Tag Archives: OTA’s

Pentagon DIU Bringing New Commercial Partners Into The Fold And Expanding

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NATIONAL DEFENSE MAGAZINE

Armed with new contracting authorities and a mandate to help the U.S. military stay head of peer competitors, the Pentagon’s Defense Innovation Unit is bringing new commercial partners into the fold and expanding its technological focus.

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“DIU was launched in 2015 by then-Secretary of Defense Ash Carter to bridge the gap between the military and the nation’s tech hubs. It is headquartered in Mountain View, California, in Silicon Valley, with additional outposts in Austin, Texas, Boston and the Pentagon.

“More and more of what the department needs going into the future is dual-use technology, which means it’s equally or more important in the commercial space as it is for the military. So we’ve got to leverage what’s going on with the tremendous innovation hubs that we have around the country and make sure those companies … are thinking about the Department of Defense,” DIU Director Michael Brown said during a panel at the Reagan National Defense Forum in Simi Valley, California.

The organization has three core mission sets: accelerate commercial technology to the warfighter; boost the military’s capability and capacity by taking on transformative projects that can be scaled across platforms and across the services; and grow the national security innovation base.

Its offices in Austin, Boston and Silicon Valley are focused primarily on commercial outreach, while the one in Washington, D.C., engages with military partners such as service acquisition executives.

“We start with the DoD customer with a DoD problem,” Mike Madsen, DIU’s director of strategic engagement, explained in an interview. “Then we put that out to the tech sector and get the imaginative minds in the tech sector to help solve our problems.”

Over the past year or so, DIU’s hand has been strengthened by a number of initiatives, he noted.

A crucial one was Undersecretary of Defense for Acquisition and Sustainment Ellen Lord’s decision to give the organization new contracting authorities, including the ability to directly enter into other transaction authority agreements that are intended to cut through bureaucratic red tape associated with the Pentagon’s traditional acquisition procedures.

“She delegated that authority so that we could award our own OTA contracts, which is a pretty big deal to continue moving fast,” Madsen said.

OTA mechanisms favor nontraditional suppliers, he noted, “whether it’s a couple of folks in a garage in Minnesota or whether it’s a Fortune 100 company in Silicon Valley that just have never done business before with the department.”

The Defense Innovation Unit has awarded about 150 contracts to 122 nontraditional vendors. Of those, 66 are first-time suppliers to the military, Madsen said.

In the past, high-tech companies in the commercial sector “evaluated the $740 billion defense market and said, ‘No thanks. I don’t want a slice of that. … It’s too complex, it’s too hard,’” he said. “What we’ve represented is a lowering of those barriers to entry, making it easier for those leading-edge technology companies to get their technology to the men and women in uniform.”

Madsen said DIU understands the commercial sector’s faster business cycles.

“We want to move at commercial speeds … and look like a commercial entity to those tech companies” that are wary of doing business with government agencies, he noted.

With other transaction authority agreements, DIU can transition from a prototype contract right into a production contract as long as the prototype contract was awarded under competitive circumstances.

The organization has stood up a defense engagement team and a commercial engagement team. The defense engagement team reaches out to the services, combatant commands and other agencies to learn about their needs.

“Then we put that problem [statement] out to the commercial sector and work with them for proposals and look to award a prototype contract as quickly as we can,” Madsen said. The goal is to award a contract within 60 to 90 days, and then move through the prototyping phase and field new capabilities within 24 months.

Once a successful prototype is developed, DIU’s defense engagement team looks for ways to scale it across the department. An example is a recent effort to use artificial intelligence for predictive maintenance.

An AI prototype developed by a company called C3.ai is capable of reducing unscheduled maintenance for the Air Force by about 30 percent, “which is pretty significant for our mission-capable rates for aircraft,” Madsen said.

“We took that successful prototype to the Army and said, ‘Hey, this works on aircraft, what do you think about trying to prototype on wheeled vehicles?’” Madsen explained.

“We worked a prototype for the Bradley fighting vehicle. Now we’re engaged with the Navy to apply the same concept to not only the aircraft in the Navy, but also shipbuilding.”

The commercial engagement team’s charter, meanwhile, is to pave the way for high-tech firms to enter the defense ecosystem and transition their products into a program of record.

It also reaches out to venture capitalists to gain greater visibility into the marketplace.

“They’re effectively the gateway to hundreds, if not thousands, of companies,” Tom Foldesi, DIU’s director of commercial engagement, told National Defense. “For any particular solicitation when we’re looking for specific technologies, they are … able to point us in the right direction.

“The VCs are always a really valuable source because oftentimes they have line of sight to companies that we might not even know about. They might be in stealth mode, they might not have announced their [funding] rounds. So we can gain a lot of insight into what might be going on in the market that might not be public.”

Being co-located in the tech hubs offers advantages. DIU also has its eye on other tech centers such as Seattle and Pittsburgh, Foldesi noted. The organization has received proposals from companies based in 44 states.

“We cast a very wide net across the country,” he said.

DIU is uniquely capable of reaching out to the commercial sector and venture capitalists on short notice, putting firms on contract and helping to scale solutions across the Defense Department, officials say.

“This is very important because most of the companies are [otherwise] pulled into a labyrinthine system within the Pentagon, and it’s really demotivating,” Foldesi said.

The often-cumbersome nature of the traditional defense acquisition system is one of the reasons why a lot of companies have opted not to do business with the U.S. military. But

DIU posts it solicitations directly on its website, with the aim of moving fast on all of its projects.

“There’s money on the table,” Foldesi said. “Someone will be awarded a contract within a few short weeks or months. And then there’s the opportunity to transition that prototype contract to a program of record.”

Over the past year, DIU has improved its decision-making process for taking on new projects, Madsen noted.

“We’ve really focused on building out that concept of transition much earlier in the process so we know what that transition from prototype to production to fielding that technology to the men and women in uniform really looks like before we’re even down the prototyping path,” he said.

The Defense Innovation Unit also helps companies navigate security and compliance issues.

“Part of the benefit of working with DIU is you have a trusted advisor and partner being able to help you manage through those … potential challenges, which can be quite significant for a company that isn’t used to doing business with the DoD,” Foldesi said.

Meanwhile, the U.S. military is trying to stay ahead of advanced adversaries such as China and Russia.

“In this great era of great competition, we think the tech race is the most important one,” Madsen said.

DIU’s top five technology focus areas are artificial intelligence/machine learning, autonomy, human systems, space and cybersecurity.

“Those are the areas that we see undergoing the greatest rate of change in the commercial sector. We think they also best represent the defense mission set,” Madsen said. “But we’re not just sitting back static on those.”

DIU is now broadening its aperture and eyeing other capabilities.

Foldesi and his team are talking to venture capitalists to get a better sense of the business sectors with emerging technology that might be of interest to the military.

“We’re looking at things like power and energy right now,” including lighter and longer-lasting batteries with faster recharge, Madsen said. Advanced materials, additive manufacturing, communications technology such as 5G, and virtual reality and augmented reality capabilities are other areas of interest.

Another new initiative being pursued by DIU is known as National Security Innovation Capital, or NSIC.

About 92 percent of U.S. venture capital funding currently goes toward software, resulting in an underinvestment in dual-use hardware. As a result, early-stage hardware development companies are in such need of capital that they might turn to foreign investors that will exert influence over their intellectual property, Madsen warned.

“The concern … from our perspective is once that happens, now that technology is probably unavailable to the department,” he said.

A key objective of NSIC is to pump money into critical hardware ventures so that they don’t have to look overseas for funding and endanger the supply chain.

DIU is also overseeing the National Security Innovation Network, or NSIN, which includes universities that aid the Defense Department. The network is growing and developing relationships with nontraditional partners in academia that are not typically involved in generating technology for the military, Madsen noted.

Pentagon efforts to engage with the commercial tech sector have not always gone smoothly. For example, in 2018 Google pulled out of Project Maven — an Air Force machine learning initiative focused on sifting through drone imagery — after employees protested the company’s involvement in aiding warfighting.

However, that case is not representative of the commercial tech sector writ large, DIU officials say.

“In fact, we see the opposite,” Foldesi said.

Madsen noted that a recent solicitation for AI technology generated responses from 50 companies. “To me, that indicates that folks definitely want to work with us.”

Foldesi said overcoming wariness of the Pentagon procurement process is the greater challenge.

“This is why our mission is so critical,” he said. “If we’re successfully able to demystify and de-risk doing business with the Pentagon, people will have perceived us having opened up arguably the single biggest [potential] customer” for some of these new technologies.

As DIU reduces some of the barriers to entry into the defense market, venture capitalists are taking notice, he said.

“You’re seeing a lot more of the top VC firms in the world start to put a little bit more money into defense[-related] startups,” he said. “This is just the start of a trend that we expect to accelerate as it becomes smoother and easier to field your technology within the Pentagon.”

The Defense Innovation Unit’s resources are growing. Its budget increased by about 60 percent between fiscal years 2019 and 2020, Madsen noted.
Brown said the organization has started 60 projects and completed 30, delivering about a dozen new capabilities to the military using cutting edge commercial technology. Total contract values exceed $500 million so far.

Companies doing business through DIU have, in turn, been able to raise more venture capital, he noted.

“For every dollar we provide in a prototype contract, on average, $10 of equity capital is raised,” he said. “We just need more volume in this to get the flywheel effect going.”

https://www.nationaldefensemagazine.org/articles/2020/2/11/defense-innovation-unit-shifts-into-higher-gear

Pentagon “Other Transaction Agreements” (OTA’s) Exploding In Popularity

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Image: You Tube
https://youtu.be/ynxQcjjyQK8?t=37

NATIONAL DEFENSE MAGAZINE

The agreements are a contracting mechanism intended to cut through bureaucratic red tape associated with the Pentagon’s standard acquisition practices, and help the department tap into innovation from nontraditional suppliers.

The number of OTAs awarded annually from fiscal years 2012 through 2015 hovered around 50, then shot up to a high of 298 in 2018. The average value of each contract increased from $2.4 million to $4.1 million

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“The Defense Department is ramping up spending on other transaction authority agreements, according to a recent report by big data analytics firm Govini.

The 2016 National Defense Authorization Act expanded their application. OTAs are now available for basic, applied and advanced research projects and for prototype projects and follow-on production, noted the Govini report titled, “Evaluating the Innovative Potential of Other Transaction Authority Investments.”

“To ensure U.S. military advantage, it is imperative for DoD to partner with businesses and academia to incorporate innovative technological advancements into military capability,” the study said. “DoD is increasingly using OTAs to leverage commercial technology for research and prototyping.”

Following the change in the NDAA, obligation totals grew by 122 percent, eventually reaching a total of $3.4 billion in fiscal year 2018, according to the report.

Last year, the Army led the way with about $2.5 billion in OTA contract obligations and more than 220 agreements. The Air Force was the next biggest user, followed by the Defense Advanced Research Projects Agency, other defense-wide organizations and the Department of the Navy, according to Govini.

Consortia are major players in this area, the report noted.

“A potential strength of OTAs is the ability for agreements to be entered into with a consortium, which is an organized group typically made up of contractors, nonprofit organizations and academic institutions,” it said. “Consortia allow members to collaborate on specific technology areas and offer the government a pool of stakeholders to help develop new technologies or processes.”

In 2018, about 20 percent of the companies that were part of OTA agreements were affiliated with consortia. Obligations to vendors associated with consortia reached a peak of $1.1 billion in 2017, according to the report.

“The increased use of OTAs … is an example of how DoD was more regularly leveraging commercial technology for prototyping and experimentation,” the study said. “Given that the commercial sector is the driving force generating innovation in a number of key technologies, this is a critical step for DoD to take to effectively compete with great power competitors.”

https://www.nationaldefensemagazine.org/articles/2019/7/9/ota-agreements–exploding-in-popularity

GSA Begins Pilot OTA-like Streamlined Process

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FEDSCOOP

The General Services Administration announced its client support center for acquisitions will use a streamlined process, designed to attract startups, to procure innovative, commercial solutions.

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“As part of a pilot, GSA’s FEDSIM innovation team will rely on the commercial solutions opening (CSO), a solicitation outside the Federal Acquisition Regulation, to acquire technologies and services in the production phase or adapted from existing products from “traditional and non-traditional government contractors.”

“The goal of this pilot program is to provide a streamlined approach for acquiring innovative commercial products and services,” GSA says.

CSO is a recently created tool with simplified contract terms, which Section 880 of the National Defense Authorization Act for fiscal 2017 authorized GSA to create the pilot. It’s similar to the Other Transaction Authority of defense agencies but differs in that it’s not legally binding, GSA says.

FEDSIM will post solicitations from client agencies for specific projects of technical areas of interest as they open.

New technologies, processes, methods, applications, and adaptations at the time a proposal is submitted will be considered.

The CSO process consists of submission of a written solution brief, an oral presentation if applicable, and a request for proposal.

Currently, FEDSIM is accepting briefs for three Defense DepartmentCSO solicitations: AFWERX Hub, Marine Maker and the Joint Artificial Intelligence Center Humanitarian Assistance and Disaster Relief DAMAGE.

The Defense Innovation Unit also uses CSOs to speed up vendor selection for innovative needs.”

Pentagon Takes Big Step to Clarify Other Transaction Authority Rules

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“NATIONAL DEFENSE MAGAZINE”

“Senior Pentagon leaders have been calling for increased innovation, speed and affordability in defense systems acquisition for some time. Occasionally they invoke other transaction authorities (OTAs) to accomplish those ends.

Now the Pentagon has added substance to rhetoric by issuing a new “Other Transactions Guide.” This follows the promulgation on Nov. 20, of two policy memoranda on their definitions and requirements and, the authority to use prototype OTAs.”

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“The new guide rescinds the previous guide of January 2017 which was seriously flawed. The new guide addresses both research OTAs (10 U.S.C. 2371) and prototype OTAs (10 U.S.C. 2371b) erasing an artificial division or stovepipes between the closely related authorities.

The ability to transition seamlessly from prototype to follow-on production means OTAs can be used as the basis for a complete alternative to procurement under the Federal Acquisition Regulation for systems development and fielding. They have also been used in the sustainment and upgrade of legacy systems.

The guide is organized in a clear and user-friendly manner. Highlights include case studies and a glossary with useful definitions. It makes plain OTAs are not just about reaching out to nontraditional contractors — as important as that might be. Traditional defense contractors can participate in prototype OTAs via a senior procurement executive determination, by teaming with nontraditional contractors or in other ways.

The new guide also clarifies some other key points.

There are a variety of pathways to use prototype OTAs — they are neither inherently subject to or inherently exempt from major defense acquisition system rules (DODI 5000.02). They may be executed as middle tier Section 804 acquisitions or in other ways.

The guide stresses the need for a cross functional government team to execute the agreements. Agreements officers need to be well qualified but need not be warranted FAR contracting officers.

The guide does not limit OTAs to a technical definition of “acquisition.” Projects have been structured with no government funding, for example. Research agreements are not limited to the technical definition of “assistance.” The arcane Technology Investment Agreement regulation (32 C.F.R. Pt. 37) receives only passing reference in the guide.

The initiation of an OTA project does not start with a determination of agency needs and requirements description as in FAR 2.101. Rather parsing the problem to be solved and communicating the problem to industry while leaving trade space for a variety of solutions is the preferred approach in such agreements.

Funding for OTAs is not restricted to research, development, test and evaluation appropriations. The decision of what funds are appropriate for a project is independent of award instrument.
The one mandatory proviso in the guide requires notice of the potential for follow-on production to be stated in any solicitation or agreement for a prototype project.

There is no single method for publicizing OTAs. Methods that reach potential performers with relevant technologies and capabilities need to be part of a thoughtful outreach strategy.

Payments can be structured as fixed amounts based on accomplishment of observable technical or programmatic milestones.

One of the case studies addresses the U.S. Transportation Command project that resulted in the Oracle America protest. The guide’s requirement for notice of follow-on production addresses the Government Accountability Office’s criticism of the Army contracting office approach in that case. However, the Defense Department’s definitions and requirements policy memorandum issued Nov. 20 clearly rejects GAO’s narrow and skewed definition of when a project is “successfully completed.”

Successful completion occurs when key technical goals of a project are met, success metrics in an agreement are satisfied, or a particularly favorable or unexpected result justifies transition to production. This is also reflected in the guide’s glossary.

Another case study relates to Global Hawk, an unmanned reconnaissance platform developed as an OTA and Advanced Concept Technology Demonstration. The prototype project was highly successful both in terms of achieving technical goals, speed of development and affordability. However, the “rest of the story” is less sanguine. Once transitioned to the traditional acquisition system requirements creep set in and the focus on affordability was lost. Global Hawk is a cautionary tale that starting a project as an OTA does not immunize it from the “costs too much, takes too long” syndrome of business as usual if transitioned to the traditional system.”The issuance of the new guide and policy memoranda constitute substantive steps in the Defense Department’s embrace of OTAs. However, much remains to be done. The department has failed to heed the call of Congress in section 867 of the National Defense Authorization Act of 2018 to create a preference for using OTAs as well as procurement for experimental purposes (10 U.S.C. 2373).

More critical is its failure to fully comply with subsection (g) of section 2371 mandating it to “ensure management, technical, and contracting personnel involved in” OTAs are “afforded opportunities for adequate education and training” including “continuous and experiential learning…”

The new guide is a big step in the right direction. When armed with proper education and training the defense acquisition work force now has the guidance to use OTAs more effectively. Thinking about problems, potential solutions and win/win scenarios is permitted and encouraged by this guide.”

http://www.nationaldefensemagazine.org/articles/2018/12/7/viewpoint-pentagon-takes-big-step-to-clarify-other-transaction-authority-rules