One of the many lessons from the wars in Iran and Ukraine is that the supply of munitions and weapons systems is finite, and difficult to replenish. That has led to a new way of doing business at the Pentagon, and a new battleground in the war between the states for jobs and economic development. "We're seeing a lot of growth coming out of the Department of War, new programs, new startups, really the SpaceX-ification, if you will, of the Pentagon," said consultant Tom Stringer of Stringer Site Selection and Incentives in New York.

In fact, three alumni of Elon Musk's space technology and AI company are behind a prime example of the new model. Castelion, a three-year-old startup based in Torrance, California, is trying to apply SpaceX's business model to hypersonic missiles. "This is going to be one of the most important capabilities in the American arsenal," said co-founder and CEO Bryon Hargis on CNBC's Squawk Box in January.

Hargis, a physicist by training, previously led SpaceX's national security product development. The U.S. military is well-versed in hypersonic missile technology.

The trick, under the Pentagon's new approach, is being able to develop the new missiles quickly, produce them at scale, and deliver a lot of them to the battlefield. The traditional defense procurement model — at least in recent years — offered little incentive for contractors to do that. Instead, under so-called "cost-plus" contracts, they could simply bill the government for their costs — including farming out work to subcontractors — then tack on a pre-determined fee.

By contrast, Castelion, which has agreements to deliver at least 500 missiles per year and potentially thousands more, is raising private capital instead of government appropriations — more than $550 million to date — to fund a massive, vertically integrated manufacturing operation. Castelion has contracts with multiple service branches to deliver its first weapons system, dubbed Blackbeard. But rather than cost-plus contracts, Castelion is operating under so-called "firm-fixed-price contracts" — the government pays the same price regardless of Castelion's costs.

That shifts the cost risks to the contractor from the government. That is a game changer, said Castelion co-founder and chief operating officer Sean Pitt, a former SpaceX director of commercial sales who previously served as an aide to Sen. Dick Durbin, D-Illinois, a member of the Defense Appropriations Subcommittee.

"We're really applying standard commercial manufacturing strategies to a space that hasn't had them applied to it for many decades," he said. "It is not acceptable to come up with a design that we can only produce a couple dozen of. Instead, manufacturability in the thousands at a cost per missile that is measured in hundreds of thousands of dollars was our guiding light from the beginning, and that's what we're executing against today." That is where the economic development opportunities — and challenges — come in.

How 'SpaceX of hypersonic missiles' landed in New Mexico Delivering on Castelion's vision, and doing so profitably, would require a huge manufacturing facility, built fast.