The U.S. Department of Defense wants to be able to launch small satellites quickly, from multiple launch sites, into a variety of orbits. This is known.

What came as a revelation to us last month, though, was just how very much the Pentagon wants to do this -- and how much it's willing to pay to make it happen.

Three men racing in business attire with one tied to a rocket

Image source: Getty Images.

A bit of history

This past summer we told you about the "DARPA Launch Challenge," or DLC, a project sponsored by the Pentagon's Defense Advanced Research Projects Agency (sometimes playfully referred to as the Pentagon's "mad scientists" division). In it, DARPA proposed to have three small, privately held companies -- Virgin Orbit, Vector Space, and a third, unidentified "stealth team" -- attempt to launch three to six small satellites on little or no notice.

In exchange for this, DARPA promised to pay each successful launcher $2.4 million for a first launch, and $8 million, $9 million, or $10 million for a second launch -- which you'll notice adds up to a total prize purse of less than $35 million.

So far, so good -- except for a couple details. In August, Vector ousted its CEO and declared it will "pause ... operations." (The company may even be insolvent by now.) Soon after, Virgin Orbit announced that it, too, will be withdrawing from the competition to focus on its (presumably less stingy) commercial customers.

As of today, that means there's probably only one contender left hoping to win DLC ... and that's the "stealth candidate" whose name we don't even know! 

Second verse -- not quite the same as the first

But not to worry. If DLC appears to be on the rocks, there's a much bigger -- and much more lucrative -- contract for small space launch investors to focus on instead.

This one's name is "Orbital Services Program-4," or OSP-4, and with a total "ceiling" value of $986 million, it's almost 30 times bigger than DLC. Technically an extension or renewal of a preceding program, the Orbital Services Program-3 awarded back in 2012, there are some significant differences between OSP-3 and OSP-4. 

OSP-3, you see, sought bidders for Air Force work launching payloads of anywhere from 1,810 to 9,072 kilograms into orbit. (Northrop Grumman subsidiary Orbital ATK, SpaceX, and Lockheed Martin won OSP-3, although Lockheed later backed out). In contrast, OSP-4 is looking to put much smaller satellites into orbit. 

As explained in the Pentagon's daily digest of contracts awarded on October 10, OSP-4 funds will be used to pay for "the rapid acquisition of launch services to meet mission requirements for payloads greater than 400 pounds" -- so about 180 kilograms, or one-tenth the size of the smallest satellites being contracted under OSP-3. So far, this sounds a lot like what DARPA was intending to do with DLC.

At the same time, OSP-4 is both less ambitious, and more generous (to the contractors) than DARPA's troubled DLC program. Instead of promising to launch satellites within just weeks, or days, of being instructed to do so, OSP-4 contractors will only need to launch "within 12-24 months from task order award." 

And despite this less stringent requirement, contractors under OSP-4 will be paid handsomely for their service. With $986 million in funds available to pay for 20 launches spread over a nine-year period, the average OSP-4 mission should pay its contractor about $49.3 million per launch -- more money than would be paid for all the launches covered by DARPA's DLC combined. 

Who gets the loot?

So which contractors won OSP-4 contracts? The Pentagon named eight winners:

  • SpaceX and Northrop Grumman (NYSE:NOC), both of which served as contractors under OSP-3.
  • United Launch Alliance, a joint venture of Boeing (NYSE:BA) and Lockheed Martin (NYSE:LMT).
  • VOX Space, a subsidiary of Virgin Orbit that won a DLC contract (and then dropped out).
  • Rocket Lab USA, a proven up-and-comer in the small rockets industry.
  • Firefly Black, a subsidiary of once-bankrupt, but now alive-again Firefly Aerospace.
  • Aevum Inc, a start-up that has yet to launch its first rocket, and
  • XBow Launch Systems, which has a picture of a rocket on its webpage -- but perhaps not much else.

What it will mean for the winners

These are the eight space companies that will be competing to split nearly $1 billion in Pentagon cash over the next decade -- and yes, I've listed them in the order of their likelihood of success. What winning means for the companies, however, could vary widely.

For companies like SpaceX, Northrop Grumman, Boeing and Lockheed -- megafirms doing billions of dollars of business a year -- winning even a large portion of the $986 million in OSP-4 funds probably won't "move the needle" a whole lot. For them, victory in OSP-4 will be nice, and even likely -- but not make-or-break for the companies. 

In contrast, VOX and Rocket Lab are still spinning up their businesses (though Rocket Lab is farther ahead than VOX, with multiple successful launches under its belt). Winning even just a handful of the 20 launches planned under OSP-4 could significantly improve their chances of "making it" in the rocket biz.

And Firefly? Aevum? XBow? As unproven quantities in small space launch, these firms have both the smallest chances of winning contracts -- and the most to gain from winning. With the Air Force expressly stating that it intends OSP-4 to promote emerging small launch providers, OSP-4 could provide an opportunity for these companies to break into the big leagues.