The policy based management is an emerging technology. Requirements exist for the global information grid (GIG) to use this technology, including in its space based component referred to as the transformational satellites (TSAT). There are serious difficulties and challenges in deploying the PBM technology in the GIG. In this paper we analyze these difficulties and challenges, and suggest possible solutions. 1 INTRODUCTION In this paper we will assume a general introductory knowledge about the policy based management (PBM) technology. The readers are referred to the published literature [1] [2] for an introduction. The global information grid (GIG) and its space base component, the transformational satellites (TSAT), are essential enablers for the Net Centric Operations and Warfare (NCOW). The GIG requires the capability for flexible and dynamic (re)allocation of resources with access control decisions made in a risk adaptable manner. The policy based management (PBM) technology uses digital policies to enable the above mentioned capabilities for the GIG. Digital policies include well-structured 'IF X THEN Y' type policy rules, where X is the policy condition and Y is the policy action. They are formulated using semantics that a computer can understand, evaluate, and arrive at a unique and unambiguous decision for taking policy action that is appropriate under the prevailing operational conditions. However, the deployment of the emerging PBM technology in the GIG and TSAT poses serious difficulties and challenges. These arise from three main sources: (1) the (mis)understanding about the PBM technology capabilities and usage; (2) the emerging nature of the technology itself; and (3) the needed systems engineering within the GIG to facilitate the deployment of PBM. In this paper we will analyze these difficulties and the ensuing challenges. Along the way we will suggest possible approaches to resolve the difficulties and meet the challenges. We will take a practical approach in our analysis, so that generality will be less emphasized relative to the practical needs within the GIG program. After a brief description of the digital policies in section 2, we discuss the PBM usage and deployment modes in section 3, the emerging nature of the PBM technology in section 4, and some needed systems engineering activities within the GIG in section 5. We summarize major recommendations in section 6, and present our conclusions in section 7. 2 DIGITAL POLICIES Policies are described in two very distinct ways. First there are policy documents that are issued from executives and administrators. These policy documents implicitly contain rules and procedures according to which the operations should be conducted. Second, there are computer interpretable statements that formally state the individual rules and procedures in such a way that a computer can evaluate them and arrive at unique and unambiguous decisions. In this paper we refer to such formal policy rule sets that computers can understand and evaluate, as the Digital Polic...