While commercial space launches from federal ranges have quadrupled in recent years, straining the Defense Department’s infrastructure, DoD has struggled to bill private companies accurately — missing opportunities to recover millions that could fund critical upgrades.

Originally built to accommodate periodic rocket launches, federal sites like Cape Canaveral Space Force Station in Florida are now supporting a significantly higher number of military and commercial launches. But a Government Accountability Office review found that the infrastructure — never designed for today’s high launch cadence, larger launch vehicles, or the logistics of modern launches — is aging, and the Defense Department hasn’t consistently been reimbursed for all the direct and indirect costs that commercial providers are racking up by using federal launch ranges.

One of the most immediate challenges for the Defense Department is direct cost recovery. 

While the Space Force collects direct cost reimbursements from private companies, the watchdog found that the service has struggled to calculate and recover the full costs of supporting commercial rocket launches from federal ranges.

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Space Force officials said the service lacks accurate tracking methods to determine how much it spends on launch support. A 2022 audit found the Space Force missed out on millions in potential reimbursements, failing to bill providers like SpaceX and ULA for basic services such as high-pressure water production and booster and rocket storage services.

“We found that DoD hadn’t always collected all the direct costs, things like utilities. There’s high pressure water that you see gets poured in during a launch to dampen the sound. And I think that that’s one of the things that we’d like to make sure that we’re collecting all those direct costs as the government,” Jon Ludwigson, a GAO director for contracting and national security issues told Federal News Network.

But recovering indirect costs, such as wear and tear on roads, bridges and other related infrastructure, is particularly challenging. 

Reusable rockets, now common in commercial operations, add a new layer of complexity to how the Defense Department manages and maintains its launch infrastructure and how it recovers the costs. Unlike one-way launches, SpaceX boosters, for example, return to Earth, get transported across the base for refurbishment and then sent back to the launch pad, creating traffic and adding stress on roads, bridges and other facilities. Similarly, Blue Origin’s massive New Glenn rocket also poses logistical challenges, requiring detours and road closures due to its size.

The Space Force only recently gained the authority to collect indirect costs from private companies, but under the current law the Defense Department can only recover up to $5 million per year in indirect costs. That cap is set to expire in 2026, and the watchdog is urging the department to start planning now to ensure it can better assess indirect costs and establish reimbursement guidance.

“I do think that there’s an opportunity here on the indirect cost to make sure that we’re capturing all the consequences that aren’t directly billed and find a way to thoughtfully and fairly allocate those costs. Because of the rising role of commercial launches on the base, we’re not trying to bill ourselves for those costs. We’re trying to allocate those costs properly to private sector entities that are using the base as a launch pad, literally for a profit-making enterprise,” Ludwigson said.

“The DoD has to figure out how to make that balanced decision about how much do we charge in order to bring that revenue onto the base and make sure that it is allocated and used to protect the infrastructure, improve the infrastructure as necessary to support this increased launch cadence. It’s a hard problem for them to solve but we think it’s doable, and we think it would benefit the taxpayers,” he added. 

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The biggest challenge the Defense Department is facing in its space launch efforts, however, is payload processing capacity.

As national security launches become more frequent and complex over the next five years, the Space Force anticipates a shortage of processing bays: officials estimate the service could face a shortfall of up to two bays per year between fiscal years 2026 and 2030.

Space Force officials said limited processing capacity partially occurs because space vehicle programs frequently reserve more processing time than necessary. Plus, the programs “do not have an incentive to be more efficient.”

The watchdog said the Space Force is already spending hundreds of millions to expand payload processing capacity but is doing so without access to commercial processing schedules.

“We found that DoD didn’t have enough information to have a good understanding of what the capacity was when people were using it, and potentially whether or not it needed to be upgraded in terms of the capacity at the different launch facilities. So we think there’s an opportunity to improve there as well,” Ludwigson said.

While there’s no requirement for the Defense Department to address GAO’s recommendations, Ludwigson said it would be helpful for the department to begin addressing both the direct and indirect cost recovery processes soon, since those efforts will take time to develop and generate additional revenue. And the Defense Department also needs to move forward with issuing a solicitation to gather information about payload processing capacity “sooner rather than later.”

“We’ve made investments nationally into helping private companies develop launch vehicles and provided a revenue source for them in the terms of launching DoD assets, as well as other civil assets. So I think when you think of the launch industry, it really does follow that virtuous circle that we made some investments, and it returned benefit to the companies and the U.S. government and the communities around these launch facilities and where the companies who are building assets are located. And I think that as you move forward, we just need to try to capture those benefits for the U.S. government through the way we procure launch services and to look forward to seeing how DoD can implement our recommendations and make sure that that works out well for the U.S. government and the taxpayer,” Ludwigson said.

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