy would be on the side with greatest visibility, incremental funding with advance appropriations would be somewhere in the middle, and incremental funding with annual appropriations would be on the side with least visibility. Prior to the full-funding requirement, the use of incremental funding was standard within the DoD. Incremental funding is still used by the DoD today, but it is used on an ad-hoc basis in which only specific programs are funded with incremental funding. The incremental funding of fixed-price contracts within the DoD is highly regulated and is only allowed under specific circumstances. One of those circumstances is if Congress has otherwise allowed for incremental funding and the contract uses funds from multiple fiscal years. In addition, the GAO has also limited the use of incremental funding specifically, stating that contracts that cannot be “separated for performance by fiscal year may not be funded incrementally without statutory authority.” Due to the Bona Fide Needs Rule, contracts that are non-severable are charged at the time of execution, rather than when the goods are delivered. However, the Bona Fide Needs Rule would not be applicable if Congress funded the procurement with no year appropriations.

There have been recent instances of using incremental funding to pay for DoD acquisitions—for example, the LHD-8 Amphibious assault ship. Congress granted the Secretary of the Navy the ability to enter into a contract for the completion of the LHD-8 on an incremental basis. The program started in the 2000 fiscal year, and the final increment was paid out in the 2006 fiscal year. The use of incremental funding is also seen more regularly in the procurement of aircraft carriers. Many of these incremental funding arrangements had the aircraft carrier fully funded within four to six years of initially starting the project. Large satellites have also been incrementally funded as well; both the Space-Based Infrared System (SBIRS) and the Advanced Extremely High Frequency (AEHF) programs were partially funded with incremental funds through the Efficient Space Procurement (ESP) program.

In addition, there are two major exceptions to the full funding policy: Advance Procurement, and Economic Order Quantity Procurement. Advance Procurement is specifically used for the acquisition of supplies that generally take a long time to build and are part of a usable end item that is currently being procured. For Advance Procurement to be authorized, the total cost of the items being procured through Advance Procurement must be relatively low compared to other costs. Economic Order Procurement is used for multiyear procurements that allow the agency to obtain supplies in increments of up to five years. This process allows the agency to take into account the economic advantage of ordering supplies in large quantities. Both of these policies show that while the full funding policy is important, there are legitimate instances in which to use other methods.

While Congress has not been keen on using incremental funding, there are some benefits to its use. Namely, incremental funding allows for the procurement of large systems within a given year without displacing other programs’ budgets for that year. The use of incremental funding could also be beneficial to those programs that use large amounts of advanced technology and more closely resemble research, but still produce a usable end item. The incremental funding policy could also give Congress the flexibility to stop funding projects that are no longer relevant to the mission. These attributes of incremental funding could prove beneficial to the Space Force, especially in an austere funding environment.

There are still substantial concerns with the incremental funding policy. Congress would essentially leave the task of funding a given project to future Congresses if it used incremental funding. In addition, the incremental funding policy does not allow Congress to see the full cost of the procurement because it is initially only paying a part of the cost. Incremental funding could also expose the project to inefficient start-up and wind-down costs in the face of unforeseen changes in the budget.

4. Funding Capital Assets Through the Use of Advance Appropriations

Another method of funding is using incremental funding, but through the budget authority of advance appropriations. The OMB A-11 Circular describes advance appropriations as appropriations that become available one or more fiscal years after the fiscal year for which the appropriations act in question was passed. The OMB also characterizes advance appropriations as a type of full funding where the first year of the project would be funded with regular appropriations and the subsequent years would be funded with advance appropriations. Because of this allocation, there would be enough budgetary authority to cover the full cost of the project at its outset.

Initially, Congress needs to pass an authorization act that allows a defense entity to build a specific type of usable end item, whether it be a ship or a satellite. Future appropriation actions would come from this authorization, which would not need to be renewed unless there was a major change in the project. Congress would then pass an appropriations act that allows the relevant defense entity to obligate funds to the specific project. The main difference between advance appropriations and traditional full funding is that, for advance appropriations, while Congress still only passes one of these appropriations acts, said appropriations act creates a schedule that distributes the appropriated funds over two or more years. This option creates “one decision for multiple pots of money,” and Congress is legislatively locked to the schedule for disbursement of funds that is set up initially. A future Congress would need to take legislative action if it wanted to modify the appropriations act that Congress used to set up the disbursement schedule. Therefore, this funding process funds the project incrementally, but the budget authority that is used for the project is advance appropriations.

The practical effect of using advance appropriations is that, instead of funding the whole project in one year, which can lead to a funding spike, advance appropriations create a decrease in the funding of the project within the first year followed by an increase in the funding of the project in the year or years following. One of the main benefits of advance appropriations is that they can smooth out the spikes and valleys in the budget. This funding method could be beneficial to the Space Force because it would relieve strain on project budgets in future years.

In addition, advance appropriations can provide a perceived budget surplus in the first year of a project. This budget surplus comes from deferring the cost that would initially be used in the first year for the whole project, and spreading that cost out to multiple years, thereby making the first year’s budget lower. The perceived surplus idea is similar to the logic of a credit card. The surplus is essentially an item bought with a credit card in which some portion of the item is paid for in cash now and the other portion is put on the credit card. The deferred charges, which would be the cost of the project over future years, would need to be paid down. This allows for the debt on the credit card to be used for one-time expenditures that could be a different cost in another program. Thus the cost of another project could be covered without increasing the budget for that specific year.

While there are positives to the use of advance appropriations, there can be negatives as well. For example, if there is a decrease in the budget for a given fiscal year, that budget decrease limits Congress’s ability to start new procurements. This is not only because there is less money for the government, but also because Congress is paying out funds from years prior because of advance appropriations. This ties the hands of a future Congress and requires the later Congress to complete the objectives of a former Congress, unless the later Congress takes legislative action to change the obligated amount. Congress should usually not tie the hands of a future Congress; this is a long-standing principle that dates back centuries. That being said, advance appropriations have been used in other contexts, such as in the contexts of the Veterans Affairs Department or the Corporation of Public Broadcasting, seemingly binding the hands of future Congresses.

In addition, the use of advance appropriations to fund a capital asset could violate the ADA if specific statutory authority for the expenditure were not already established. The ADA requires that an appropriation is available before an agency enters into an obligation and that an agency does not enter into an obligation that is greater than the appropriation. Here, the agency would be entering into a procurement, but the appropriations would not technically be available until a prescribed year, so while Congress has technically funded the contract, the appropriations would not be available and may be considered to be in advance of an appropriation. This situation can be remedied, however, so long as Congress passes a law allowing for the use of this kind of funding profile.

Different parties in the procurement process may have different views on the use of advance appropriations to fund capital assets. A contractor would likely support advance appropriations because it would limit the government’s ability to change plans. Armed Service leadership would likely have mixed feelings about advance appropriations; on the one hand, it reduces funding peaks and gives them a budget surplus, but, on the other, it decreases the Service’s flexibility. Congress in the past has opposed advance appropriations, mainly because it thinks that advance appropriations would limit its ability to conduct oversight. These views are aligned with the different benefits and drawbacks that come from the use of advance appropriations.

The use of advance appropriations for the funding of procurement projects is not a new idea. In early 2001, the Navy had made a concerted effort to use advance appropriations to fund ship procurement projects. Proponents suggested that, if used correctly, advance appropriations could be beneficial for the Navy, namely in conjunction with an increase in the ship building budget, in that the funding policy could increase the production of ships. Advance appropriations were also seen as a way to increase engineering flexibility, due to the flexibility within the budget. The OMB, however, did not support the idea and there was no official proposal of using advance appropriations to fund the procurement of Navy ships in the FY 2002 budget. Advance appropriations were also promoted by the Air Force in its Evolutionary Acquisition for Space Efficiency (EASE) program in 2011. However, while the OMB was supportive of the Air Force’s use of advance appropriations, Congress was generally not supportive. Advance appropriations have not been used in a defense procurement yet, but it could be a valuable tool for the Space Force.

III. Current Issues Facing the Space Procurement System and Future Challenges

Although this Note focuses on implementation of a new acquisition system for the Space Force, the new service is situated within the Department of the Air Force. In fact, the creation of the Space Force is the redesignation of the Air Force Space Command as a separate service. Therefore, it is helpful to look at prior acquisition programs utilized within the Air Force.

An example of the difficulties and challenges surrounding space acquisitions is the Air Force’s SBIRS program. SBIRS began in the 1990s to update a prior satellite system. The program experienced major hardware and software failures, which led to substantial budget and scheduling issues. For example, the system saw the launch of one its important components, a geosynchronous satellite, a decade later than originally scheduled. The original program cost was estimated to be $2.3 billion, which was much less than the cost of the satellites that the SBIRS system was replacing. Throughout the early 2000s, the costs of the satellites ballooned. In 2001, the total cost for the project was $5 billion. By 2007, the costs had risen to $9.2 billion. As of 2019, the total cost of the SBIRS system had reached $19.9 billion.

SBIRS is not the only example of a program whose costs have increased at lightning speed. Another example of rapidly expanding cost is the Advanced Extremely High Frequency (AEHF) satellite program. The AEHF program also started in the late 1990s and was designed as a follow-on program to implement a worldwide secure communications program for the U.S. military. While this program was initially believed to be a success, issues soon began to arise. These difficulties stemmed from technical problems and costly start-stops due to changes in the number of satellites being produced. The AEHF program incurred significant cost increases. The program cost was initially projected at $3.2 billion in 2001; however, by 2012, the costs had climbed up to $9.3 billion. The GAO has found a number of issues that have led to the failures of programs like SBIRS and AEHF, as well as space acquisitions in general. These causes can range from focusing on cost instead of mission, and developing unrealistic cost estimates, to creating ambitious projects.

Space programs have seen cost increases and major scheduling delays caused by a range of issues. The Air Force put forth a solution called EASE for the 2012 fiscal year. EASE was described as a block buying approach focused on stabilizing research and developing investment through fixed price contracting and advance appropriations. EASE was geared toward providing lower costs and greater program stability by purchasing multiple satellites at once. The approach was designed to take advantage of economies of scale to lower costs. Congress was supportive of the EASE approach generally, but it did not support funding EASE through advance appropriations and instead used incremental funding with regular annual appropriations to back the initiative.

The Efficient Space Procurement initiative (ESP) evolved from EASE and was used to procure vehicles 5 and 6 of the SBIRS and AEHF programs. The application of ESP to SBIRS and AEHF programs has had a positive effect on both programs. SBIRS saw a unit cost decrease of twelve percent for vehicles five and six. The AEHF program saw a savings of twenty-three percent for vehicles five and six. While both of these programs have seen benefits from the use of ESP and incremental funding with regular appropriations, the use and application of incremental funding with advance appropriations would likely provide more benefits to the space procurement system as discussed in the solution section.

Space Force leadership has emphasized that the Space Force should be an agile and lean force that is willing to accept some risk. The Chief of Space Operations, John “Jay” Raymond, stressed to the media that “we have to go fast.” A need for speedier acquisitions makes sense; in summer 2020, there were claims that Russia tested a space-based satellite weapon. This weapon test, along with a recent report from the Center for Strategic and International Studies stating that both China and Russia are currently developing anti-satellite capabilities, seems to show that space may become a more dangerous place in future years and that the American program cannot fall behind.

In addition, the DoD has recently started nine new acquisition projects to increase current space capabilities. These acquisition projects are in competition for funds with other assets like ships, aircraft, and the nuclear triad, and it can be difficult to secure funding. Space funding is generally small in comparison to these other programs; for example, within the past ten years, space program modernization has only accounted for three to five percent of weapon system modifications. The GAO has found it difficult for the DoD to fund multiple projects at once while also dealing with the cost overruns of past projects and maintaining legacy programs. The need to adequately prepare the Space Force for the demands of defending U.S. assets in space is real and should not be taken lightly. Congress should consider altering how it funds the procurement of satellites for the Space Force.

IV. Solution: Advance Appropriations Should Be Used to Fund Space Procurement Programs

The use of incremental funding along with regular and advance appropriations would allow the Space Force the timely funding support it needs to combat the threats posed by China and Russia while simultaneously providing a funding system that can withstand the possible decrease in defense spending due to COVID-19. Advance appropriations could allow the Space Force to take advantage of different buying strategies, such as block buys, which have seen success in past programs. Simply applied, this funding system would be set up by Congress such that the first year of funding would be a regular annual appropriation that would cover the costs for the first fiscal year. Congress would then appropriate the funds necessary to maintain the program and score those costs in future years, thereby spreading the cost of that specific satellite acquisition program across multiple fiscal years.

A major advantage of advance appropriations is that it allows costs of satellites to be split up between multiple years. As discussed above, advance appropriations could be used essentially as a “credit card,” through which the government pushes out the funding of these satellite programs for multiple years, and then subsequently pays down that balance over time. Unlike full funding, which in the past has led to spikes in funding and has therefore required money to be moved between programs, advance appropriations would allow for these costs to be spread out across a number of years.

Advance appropriations would also allow the Space Force to take advantage of new and discrete buying strategies, such as block buys. By using advance appropriations to push funding out into future fiscal years, first-year costs of the project would decrease, and advance appropriations would allow the Space Force to buy additional satellites without increasing the budget in that fiscal year. While this approach would put costs of current satellite programs into future fiscal years, advance appropriations would allow for better planning and would increase the stability of the space industrial base, and would further take advantage of economies of scale. In addition, any change Congress wanted to make would require a recission and would require positive action, thus increasing Congress’s accountability in making decisions about the satellite budget.

The Air Force has already used a program similar to this in FY 2012 and 2013, known as ESP. As was referenced previously in this Note, ESP was used for both the AEHF program and the SBIRS program, and the units for which it was used noticed costs decrease. However, ESP used incremental funding with regular appropriations to support the AEHF and SBIRS; incremental funding with regular appropriations does not have the same cost controls as full funding or advance appropriations. Both advance appropriations and full funding set the total cost of the program at the beginning and fund up to that amount, unlike incremental funding with regular appropriations. Incremental funding with advance appropriations is “one decision for multiple pots of money,” while incremental funding with regular appropriations is “multiple decisions for multiple pots of money.” Therefore, with the latter, there are more instances in which costs can increase because Congress has to make a decision each year. The amount of money that Congress appropriates could grow each year because there would not be an original cost at the outset that Congress agrees to.

Advance appropriations do have their drawbacks, however. Future Congresses are bound to the decision of a past Congress and would have to take action to stop the funding system that they set up. Advance appropriations require Congress to take positive action when it would like to change the funding schedule. Incremental funding does not require Congress to take positive action, and Congress could hypothetically simply stop funding a given project. Incremental funding with regular appropriations does not bind the hands of Congress legislatively but limits their control practically. It is unlikely that Congress would stop funding a program halfway through its development, as millions or even billions of dollars could be lost to a program that would not produce any useable end item. This creates a very strong incentive for Congress to continually fund these programs, resulting in essentially deciding for a future Congress.

In the context of space, advance appropriations would be useful, namely because space procurements take years to achieve a useable “end item.” For example, there are satellites and systems that were procured in 2017 that are scheduled to only start delivering usable “end items” by 2025. In the case of one satellite system, it will take until 2029 for the whole satellite constellation to be in orbit. Stability in this area would be a good thing. Advance appropriations could also give some security to the programs as well. Further, unlike in incremental funding with regular appropriations in which every portion of the budget needs to be cleared by Congress, the full cost of the project would be available to the program unless changes occurred within the procurement. In addition, the use of advance appropriations could provide a strong message to adversaries such as Russia and China. It would show that the United States is not afraid of taking innovative and unique steps to fund its space programs.

Advance appropriations could also provide particular benefits to satellite procurements in an uncertain fiscal environment. Since COVID-19 began to spread in early 2020, the federal government has already spent trillions on COVID-19 relief. Congress increased the federal deficit of fiscal year 2020 to $3.7 trillion and of fiscal year 2021 to $2 trillion. The deficit, along with a federal debt that has ballooned to $23.4 trillion, raises serious concerns about federal defense spending in the near future. While it is hard to predict how COVID-19 will affect spending, specifically defense spending, signs point to smaller budgets. It has been suggested that just from the decrease in the gross domestic product due to COVID-19 alone, there could be a decrease in federal defense spending anywhere from $350 billion to $600 billion over the next decade. This is on par with the budget cuts due to the Budget Control Act of 2011.

A future with defense budget cuts would be a stark contrast from the last five years, in which defense spending in the U.S., and globally, has been on the rise. EASE was initially proposed during the years after the Great Recession. EASE’s development was in full knowledge of that budget atmosphere and was designed to mitigate budget spikes that could lead to funding issues caused by this austere budget environment. Initiating a program similar to EASE, including advance appropriations, could be critical to maintaining stable funding of satellites in the near future. In a future that could have austere budgets due to increased debt and slow economic growth, a program that could spread costs out between fiscal years could be vital to maintaining a strong space acquisition and procurement system.

The Space Force is moving ahead with the next generation of satellites known as the Next Generation Overhead Persistent Infrared (“Next-Gen OPIR”) constellation, and it is critical that Congress support an alternative funding method. Setting up a stable system now in the early stages of the next cycle of satellite development will allow for an increased chance of successful completion of these procurements on time and within budget.

To achieve this policy goal, Congress should implement the necessary language for the Space Force to use incremental funding with advance appropriations for satellites that have moved pass the research and development phase and are now in production. This language would likely appear in the NDAA, and it would look like the language that appeared within the FY 2012 and 2013 NDAAs that authorized the use of incremental funding for the AEHF and SBIRS systems. Here, the Space Force would be given the ability to use incremental funding for satellite procurements. Congress would then use an appropriations act to set up an appropriations schedule.

V. Conclusion

Congress has asked for a report on an alternative acquisition system for space procurement. It is clear that space procurement has been troubled. Major delays and blown budgets have been a common occurrence in the context of space procurement. Prior projects, such as the SBIRS and AEHF programs, are prime examples of these problems. In addition to the systemic issues within space procurement, threats from the Russian and Chinese space programs seem to show that the United States should take a renewed look at space. This development leads to the question of how we can better alter our space procurement processes to solve recurring issues and support the Space Force in developing an acquisition system that will allow it to meet future challenges.

This Note argues for the application of advance appropriations in a new alternative acquisition system for the Space Force. Advance appropriations have not been used for prior DoD procurements; however, this funding mechanism does have important qualities that would allow for better management of funds for space procurement. The benefits of decreased funding spikes and stable funding outweigh the potential disadvantages. Congress has already approved the use of incremental funding for the SBIRS and AEHF programs in the past. The ability to offset costs to future years would allow the Space Force more resources for the first year, which would allow the procurement of additional assets, which would greatly assist the Space Force in combatting foreign threats. The application of advance appropriations should be used in an alternate acquisition system for the Space Force because it provides necessary capabilities that will increase efficiency within space procurement.