Why Space Startups Could Thrive Under Trump

The commercial space business in the U.S. is already a growth industry, as new companies continue winning important NASA contracts that not so many years ago, would likely have gone to “traditional” aerospace companies like Boeing or Lockheed Martin. There’s already a shift underway affecting these legacy defense firms with decades of experience working on these sorts of government contracts. Industry insiders are looking ahead to the incoming Trump administration, as some predict that the industry may swing even further toward newer space businesses, from SpaceX to startups. 

Industry news site SpaceNews.com reports that this was very much the sentiment shared by speakers at last week’s Baird Defense & Government Conference in McLean, Virginia.

One major theme was that Elon Musk, recently recast as a trusted Trump confidante, and his industry-upending SpaceX rocket and satellite company may play an increased role in disrupting the traditional contract awards process. That’s largely because established space and defense contractors are used to working under so-called “cost plus” contracts that have been a staple of the aerospace and defense industries for decades. Under this system a contract winner is awarded a fee that equates to a profit margin, and, as Space News explains, all other “direct costs incurred during a project” are covered. 

The system works, especially for a complex industry like space manufacturing, because it means that if significant technical challenges are encountered during the project, ultimately there are enough financial resources available to ensure that barriers are overcome and the final outcome is, eventually, achieved—important if, say, your project is a national prestige objective, like landing on the moon.

But cost plus contracts are also seen as disincentives for innovative approaches to solving problems, and are sometimes leveraged as a sort of endless “money train” by contractors who slow-walk development processes. In late 2023 Boeing executives, for example, swore that the company (which was already plagued by significant technical issues with its Starliner space capsule) just “couldn’t make money” off non cost-plus contracts. In a conference call with financial analysts the company’s chief financial officer, Brian West, even said “rest assured, we haven’t signed any fixed-price development contracts, nor intend to” in the future.

Hence it’s interesting that the term “cost minus” was being mentioned at the Baird event in relation to future space contracts under the incoming Trump administration.

SpaceNews discussed the possible shift with Frank Backes, CEO of space radar imaging company Capella Space. He said Elon Musk’s space company—which has already won many fixed-price contracts to launch payloads for government bodies like NASA and the NSA—may end up acting as a model for the kind of disruption that may happen. “We’re going to see more budgets moving from traditional, legacy, decades-old programs of record into the newer space community,” he said, adding that SpaceX’s fast growth (likely enabled by its move fast and break things startup-like mentality) has already opened the industry up for other space startups.

Peter Platzer, CEO of space data and analytics firm Spire Global, took a more conservative stance, and argued that the commercial market, essentially the list of contracts coming up for non-government satellite payloads, is nowhere near as big as the government side of the equation. He also pointed out that shifting these contracts to new, small, agile space startups instead of “old” space brands may face resistance among other lawmakers. Congress has the final say on spending, and members may favor doling out lucrative space contracts to big firms with local factories that employ thousands of people in their states. 

A recent report on an industry rumor adds an extra wrinkle. Well-connected space industry journalist Eric Berger recently posted on X that inside sources had said there may be as much as a 50/50 chance the Trump administration may cancel the entire Space Launch System (SLS) project. This decades-long effort to develop a giant, heavy-lift rocket with a central role in the upcoming Artemis moon missions, has already faced considerable criticism. Although it’s already using existing tech from the Space Shuttle program, the Government Accounting Office, and other critics point to its massive costs—each launch has an estimated price tag of around $4 billion.

Cancellation of a rocket contract at this scale would really hit its manufacturers, which include Boeing, Northrop Grumman and the United Launch Alliance, a partnership between Boeing and Lockheed Martin. If it is scrapped, that money could be funneled to smaller space companies instead.