Commercial Competition

Enable Commercial Solutions to Compete With Current Acquisition Programs

Imagine if a dozen acquisition programs pivoted from a long development and production schedules to a commercial solution that can deliver capabilities today.

Even better, what if that commercial solution:

• Offered comparable capabilities for 25-50% lower cost (over the lifecycle).

• For the same cost, the DoD got 5-10X the capability.

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Let’s start with a few first principles.

1. The DoD needs to deliver more capabilities to operations faster.

2. Buy Before Build is the law - Requiring a preference for commercial solutions, yet the DoD widely dismisses it to pursue defense unique solutions.

3. Non-traditional defense contractor offerings are treated as commercial products and services - and are bringing novel approaches to defense problems.

4. Competition generally increases innovation and quality; and decreases costs.

Statutes and regulations governing commercial procurement include the following:

• Commercial products, services, and COTS are defined in FAR 2.1.

• 10 USC 3453 covers Preference for Commercial Products and Services

• 10 USC 3456 covers DoD Determinations of Commercial Product and Services

• 10 USC 3014 covers Nontraditional Defense Contractors

• FAR Part 12 covers Acquisition of Commercial Products and Services

  • DFARS Part 212 covers the same for DoD to include supplies and services from nontraditional defense contractors as commercial products or services. This is per 10 USC 3456 above.

  • DFARS Part 239 covers Acquisition of IT (which is heavily commercial)

Proposed Approach

DoD issues a notice to industry seeking to identify commercial solutions that could replace any existing acquisition program cheaper or faster than the current efforts or offers performance advantages at a comparable cost and schedule.

This notice can be a CSO, BAA, RFI, or other process and is merely the first step for DoD to understand what commercial alternatives exist. Commercial solutions are not required to replace the entire acquisition program currently in the design or development phases but must be able to address a significant portion of the program’s scope of work and large enough to warrant considering switching. This could be done with significant promotion in the media, at conferences, and leadership discussions.

This could span the capability spectrum from digital technologies to more substantial physical systems. This approach would not work well for replacing the capability of an aircraft carrier or high-end bomber but could be used to identify complementary capabilities to major systems.

This could be conducted using a 5-step process, not dissimilar to DIU’s Solution Brief approach today.

1. Request for Initial Responses

2. Viability Assessment

3. Proposal Request / Demonstration Event

4. Acquisition Decision

5. Contract Action(s)

Step 1: Request for Initial Responses

A Program Executive Office would request 1-5 page industry responses summarizing their commercial solution in response to a set of mission threads, problem statement or summarized requirements that represented the core goals of the ongoing program.

Initial responses would include details on how the product or service could satisfy some or all of the government needs (as stated in the notice), past customers and a ROM based on existing commercial pricing tables. If modifications are needed to the product, vendors could provide schedule estimates for addressing those features.

Responses would be limited to eligible, U.S. based companies.

Step 2: Viability Assessment

Acquisition executives would assign the relevant program office (PMO) to review all responses. Clearly non-viable proposals may be documented with a few sentences. Reasons for non-viability may include, but not limited to immature technology, company financials, unable to meet government needs, insufficient cost or schedule savings to warrant switching, security, and/or integration factors.

The PMO should be cautious in not eliminating vendors merely because their approaches do not conform to normal DoD solutions. There should be good faith efforts to identify a pathway that a commercial product or service could be employed to meet a government need. For instance, not every commercial product will have been deployed on a government network but if it’s being used in sensitive commercial applications, then it should be assumed that the vendor can support the process for obtaining an ATO.

PEOs (or SAE offices) should inform companies who submitted responses in a timely manner of their decisions. As this does not commit the government to any action or contract, the decision cannot be protested. If the PMO didn’t believe it was a viable option, it would ideally (but not required) provide feedback as to why.

Step 3: Proposal Request / Demonstration Event

For responses that have merit, the PMO will request additional details to support more in-depth analysis and possible award. This may include additional technical details on how the product or service is employed or information on testing under various conditions. It may also include financial details regarding how the pricing works under different scenarios.

The PMO should be encouraged to conduct follow-on engagements with the company to refine how their proposal could be executed and allow for updates until a viable path forward is determined. The PMO should also reach out to past customers to obtain feedback where possible.

Whenever possible, the PMO should try to conduct a demonstration under as real-world conditions as is reasonable or feasible. The vendor may be willing to lease their capability to the government for some period to help inform an acquisition decision. This would provide the PMO with important information related to test-type results and user assessments.

This level of engagement should only be done with companies that have real promise as it will undoubtedly raise expectations and failure to see the evaluation through to completion could serve the unintended consequence of further discouraging involvement with DoD.

Step 4: Acquisition Decision

Within a reasonable period of time (depending on the complexity of the system), the PMO should present their results to the acquisition decision authority for a decision on one of three options:

1. Proceeding as planned (current program is still best option)

2. Pivoting to the commercial alternative.

3. Partial pivot.

A partial pivot could include scaling back a portion of an ongoing program or potentially directing a source to the current prime to ensure integration of a commercial solution that has significant value for the government but may not be suitable as an end-to-end replacement.

Even if the decision is to proceed as planned, this exploration of commercial solutions will serve to increase the pressure on incumbents to perform. It may also identify new subcontractors that offer better and/or cheaper products or services or that address supply chain risks (second sourcing). PEO should consider conducting these types of assessments on a regular basis particularly for programs that are experiencing issues.

With a proceed decision, the PMO or PEO could still procure a few commercial products or services for experimentation purposes or explore a no-cost Cooperative Research and Development Agreement with the company to enable ongoing parallel collaboration in specific areas or to support a longer-term assessment.

To support a final assessment, SAEs and PEOs should be encouraged to conduct an independent review. This could include oversight official(s) and/or experts outside the organization. SAEs could establish criteria whereby programs with the highest number of proposals and programs with the highest potential cost savings require an independent review.

Step 5: Contract Action(s)

If the decision is to proceed, then the only contract action may to be procure a few items or process a CRADA. If however, the decision is to pivot to a commercial solution, then there will be a series of follow-on actions required:

• Finalize contract scope with commercial vendor (support commercial terms).

• Agree on pricing with commercial vendor (based on commercial pricing tables).

• Conduct a partial/full termination of existing requirement or allow active CLINs to be fully executed and decide not to award option follow-on CLINs.

Report

PMOs should compile an abbreviated report for the record that succinctly documents the evaluation and decision. This should be shared with other PEOs and program offices to promote awareness of the capability and support monitoring the progress of promising commercial solutions (since they usually evolve over time if the company remains in business).

SAEs and PEOs should consider providing summary-level details of the evaluations to appropriate industry groups (if the company agrees) to demonstrate the willingness of DoD to entertain more commercial offerings to existing efforts. This could serve to entice more new entrants into the defense industry given that many may be deterred by the existence of long-term programs where there is no entry point. It could also encourage private investment into particular tech areas given the demand signal from senior government officials.

Here’s the interesting part…

A longtime acquisition expert and friend of the Substack pointed us to 10 USC 4062 - Defense Acquisition Challenge Program established in 2006. An excerpt is:

USD(R&E) shall carry out a program to provide opportunities for the increased introduction of innovative and cost-saving technology in acquisition programs of the DoD.

The Defense Acquisition Challenge Program, shall provide any person or activity within or outside the DoD with the opportunity to propose alternatives, to be known as challenge proposals, at the component, subsystem, system, or system-of-systems level of an existing DoD acquisition program, or to address any broader functional challenge to DoD missions that may not fall within an acquisition program, that would result in improvements in performance, affordability, manufacturability, or operational capability of that acquisition program or function.

The USD shall establish one or more panels of highly qualified scientists and engineers to provide preliminary evaluations of challenge proposals.

The USD shall establish procedures pursuant to which appropriate officials of the DoD may identify proposals submitted through the unsolicited proposal process as challenge proposals. The procedures shall provide for the expeditious referral of such proposals to a Panel for preliminary evaluation under this subsection.

The USD shall issue on an annual basis not less than one such BAA inviting interested parties to submit challenge proposals. Such announcements may also identify particular technology areas and acquisition programs or functions that will be given priority in the evaluation of challenge proposals.

The use of general solicitation competitive procedures established under subsection (c) shall be considered to be the use of competitive procedures for purposes of 10 USC 3201 through 3205. [This means this competition qualifies as full and open competition per CICA.]

We think this statute could be tailored to support our proposal. We would like to see it adopted beyond USD(R&E) to the program offices across DoD. We would also like to see this limited to commercial solutions as that is the untapped source of innovation … and we think it appropriate to highlight cost saving potential so would expand the evaluation team beyond just scientists and engineers.

What are your thoughts on the viability of this approach and ideas to improve it?