Military embraces small satellites, suppliers in trouble

WASHINGTON: A surge in demand for small satellites to support national security space programs has exposed weaknesses in the U.S. space industrial base and led to supply chain problems as the military prioritizes rapid deployment of constellations.

In the latest sign of tensions, defense contractor L3Harris Technologies has sued one of its suppliers, aerospace company Moog Inc., in federal court, alleging that Moog failed to deliver critical satellite components on time and that its The part supplied is defective.

The lawsuit, filed in late March in the U.S. District Court for the Middle District of Florida, is the latest flashpoint in the aerospace industry’s efforts to adapt to the military’s shift toward smaller, cheaper satellites led by the Space Development Agency.

The Space Development Agency (SDA), established in 2019 and now part of the U.S. Space Force, is upending the military’s long-standing model of regularly purchasing large, expensive satellites. Instead, SDA plans to spend about $4 billion a year to build a constellation of hundreds of smaller, lower-cost satellites that would be deployed more frequently.

This model places new demands on suppliers.

According to the March 28 complaint, L3Harris subcontracted with Moog to provide Satellite Bus with core hardware and software used to build spacecraft for a total value of $77.9 million to fulfill two major contracts, one with SDA, The other was with a confidential government client.

L3Harris said Moog missed multiple delivery deadlines, with satellite buses arriving 11 to 13 months late. Moog’s failure also damaged L3Harris’ credibility with customers and put L3Harris’ future business at significant risk, the complaint said.

Moog eventually delivered the bus, and SDA launched the L3Harris satellite in February. L3Harris said in the lawsuit that it discovered flaws in the Moog hardware that could cause catastrophic damage to the satellite and SDA mission.

Answer questions from space newsA spokesman for L3Harris said the company could not comment on ongoing litigation.

Aaron Astrachan, director of investor relations at Moog, said in a statement, “We are aware of the lawsuit filed by L3Harris and do not plan to comment publicly on these allegations at this time.” However, we intend to vigorously defend against these allegations and will respond to the complaint in court when appropriate.

Industry struggles to rise

The lawsuit highlights the challenges the space supply chain faces as it tries to increase production to meet growing demand from the military and intelligence communities.

Like the companies that emerged to support a surge in orders for iPhone parts, aerospace companies are scrambling to prove themselves as reliable, high-volume suppliers of buses, hardware and software.

Defense industry companies long accustomed to building a few large, complex satellites are adapting to the new reality of producing large numbers of smaller, cheaper spacecraft, experts say. The surge in demand driven by SDA has exposed weaknesses in the aerospace industry’s base.

SDA director Derek Tournear has often said the agency’s vision is to foster a strong and diverse market. Fixed-price contracts are awarded to incentivize bidding speed and technology maturity. Tournear noted that the business model of SDAs is primarily focused on progress.

To incentivize companies to invest in production capabilities, SDA competitively selects prime contractors to bid every two years for each portion of the SDA space network in low-Earth orbit, the so-called “Proliferation Warrior Space Architecture.”

Tournier, who met with reporters April 10 at the Space Symposium in Colorado Springs, acknowledged that some suppliers are having trouble securing parts and sub-parts, some of which are produced by only one or two suppliers.

A case in point are critical satellite components manufactured by Innoflight, the sole provider of Type 1 encryption required for SDA satellites. Type 1 encryption is necessary for transmitting sensitive national security material, and it can take years to get NSA approval for specialized hardware.

Tournear noted that Innoflight is in a unique position in the market as the only supplier today that has the correct size and form factor for Type 1 encryption to meet SDA requirements.

Everyone relies heavily on Innolight, he said. We have some encryption alternatives in the future, but they may not be ready until after the Tranche 3 timeframe. Batch 3 is the next satellite purchase planned by SDA in 2025 and 2026.

The good news, Tournier said, is that suppliers can transform. We see this with the Astra. Several SDA prime contractors have chosen Astra Space as a supplier of spacecraft propulsion systems. But he noted that after Astra experienced financial difficulties, some suppliers had to find alternative sources for satellite thrusters.

Meanwhile, L3Harris’ legal dispute with Moog illustrates the challenges faced by prime contractors in finding bus providers who can meet reliability and timetable requirements.

For the next batch of satellites L3Harris is building for SDA, expected to launch in 2025, the company turned to bus supplier Maxar Space Systems. Other SDA prime contractors, such as Lockheed Martin and Northrop Grumman, use buses from Terran Orbital and Airbus, respectively. Other major contractors, including York Space Systems, also build their own buses. Rocket Lab said it plans to develop a new bus for SDA.

Sierra Space, a new entrant into the SDA market, is designing its own buses but using components from Raytheon subsidiary Blue Canyon Technologies. Sierra Space won SDA’s second tranche of contracts to produce 18 satellites.

Tournear said Raytheon won a contract last year as prime contractor to produce seven Tranche 1 satellites for SDA, but later decided it could not meet price targets. Many jobs are being eliminated from the contract, he said. Raytheon, by executing on that contract, realized that the scope of the price points they chose was not going to close.

Tournear said some of the components Raytheon plans to use on its satellites are flowing to some Tranche 2 suppliers.

Sierra Space said in a statement that it has partnered with Blue Canyon to provide several critical spacecraft parts for our buses.

High-level criticism

Supply chain issues across the aerospace industry have drawn criticism from the top U.S. Space Force procurement official, who called on defense contractors to do a better job of addressing them.

In recent comments, Frank Calvelli, the Air Force’s assistant secretary for space acquisition, criticized key leaders for “complaining” about supply chain challenges rather than taking more proactive steps to address them.

“We have big companies complaining about supply chains, and I think they have the resources and the assets to really do something about it,” Calvelli said in February.

Calvelli said businesses still blame the COVID-19 pandemic for supply chain woes, but he doesn’t think that’s a legitimate excuse anymore.

However, there are real issues with the space supply chain, Space Capital managing partner Chad Anderson said April 9 during a panel discussion at the Space Symposium.

“I don’t think we’re paying enough attention to supply chain issues,” Anderson said. If you’re an investor and you’re looking for a company, pay extra attention to the security of your supply chain. We are already seeing cracks in the supply chain of today’s aerospace industry. Imagine what it will be like in three years.

Several senior executives interviewed space news One person, who spoke on condition of anonymity, noted that SDA creates an entirely new market and exposes growing pains in the U.S. space industrial base.

It is the industry’s responsibility to address supply chain issues and adapt to new models for small satellite constellations, these sources said. But they believe the problems encountered by SDA providers point to deeper systemic challenges that cannot be solved quickly. They warned that some companies with the capability to build the satellites the SDA seeks are structured to produce single-digit spacecraft at a time, and that it would take time and effort to ramp up production to meet the SDA’s needs.

According to these sources, the new growth in demand for military satellites has created real bottlenecks, not only in cutting-edge subsystems such as Class 1 encryption, but also in conventional components such as batteries, thrusters and solar arrays. Prime contractors have been working to qualify multiple suppliers for critical parts, but given the strict specifications, the process can be time-consuming.

Experts point out that SDA’s ambitious plan is to deploy hundreds of small satellites in the next few years, and solving supply chain challenges is critical to the agency’s success.

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