In the biggest boost yet for commercial investment in outer space, the U.S. government awarded two companies contracts valued at up to $3.5 billion to ship cargo to the International Space Station.

The contracts were awarded to a team led by Orbital Sciences Corp. and to closely held Hawthorne start-up Space Exploration Technologies Corp. (SpaceX), founded by Internet entreprenuer Elon Musk. The contractors will operate their rockets starting in late 2010.

The first-of-its-kind decision by the National Aeronautics and Space Administration is a prelude to what could blossom into a major commercial-cargo business in the heavens through the middle of the next decade. But it also could be the ultimate risk in government outsourcing.

Instead of operating as a traditional NASA-run program — in which the agency determines what will be built, pays for it and then operates the systems — Tuesday’s decision calls for the contractors to develop and largely pay for a new generation of rockets and cargo modules to service the space station. The bulk of the money, payable over eight years, won’t begin to flow until the companies meet design and performance milestones.

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