I think a private company of any size should be able to offer its products on whatever terms they choose. If the military doesn't like those terms, they're free to do business elsewhere.

You mean like pharmaceutical companies refusing to supply chemicals for lethal injection?

There are already several private companies that have this, eg. Apple has specific exemptions from tariffs on smartphones, computers, and semiconductors that they got by paying off Trump and promising to make their iPhone glass in Kentucky:

https://thedailyeconomy.org/article/tariff-exemptions-are-bi...

https://www.warren.senate.gov/wp-content/uploads/media/doc/l...

The correct mental model for the U.S. federal government right now is not an omnipotent democratic overseer for economic activity, but rather as just one firm that negotiates directly with other major firms for legitimization and legal protection. Their power is likely to decline further, as is the value of "legitimization", as technological developments erode the military's monopoly on physical force. Interesting times ahead - historically tech transitions like this lead to a splintering of state legitimacy and then a reorganization under new forms of governance.

Somebody clearly has to

Its not dictating policy. Any company of any size should be able to set any contract they want with the government or any other party.