Earlier this year, the U.S. Department of Defense (“DOD”) issued its Commercial Space Integration Strategy. While arguably still in the early stages of implementation, this policy shows a significant shift in creating new opportunities for contractors to work with and sell commercial solutions to DOD. This creates big opportunities for the construction industry. DOD’s current construction budget is over $2.9 billion,[1] and seeking to increase funding and projects with the private sector also increases the need for construction of facilities to house those partnerships. For contractors who may be able to take advantage of these opportunities and the facilities that support them, it is worth having an understanding of what a prospective contractor would need to do to participate and what pitfalls may be attached to these programs.
In an effort to call out the elephant in the room, the timing of these policies coming out in the year before an election should not be ignored. While grounded in the 2022 National Defense Strategy and other established departmental policies, a change in administration could create change in how these prospective opportunities are handled.
In the big picture, DOD’s commercial strategy shows a way for DOD to shift its approach from the traditional government model of using established major contractors to create custom government solutions to the acquisition of already existing goods, services, and technology that can fit into existing government systems. While this is easier said than done, DOD’s policy also gives some thought as to how to remove the structural, procedural, and cultural barriers that have traditionally surrounded military contracting.
DOD’s commercial strategy is grounded in four principles: (1) balancing government and commercial solutions in mission areas, (2) interoperability of military and industry standards, (3) increasing the number of contractors and diversifying supply chains, and (4) behaving ethically in accordance with international norms and standards, including DOD’s Tenants of Responsible Behavior in Space.
For contractors interested in taking advantage of these potential new opportunities, now is the time to get up to speed. For instance, construction contractors should become familiar with standards used and required by DOD for construction and design projects, including the Unified Facilities Criteria (UFC) Program.[2] Additionally, DOD repeatedly emphasizes ethical and responsible behavior and cites its Tenants of Responsible Behavior in Space as a guidepost.
DOD has identified four priority areas for how it wants to implement this shift to a broader use of commercial technology and solutions:
- Ensure Access to Commercial Solutions Across the Spectrum of Conflict – Contractors should be prepared to meet cybersecurity, data privacy, and supply chain security requirements and be able to scale and prioritize providing to DOD over other commercial clients when called upon to do so. Cybersecurity and data privacy can be complex areas where your lawyer can assess and guide your company policies. A hot topic in any industry, the construction industry has seen renewed emphases on cybersecurity and data privacy, including with increasing state legislation on sensitive building plans, such as those used in ports. Contract assessment can also be performed to further assess a contractor’s ability to shift products and services from existing clients to DOD should they be called on to suddenly divert. Construction is (ideally) an industry run on contracts; to be able to take advantage of these new opportunities, construction contractors should take a good hard look on whether their current contracts would allow them the flexibility if needed. Should an opportunity with DOD arise, additional contract language may be necessary to protect the contractor from breach of contract fallout should the federal government suddenly demand an increase of service. Part of being able to scale rapidly may require qualified contractors who can jump into facility expansion to support that scaling. For the industry to grow, somebody has to be able to build it.
- Achieve Integration Prior to Crisis – DOD is not waiting for war times. Rather, contractors have the opportunity and should be prepared to integrate their goods/services/technology into government systems during peacetimes so that such solutions can be deployed and refined. Such integration will include wargames and training exercises to test and hone. Increasing involvement with industry organizations that are interfacing with DOD, including Associated General Contractors of America and the National Association of Government Contractors, is one way to begin building these relationships.
- Establish Security Conditions to Integrate Commercial Space Solutions – Within their baseline of ethical behavior, DOD intends to increase information sharing with commercial partners, including threat information sharing within the commercial space sector. Admittedly, there are some kinks that will have to be worked out regarding clearance levels and processes, overclassification of information, and standards for commercial facility access to government information. What we know is that the need for the construction of Sensitive Compartmented Information Facilities (SCIFs) is on the rise. A SCIF is a secure area within a facility where sensitive information can be handled. The federal government has a separate set of design and construction standards for SCIFs, which construction contractors hoping to take advantage of new DOD opportunities emerging under the Commercial Space Integration Strategy should educate themselves on.[3] Being up to speed on construction standards specific to DOD for these anticipated needs and facilities is another way contractors can prepare now.
- Support the Development of New Commercial Space Solutions for Use by the Joint Force – In addition to creating opportunities to work with new contractors and new technologies, DOD is looking to create expansion opportunities for these players and products. Part of DOD’s priority will be to integrate private investment and commercial lending to allow solutions to be rapidly scaled up. This would also include assistance on clearing regulatory hurdles. Increasing projects plus increased money will fuel increased construction.
One challenge that comes with cutting edge development and military contracting is that there are significant gaps in industry-standard insurance policies. Such gaps create additional risks, which DOD is working is decrease. To do so, DOD is exploring alternative insurance options that could be offered to commercial partners to fill gaps in traditional CGL policies. This could include space commercial insurance, commercial war-risk insurance, U.S. government provided insurance, or contractual indemnification. Construction contractors should review their current insurance coverage to gain a better understanding of where their risks are relative to government and military contracting, space-adjacent construction, and wartime construction.
Because this article on military contracting would not be complete without another numbered list, DOD has three categories for mission areas based on how much each category lends itself to cooperation with the private sector. (1) With government primary mission areas, DOD will still keep the majority of goods and services within the government. This includes combat power projections; command and control; electromagnetic warfare; nuclear detonation detection; missile warning; and positional navigation and timing. If your commercial solution falls into one of these categories, you may still be out of luck (or more realistically, already integrated as a government contractor). But opportunities abound in (2) hybrid mission areas and (3) commercial primary mission areas. Regardless, all three will generate supporting construction projects.
Hybrid mission areas are those where government and commercial partners can work side-by-side to share responsibilities and functions. This category includes cyberspace operations; satellite communications; spacecraft operations; intelligence, surveillance, and reconnaissance; space domain awareness; and electromagnetic warfare. Commercial primary missions go even farther into the private sector with mission areas that could be performed by commercial partners with only limited government involvement. These areas include space access, mobility, and logistics and in-space servicing, assembly, and manufacturing. Yes, construction in near-Earth orbit is another rising trend that we will continue to see grow and impact the construction industry.
As the commercial sector and other nations press into layers of the stratosphere and beyond, DOD is looking to the private sector to keep up. Gone may be the days when the U.S. military wants to go it alone, seeking custom solutions that are unavailable to anyone else. By integrating new commercial partners, and thereby creating new business opportunities for the commercial sector, DOD seeks to move faster and be able to deploy solutions in a more timely and agile way. With the space industry expanding, somebody is going to have to build it. Although there is some risk, construction companies who prepare now will be able to take advantage of the new opportunities that come along with these expansions.
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[1] Department of Defense Fiscal Year (FY) 2024 Budget Estimates – Military Construction, Family-Housing, Defense Wide, March 2023, https://comptroller.defense.gov/Portals/45/Documents/defbudget/fy2024/budget_justification/pdfs/07_Military_Construction/Military_Construction_Defense-Wide_Consolidated.pdf.
[2] UFC provides planning, design, construction, sustainment, restoration, and modernization criteria and applies to the Military Departments, the Defense Agencies, and the DoD Field Activities in accordance with DoD Directive 4270.5 (Military Construction) and USD(AT&L) Memorandum dated 29 May 2002.
[3] Technical Specifications for Construction and Management of Sensitive Compartmented Information Facilities, National Counterintelligence Security Center, July 26, 2021, https://www.dni.gov/files/NCSC/documents/Regulations/IC_Technical_Specifications_for_Construction_and_Management_of_Sensitive_Compartmented_Information_Facilities_v151_PDF.pdf.