Defense Dominates Experiment in Streamlined Bidding for Innovation

Civilian agencies are missing an opportunity.

Streamlined solicitations for innovative commercial products and services, known as commercial solutions openings are beginning to take off in the Defense Department. Even the General Services Administration’s CSO service, which is open to all agencies for a fee, so far has been dominated by Defense users.

CSOs aren’t as well known or broadly used as their procurement-innovation cousin, other transaction authority, which gives agencies the ability to strike contracts outside the Federal Acquisition Regulation for research, prototypes and production to obtain technology from nontraditional defense contractors. Eleven agencies including Defense have OT authority.

GSA’s CSO holds the potential to bring civilian agencies, most of which don’t have OT authority, the ability to reach out to and select suppliers unencumbered by the Federal Acquisition Regulation. So far, civilian agencies haven’t been biting, but Pentagon organizations are, even though they have their own CSO provider.

The very first GSA CSO customer was none other than the Defense Innovation Unit, a once-experimental buying organization that invented CSOs. Originally designed to lure emerging companies to work for the Pentagon by easing the pain of federal procurement processes, the Defense Innovation Unit Experimental, or DIUx, lost the X last summer, when it was designated a permanent outpost for testing defense buying boundaries.

The Defense Innovation Unit uses CSOs for all of its deals on behalf of department programs in order to strike OT agreements to buy technology prototypes to improve military mission effectiveness. Lacking OT authority, GSA uses CSOs on its own or others’ behalf to ease the way for FAR-based contracts for new commercial items, new adaptations of existing commercial products or items in the “production/commercialization phase but not yet in broad use in government.”

In the 2017 National Defense Authorization Act, legislators created a pilot program allowing the Defense and Homeland Security departments and GSA to test CSOs through 2022. GSA and Homeland Security CSO contracts are limited to $10 million, while the Pentagon’s limit is $100 million.

The OT agreements the Defense Innovation Unit strikes for its customers permit a direct, sole-source award of a follow-on full-production contract to a successful prototype award winner. But even prototypes not slated immediately for follow-on production have utility. So DIU is creating an e-commerce portal for those not immediately picked up. To find a portal-builder, in 2018, DIU became GSA’s first CSO customer and engaged Apttus, maker of business-to-business e-commerce portals.

The Air Force edged out DIU in taking a GSA CSO all the way to award. Thus was born the Air Force Accelerator Powered by Techstars, which opened in January 2018. The accelerator, based in Boston, focuses on early-stage startups making technology with both commercial and government applications. Examples include anti-collision radar for drones from OmniPreSense and anti-counterfeiting laser-activated ink to secure aviation parts from SecureMarking, both among the 10 companies in the first accelerator class.

Original accelerator sponsor AFWERX, an Air Force technology incubator, has been joined by BAE Systems FAST Labs, the Air Force Research Laboratory, Air Education and Training Command and the MD5 Defense technology accelerator in supporting the 2019 class of 10 startups, including one that makes drones that can be thrown and bounce off floors and walls, and another that identifies and reports hostile drone swarms.

In January, AFWERX teamed with ARFL and Space and Missile Systems Center on another CSO for a development and operations platform, where the Joint Force Space Command operations center can develop software, integrate data, perform machine learning activities and more.

Meanwhile, other Defense programs also are striking out on their own in using CSO authority.

This March 29 through April 11, Space and Naval Warfare Systems will conduct the 21st Century Combined Arms Advanced Naval Technology Exercise (ANTX) West. Sailors and Marines will help test more than 96 technology prototypes in information warfare, strike capability, and counter intelligence, surveillance, reconnaissance and targeting. The ANTX will constitute the live demonstration of solutions solicited under a CSO issued in August.

A second ANTX, is slated for April to test technologies for command and control, force protection, tactical diction within littorals, operational distribution to the littoral, cross-domain mobility, signature management and deception, logistical support, and medical applications. The two exercises are part of the Fight the Naval Force Forward campaign exploring amphibious and sea multi-domain operations combining cyber, space and electromagnetic spectrum operations on land and at sea.

Renovating After Protest Loss

In November, the Defense Innovation Unit issued its second overarching five-year CSO, setting revised procedures for soliciting solutions in an array of areas of interest, including autonomy, artificial intelligence, human systems, information technology and space.

DIU altered the new CSO to prominently address concerns raised by an adverse May 2018 Government Accountability Office bid protest ruling on a DIU-run CSO-OTA. GAO ruled against the Army on an Oracle America protest of a nearly $1 billion OT production agreement for cloud migration and operation services. GAO found that the service failed to apprise bidders on the original CSO solicitation that the winner could receive a sole source, noncompetitive follow-on production award. GAO also ruled that the production work was awarded before the initial prototype had been judged to be successful.

DIU’s new CSO has a section spelling out follow-on production notice requirements—CSO areas of interest and prototype OT agreements will explicitly identify that a follow-on production award is a potential outcome of successful prototyping.

Another section defines what successful prototype completion looks like—the project met the technical requirements, satisfied success metrics in the OT agreement, or had a “particularly favorable or unexpected result that justifies the transition to production.” Successful completion can occur prior to the conclusion of a prototype project so any aspect with utility can move into production even as other aspects remain to be finished.

The new CSO also amps up the section on in-person or virtual solution pitches that may follow five-page or 15-slide solution briefs. Solution briefs and pitches will be evaluated for technical merit and uniqueness and innovation against the area of interest they address, as well as viability, both of the company and its proposal.

The Defense Innovation Unit’s CSO renovations aren’t directly  applicable to GSA’s version because DIU has OT authority and GSA doesn’t, said Chris Hamm, director of the Federal Systems Integration Management Center, which runs the program for GSA. Nonetheless, GSA can provide extra contracting expertise DOD organizations need. Hamm points out that freedom from FAR-imposed terms and conditions can make CSOs more difficult to conduct than standard solicitations and awards because there is so much more open to negotiation.

Anne Laurent, former executive editor of Government Executive magazine, runs The Agile Mind Thought Leadership Consulting and The Acquisition Innovators Hub, a procurement innovation intelligence collector.