Government’s transition to commercial procurement method and its limitations

Although government agencies around the world are actively introducing commercial contracting mechanisms to secure space capabilities, these changes do not appear to be leading to additional business opportunities for actual space companies.

According to related industry reports, there is a clear trend in which the government is shifting its contracting method with private companies from a traditional procurement model to a commercial model. However, it is pointed out that these changes are not having as positive an effect as expected on the space industry ecosystem.

Structural limitations of the commercial procurement model

The commercial procurement model is a method in which the government purchases existing services or products from private companies, and has the advantage of being highly cost-effective, unlike customized development contracts. However, in the space field, these models have inherent limitations.

The space industry is a field that requires high technological barriers and huge initial investment costs. Even if the government purchases commercial services, the market expansion effect is not significant because the number of companies that can provide the service is limited.

Additionally, the special security requirements and mission characteristics of government agencies are often not fully compatible with purely commercial services. This forces companies to make additional modifications or customizations for government contracts, reducing the efficiency of their commercial model.

From the perspective of space companies, contrary to expectations, changes in government procurement methods often end up changing existing contract structures rather than creating new revenue sources, making it difficult to lead to actual business expansion.