How the DoD Buys Commercial Space Tech: SBIR, OTAs, CSOs

The Department of Defense (DoD) buys commercial space technology through six main pathways: standard contracts under the Federal Acquisition Regulation (FAR), broad agency announcements, the SBIR and STTR small-business programs, research and prototype Other Transactions, and Commercial Solutions Openings. Which one fits depends on how mature the technology is, who owns the company, and which DoD organization has the problem.

What are the main ways DoD buys new technology?

DoD buys new technology through six pathways, each with its own legal basis. FAR-based contracts are the default. Broad agency announcements fund research. SBIR and STTR fund U.S. small businesses. Other Transactions fund research and prototypes outside most procurement rules. Commercial Solutions Openings buy commercial products and services through an open, rolling call.

"No ownership test in the statute" does not mean every solicitation is open. Individual calls can require U.S. citizens in key roles, security clearances or a clean drone supply chain, as the sections below show.

How do FAR-based contracts and broad agency announcements work?

FAR-based contracts are DoD's default buying method and carry the full set of FAR and Defense FAR Supplement (DFARS) clauses. By statute, DoD must state requirements so that commercial products and services can compete "to the maximum extent practicable" (10 U.S.C. 3453). A broad agency announcement is the FAR tool for funding research ideas.

Under FAR 35.016, a broad agency announcement (BAA) covers basic and applied research and development "not related to the development of a specific system or hardware procurement." Proposals are judged by peer or scientific review against published criteria, not against each other, and the notice must be published at least annually. Selection under a general solicitation with peer or scientific review counts as a competitive procedure under 10 U.S.C. 3012.

The Space Development Agency (SDA) shows how a space buyer uses a BAA. Its Systems, Technologies, and Emerging Capabilities BAA, updated on March 4, 2026 with offers due by March 3, 2027, asks for executive summaries, abstracts and proposals for future tranches of its Proliferated Warfighter Space Architecture. SDA says it updates the BAA every year and strongly encourages an executive summary before a full proposal.

What are SBIR and STTR, and who can win them?

The Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs reserve part of federal research budgets for U.S. small businesses, in three phases: Phase I tests feasibility, Phase II develops the idea, and Phase III commercializes it with non-SBIR money (15 U.S.C. 638). SBIR is closed to companies that are not majority U.S.-owned.

The eligibility test in 13 CFR 121.702 requires the awardee to be more than 50% directly owned and controlled by U.S. citizens or permanent residents, by other qualifying U.S. small businesses, or (for SBIR at agencies that allow it) by multiple venture capital, hedge fund or private equity firms. The company and its affiliates may have no more than 500 employees. SBA also requires a place of business in the United States and caps foreign business participation in a joint venture at 49%.

Two 2026 changes matter. SBIR and STTR authority lapsed on September 30, 2025; the Small Business Innovation and Economic Security Act, signed April 13, 2026, extended both programs through September 30, 2031. The same law requires agencies to screen applicants for security risks, including foreign ownership, financial ties to foreign persons, and links to entities on lists such as the Commerce Department's Entity List and DoD's Section 1260H list.

In the Space Force, SBIR and STTR run through SpaceWERX, which calls itself "the innovation arm of the U.S. Space Force." SpaceWERX lists open SBIR/STTR topics, STRATFI and TACFI funding (TACFI uses rolling submissions), and links to the Foreign Risk Evaluation program run under AFWERX, the Department of the Air Force's innovation arm. Our guide Can a Non-U.S. Company Win SBIR/STTR Funding? covers the realistic structures in detail.

What is an Other Transaction, and when does DoD use one?

An Other Transaction (OT) is an agreement that is not a procurement contract, grant or cooperative agreement, so most FAR rules do not apply. DoD uses research OTs for basic, applied and advanced research (10 U.S.C. 4021) and prototype OTs for projects "directly relevant to enhancing the mission effectiveness" of DoD (10 U.S.C. 4022).

A prototype OT can be used only if one of four conditions in 4022(d) is met:

1. At least one nontraditional defense contractor or nonprofit research institution participates to a significant extent.
2. All significant non-government participants are small businesses or nontraditional defense contractors.
3. At least one third of the project cost comes from non-federal sources.
4. The senior procurement executive certifies in writing that exceptional circumstances justify an OT.

"Prototype project" is defined broadly. It includes a proof of concept, a pilot or "novel application of commercial technologies for defense purposes", agile development, and demonstration of operational utility.

The main attraction is production. Under 4022(f), DoD may award a follow-on production contract or transaction to the participants without new competition if the prototype OT was competitively awarded and the prototype was successfully completed. Larger deals need sign-off: prototype OTs above $100 million need a written determination by the head of the contracting activity (or the director of DARPA, DIU or the Missile Defense Agency), and those above $500 million need a senior procurement executive's determination and 30 days' notice to Congress. Follow-on production over $100 million needs a written determination and notice to Congress. Agreements over $5 million generally give the Comptroller General access to records.

The Space Development Agency already uses this route: in a September 23, 2026 sources-sought notice for its PEREGRINE Sentry ground software, SDA said it anticipates an 18-month firm-fixed-price OT prototype award followed by a production OT.

Who counts as a nontraditional defense contractor?

A nontraditional defense contractor is a company that has not performed, for at least one year before the solicitation, any DoD contract or subcontract subject to full coverage under the Cost Accounting Standards (10 U.S.C. 3014). The definition says nothing about nationality, so a non-U.S. company new to DoD work will usually meet it.

That status now carries more benefit. Section 1826 of the FY2026 NDAA exempts products and services from nontraditional defense contractors from ten DoD requirements, including FAR Part 31 cost principles, the certified cost or pricing data requirement of 10 U.S.C. 3702, and DFARS clauses on business systems and earned value management. A head of contracting activity can still apply them with a written justification.

What is a Commercial Solutions Opening?

A Commercial Solutions Opening (CSO) is a general solicitation under 10 U.S.C. 3458: DoD publishes a problem, companies propose solutions, and proposals are chosen through peer, technical or operational review. A CSO counts as a competitive procedure, awards must be fixed-price, and whatever DoD buys is treated as commercial.

The FY2026 NDAA, signed December 18, 2025, changed CSOs in two ways (Section 1823):

1. Scope. CSOs can now buy any commercial product, commercial service or nondevelopmental item. The earlier requirement that the item be "innovative" was struck.
2. Production. A CSO can lead to a follow-on production contract, including a sole-source contract subject to the usual approvals, or a follow-on production contract or transaction as defined in 10 U.S.C. 4022.

DoD must notify Congress within 45 days of any CSO award over $100 million. Regulations lag the statute: as of its May 7, 2026 update, DFARS Subpart 212.70 still describes CSOs as a tool for "innovative" commercial products and services. Separately, Section 813 of the FY2024 NDAA requires DoD to run at least four CSOs a year for the needs of geographic combatant commands, until September 30, 2027.

How does the Defense Innovation Unit use CSOs and OTs?

The Defense Innovation Unit (DIU) is DoD's best-known CSO user. It posts problem statements, asks for short solution briefs, invites selected companies to pitch, requests proposals and then awards prototype OTs under 10 U.S.C. 4022, which it says can be awarded "in as few as 60-90 days". A successful prototype can lead to follow-on production without another competition.

DIU is also one of the few DoD buyers that addresses non-U.S. companies directly. Its solicitations page says DIU works "with companies both in the U.S. and internationally, across allied countries" (DIU). Individual calls still set their own limits, such as U.S. citizenship for key management personnel, so read each one in full.

Where do space companies enter the Space Force?

For space companies, the main front-end is the Space Force Front Door, run by Space Systems Command's Commercial Space Office (COMSO). Companies submit a technology through an online portal, and Front Door routes it to the government office most likely to need it. It was renamed from SSC Front Door on September 23, 2025.

Space Systems Command reported more than 1,700 technology submissions from more than 1,400 companies between the portal's 2023 launch and September 2025. The portal now also lists government challenges and requests for information, and registered users receive Orbital Watch, an unclassified threat report from Headquarters Space Force Intelligence. Front Door is a routing service, not a contract: the award itself still comes through SBIR, a BAA, a CSO, an OT or a FAR contract.

What changes for a foreign drone company?

A foreign drone company can sell to DoD only if its product is clear of the covered foreign countries. Section 848 of the FY2020 NDAA, as amended by Section 817 of the FY2023 NDAA, bars DoD from buying drones made in, or by companies domiciled in, China, Russia, Iran or North Korea.

The ban reaches inside the product: flight controllers, radios, data transmission devices, cameras, gimbals, ground control systems, operating software, and network connectivity or data storage tied to those countries. Since October 1, 2024, DoD also may not contract with companies that operate covered drone companies' equipment on DoD work.

The practical gate is DoD's Blue UAS list, which DIU created and handed to the Defense Contract Management Agency on December 3, 2025. As of November 19, 2025, it held more than 39 systems and 165 components. A foreign drone company's realistic sequence:

1. Document the origin of every restricted component and its software.
2. Seek Blue UAS listing for the drone or component.
3. Answer DIU and service CSOs that are open to international vendors, usually leading to a prototype OT.
4. Form a qualifying U.S. company only if you need SBIR/STTR or a domestic presence for a specific buyer.

Our guides to Blue UAS and NDAA drone rules and non-red supply chains cover the component rules in full.

What this means for allied companies

For a non-U.S. company, the open doors are CSOs and Other Transactions, not SBIR. Neither statute asks who owns you, and a company new to DoD work usually qualifies as a nontraditional defense contractor, which both satisfies the main OT condition and, since December 2025, removes several cost-accounting burdens. The limits come from the individual solicitation (clearances, citizenship of key staff, drone-component rules) and from U.S. export controls, which apply whatever the contract type; see our ITAR vs. EAR guide.

The 2025–2026 changes point the same way. CSOs now reach any commercial item and lead straight to production, and DIU says openly that it works with allied companies. The work is in reading each call carefully and arriving with a prototype a DoD office can test.