Military Capabilities as a Service

Deliver solutions at greater speed, agility, and effectiveness.

Recently, Bryan Clark hosted a series of experts for a thoughtful discussion at Hudson on Fielding Military Capabilities as a Service that is worth unpacking further.

Bryan urged the DoD to shift its mindset from being an industrial provider that designs, builds, and operates major systems to acting as a customer leveraging services from multiple sources. This transition would enable the DoD to operate its enterprise more effectively by integrating diverse, industry-provided capabilities.

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Gen (Ret) Mike Minihan offered a compelling assessment, noting that a future Indo-Pacific conflict would differ markedly from recent conflicts. He proposed transferring retiring KC-10 aircraft to industry who can provide to DoD as a service in training, homeland security, and conflict surge operations, rather than sending them to the boneyard. He highlighted the C-5’s low 46% availability rate, expressing confidence that industry could enhance readiness for the C-5 and other systems more effectively than current DoD efforts. To address the DoD’s poor interoperability track record, he advocated for industry to rapidly integrate connectivity into Air Mobility Command aircraft and deliver it as a service. He criticized the current model, where defense primes are rewarded with more funding and control despite delivering capabilities over budget, behind schedule, and below performance expectations.

Mike Connor emphasized that commercial industry focuses on delivering capabilities as a service, with customers paying only for the services needed and ceasing payment when the job is complete. He argued that the DoD could achieve greater value and agility by adopting this model. He criticized the DoD’s excessive spending on sustaining and upgrading outdated legacy systems, noting that the cost of one failed program over the past decade could have funded acoustic sensor coverage across the entire western Pacific.

Colin Carroll stressed that the DoD’s acquisition focus remains on delivering major systems in the mid-2030s, despite industry’s ability to address current combatant commanders’ immediate needs far more rapidly. He described aircraft hardware as a platform for rapidly iterating autonomous software, advocating for building new aircraft around advanced software rather than retrofitting legacy systems. Delivering capabilities as a service enables faster operation and iteration compared to the sluggish traditional acquisition system. He cited the Orca program, noting that a 10-year-plus acquisition led by a traditional prime with low quantities and extended timelines fails to meet ADM Paparo’s operational needs. Industry, he argued, could deliver this capability as a service within more relevant timelines and at scale. He explored how the transformed requirements system can drive effects based services and debating the line between lethal and non-lethal effects. We’ll see DoD employ more Government-Controlled, Contractor-Owned, Contractor-Operated (COCO) models in the future.

Muk Pandian highlighted his company’s success in providing spacecraft as a service for pharmaceutical customers, with clear applications for the DoD. He noted that a fixed-price service model is far more cost-effective than the DoD’s approach of spending hundreds of millions on new development and production programs. He emphasized the space industry’s transformation driven by low-cost launches, proposing that reusable and recoverable satellites and architectures—enabling space-based sorties—offer a model for rethinking DoD space capabilities. He stressed wargaming is a key element for operators to understand how to define and operate capabilities as a service.

Rep. Rob Wittman emphasized that the DoD has lost its technological edge in key domains, urging a broader adoption of advanced technologies like AI and cyber across services. He advocated empowering combatant commanders and operators, who best understand current operational and threat environments, with faster decision-making authority. Acquiring capabilities as services, rather than through the traditional, decade-long process of defining requirements, securing budgets, and overseeing development, enables greater speed and impact. Rep. Wittman stressed prioritizing mission outcomes over bureaucratic processes, rapidly responding to adversary capabilities, and accelerating capability delivery. To win future conflicts, the DoD must shift its production paradigm, leveraging software dominance and evolving capabilities. PEOs, in collaboration with DIU, should gain deeper insights into industry’s existing and emerging capabilities to drive innovation.

Kudos to Bryan for hosting a pivotal and timely discussion with key experts. We recommend watching the full event.

Opportunity Space

The DoD must take advantage of the moment and leverage innovative acquisition models to deliver capabilities faster….as a service approaches have tremendous potential to deliver the speed and defray the upfront cost.

Bypass Inefficiencies of Traditional Acquisition

Legacy approaches—burdened by exhaustive upfront analysis, tedious checkers checking checkers exercises, hyper derisking of technology, micromanaged design, testing, and production—have left us delivering systems to warfighters that are drastically out of date to the threats and the need. While we are often skeptical consumers of GAO analysis, their recent weapons report indicates that the efficiency problem is getting worse potentially despite some of the new tools that have been provided to the acquisition community. This is not because those tools are not good but rather that they need to be married with new business approaches…like capability as a service.

Exploit Private Investment

According to the Silicon Valley Defense Group, over $70B of private capital has been raised among the top 100 non-traditional, private-backed defense companies. Essentially, the value of defense venture capital deals has grown 18x over the past 10 years - heralding what should be seen as a golden age for defense acquisition as it brings fresh external capital that was always desired from the legacy primes. Under an as a service approach, DoD can clearly define their needs and empower industry to invest billions in private R&D in the capabilities they are willing to buy at speeds that are likely to far surpass what would have been executed as a new start program.

Rapid Iteration

DoD has some exemplars but generally struggles to field upgrades on timescales that they advertise as goals. A services-based acquisition model enables the DoD to procure capabilities from multiple vendors with unprecedented speed, flexibility, and cost-efficiency while also enabling a new means of driving updates that respond to desired operational needs. As threats, operations, and technologies evolve, industry can iterate solutions—through software and hardware upgrades—in a fraction of the time required for the traditional approach that sometimes gets bogged down with new budget line items, extensive engineering change proposals, contract pricing demands and other bureaucratic inertia that can drive delays. Industry is less bound (if the contract is written correctly) and can continuously refine service offerings based on DoD demand signals and real-time operational feedback.

While there are nuances and level of success associated with each of these, there are many early use cases to build upon and learn from as capability as a service becomes a more mainstream approach for delivering operational capability:

• DoD buying commercial launch services from SpaceX (and now new companies like Rocket Lab and Stoke Space).

• NGA buying Commercial Imagery Services through companies like Maxar Technologies, Planet Labs, and BlackSky.

• Space Force’s Commercial Satellite Communications Office (CSCO) buying significant MILSATCOM services from various companies.

• Space Force’s Commercial Space Office establishing a commercial marketplace with contracts awarded for a Commercial Augmented Space Reserve (CASR).

• NRO’s Commercial Systems Program Office acquiring commercial space-based ISR capabilities for the IC and for Space Force needs.

• SOCOM acquiring Counter UAS as a Service from Anduril.

• Navy using Saildrones for maritime ISR as a service in SOUTHCOM.

• PEO Unmanned Aviation and Strike Weapons looking for COCO drones and sensors for ISR missions.

• Army exploring Radios-as-a-Service to support its growing inventory of different communication form factors.

• Air Force buying commercial refueling services from companies like Metrea and Omega.

• Numerous software examples from Palantir’s Maven Smart System to licenses procured from cyber providers.

Apart from active explorations or active contracts for capabilities as a service, USD(A&S) is also running a pilot program for Anything-as-a-Service contracts following new authorities granted in the FY24 NDAA (Section 809). The pilot program covers SaaS, DaaS, and Space-aaS (facilities) PSCs.

Challenges

There are some challenges that need to be worked to make this high impact acquisition model more tenable for acquisition professionals (engineering, program management, financial management and contracting).

Financial Restrictions

• The Anti-Deficiency Act (ADA) prohibits programs from obligating or spending funds in advance or in excess of an appropriation. This can create a challenge as usage and costs may vary depending on the military needs. The focus on estimation with the uncertainties can be challenging and in the worst case of this, a program could burn through funds forcing a stop-work or over obligate and get themselves in legal trouble.

• There are ways to work this but it does require a new skillset and likely a revisit of the ADA and FMR guidance to really enable scaling of the capability as a service model.

Operational Acceptance

• To date, most operational commanders are used to contractors supporting them in various support roles (IT, maintenance) but less so when it comes to an operational capability. Not surprisingly, military commanders want full control over their units to execute deliberate plans but more importantly to be able to respond to contingency events.

• While a capability as a service may have some limitations here, as we move into a space where more autonomous systems are fielded and there is less contractor manpower required (especially in the combat zones), there should be much greater flexibility for contracts to be structured where commanders have full control of the assets (or effects). Commanders are already well trained in making tradeoff decisions and more as a service capabilities will require some additional elements.

Investment Planning

• While very manageable, there is likely training that is required for cost estimators and programmers on how to budget for a new capability as a service. There will be numerous elements that need to considered that could drive the cost up or down (availability, replenishment, distribution etc.).

• The different elements will also vary widely by capability. Acquisition officials will have to get familiar with the different approaches and how to convey the potential tradeoffs to the operational community during acquisition planning and during the budget process.

Contracting

• Bringing in new as a service models will challenge the current processes and training for contracting officers - as it will involve areas such as insurance and new business models to structure the right arrangement.

• Value-based pricing may have to play more of a role too in identifying what is fair and reasonable for a new service that historically has only been provided by highly exquisite systems.

• The commercial space community was very wary of providing their assets in a war scenario for fear of their satellites being targeted and bankrupting their business. War Insurance is now a financial tool the Space Force is exploring for their CASR capability.

• Some recommendations from the Section 809 Panel could drive some helpful FAR updates such as adding different Product Service Codes (PSCs), a new contract type (fixed-price resource units) to FAR Subpart 16.2 and create a a new subcategory of services called consumption-based solutions in FAR Part 37 to make execution easier for contracting officers.

Forecasting and Management

• When it comes to any consumption-based service, there needs to be processes and personnel in place to manage it both to support forecasting of needs, budgeting and management of the available resources the service provides.

• This was a challenge when cloud-based services first became available and there are a lot of lessons and best practices that can be gleaned from that experience (which the commercial sector and DoD know well).

• The GSA Cloud Operations Best Practices and Resources Guide could be a model on which to illuminate management practices for different types of capabilities as a service.

Way Ahead

Program Executive Officers (PEOs) should rigorously evaluate their portfolios to identify capabilities better suited for acquisition as a service. Pride in maturing existing systems for warfighters can create bias toward traditional pipelines, but PEOs must scrutinize the full lifecycle—from concept to Initial and Full Operational Capability (IOC/FOC). They should weigh the total costs of research, development, testing, production, operations, personnel, and maintenance, as well as the time and cost of major system upgrades.

Engaging both traditional and non-traditional industry partners in candid discussions about delivering capabilities as a service is critical. The focus must shift from specific systems to operational objectives. For example, a single billion-dollar, multi-mission, manned system—often a vulnerable, limited asset—could be replaced by five to ten smaller, unmanned, single-mission systems acquired through a services model. These systems offer greater speed, flexibility, and resilience, enabling rapid iteration to meet evolving mission demands with enhanced effectiveness. Similar to our proposal for commercial competition, PEOs can solicit industry pitches for delivering existing acquisition programs per novel services models.

Acquisition executives must scrutinize the Adaptive Acquisition Framework to expand and optimize the services acquisition model. The current Acquisition of Services pathway, overly focused on contracting and constrained by an outdated seven-step process, fails to address the complexities of acquiring major defense capabilities. Analyzing successful services acquisitions—such as space imagery and counter-UAS—can inform the development of robust playbooks and a modernized pathway tailored for acquisition professionals. Proactive, ongoing collaboration with industry, extending beyond individual programs, is essential to understand business models, tackle challenges, seize opportunities, and co-develop innovative, scalable commercial acquisition solutions.

Given the White House, Pentagon, and Congress are driving commercial preferences, acquiring capabilities as a service offers a prime opportunity to buy before build.

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