As Austin, TX is becoming more and more of a hotbed at the intersection between the military, the government, drones, robotics, and technology startups, we’ve been able to help our clients navigate between the commercial space and the government sector. You may have heard about Army Futures Command, DIU, AFWERX, SOFWERX, OTAs, 804s, 2371 Bravos, and the Defense Production Act, but what do each of these mean and what do startups and innovative companies need to know about how to interface with this potential opportunity?
1. The culture within the DOD procurement community is changing.
There is a need for expansion when it comes to procuring partnerships within the DOD. Rather than working with who they’ve always worked with, the DOD procurement community is looking beyond prime contractors and hotspots for business and over to new companies in an effort to be more efficient with their time. The traditional cycle everyone is accustomed to usually begins with the DARPA, and R&D, and S&T, and eventually leads to a requirement definition, which eventually leads to a program of record, then to procurement money, to operations and maintenance money, and selling and so on. The catch? This cycle is usually about 10 years long.
Within Austin, we’re starting to see the encouragement of new thought patterns and new ways of acquiring. Army Futures Command, is a great representation of a command, just like a forces or training command that has started to focus on the future by creating cross-functional teams to speak to new people who can bring new ideas to the table. Though the sentiment is good, it gets a bit lost in the middle, becoming somewhat like a situation you see at a middle school dance. Everyone wants to talk, but they don’t quite know which first steps to take in order to make it happen, so they just stand on the wall looking around instead.
Those working in the government are used to working with prime contractors within this 10-year cycle framework they have grown so accustomed to, while startups, on the other hand, aren’t familiar with the ways the government works and how to open up a dialogue. In downtown Austin, Army Futures Command is located within a shared space owned by Capital Factory. Both are making an effort to host events, startup weeks, panels – anything to get people together – so that they can get this new dialogue rolling. It’s still relatively new, so if you have a good idea and you want to talk with Army Futures Command, look them up, set a meeting to start a conversation.
2. You’re not visible.
Army Futures Command, AFWERX, and SOFWERX are all examples of ways that the DOD can express things they are interested in acquiring, either in the form of money or sponsorship, in order to solve a problem. However, this is where it gets tricky. The DOD can only express interest in things they know exist, and they plan in four to eight-year cycles based on things they think they might want in the future.
If you have technology that is a solution to a problem the DOD currently faces, but haven’t opened up a dialogue with them yet, they have no idea that it even exists, therefore they won’t come asking you for it.
The system for how the DOD gathers information on existing technologies is evolving. It used to be that the government would put out a request for information, maybe a market survey, for example, that would list problems and specific solutions they were seeking out. Companies would respond and say we think we can do this. Then, the government would use those responses to form the requirement and plan their four to eight-year acquisition cycles.
Now, we are starting to see more of a two-sided dialogue. Rather than waiting on the government to come to startups with problems asking for solutions, startups can approach the government with solutions that they didn’t even know existed and might be useful for problems not on the current radar. AFWERX, for example, has been great about solving these tactical problems by using this new line of communication with startups and crowdsourcing the Air Force. Rather than waiting on the Air Force to submit formal problems they face to the government, AFWERX has a direct dialogue with them to ask about the current problems they face, pitch ideas like a widget, for example, that can do X,Y,Z to reduce maintenance time. From there, they’re able to call on the startup community with a specific problem and get them to solve it, which is in many cases easier on the startups.
3. Understanding OTAs
OTAs are an acronym for Other Transactional Agreement, which basically means it’s a nontraditional way to handle contracting outside of the government’s traditional 10-year cycle of acquisition. One example of this type of agreement is the SRO Program.
The SRO program was created after the government gave $11 million in R&D money to solve a short-range reconnaissance problem. The money was originally split between six competitors, but there are only five remaining. The money was split in different ways to incentivize these competitors to develop the platoon drone for the Army. In order to do this, an OTA was used and structured in a way that allows the government to down select through this program with nontraditional defense contractors and award a contract between 10-20,000 units at the end of the program rather than having to inform a requirement and staff it all the way back through again.
This new process is especially beneficial for venture-backed startups that don’t have four or five years for real venture opportunities. This program allows these startups to design to a requirement instead of for a requirement, get a PO, get revenue, and start making units, resulting in a more efficient, faster result.
4. The government has realized it’s part of the problem.
Ultimately, the goal of the government is to make its procurement process faster. To do this, they had to come to terms with the fact that they are partially responsible for the slow pace at which these things move. By cutting out various staffing, same page, and alignment iterations, it makes more flexible technological startups and entrepreneurial assets more willing to do more to interact with them.
5. Glossary Terms.
804s
An 804 refers to the rules that govern OTAs and other types of non-traditional vehicles.
2371 Bravos
A 2371 Bravo is equivalent to a middle-tier acquisition. Simply put, it forces a large government contractor to sub or partner with smaller tech and entrepreneurial ventures as partners. Its rules allow for smaller business participation that would otherwise be absorbed by the larger prime contractors.
The Defense Production Act (DPA)
The Defense Production Act was passed in 1950. The law allowed the government to open up to the possibility of using new tools, acquisition vehicles, investment opportunities, or any other incentives are essential to our national offense or defense. In a more recent example, the government has deemed rare Earth metals and small drones as protected under the DPA and essential to our national offense. The purpose of the act is to give the Executive branch more tools to incentivize growth, capacity, capability, investments, or acquisitions.
What’s interesting about the DPA is that each time it’s deployed, the vehicle has been different, making it difficult to predict how the government plans to incentivize exactly. The key questions we should be asking are: where is the government going to decide to put its money? Is it going to companies? Is it going to actually buy? Will it put money via venture into companies? Is it going to put money into buying more things even though they might not use them all because it will incentivize people to invest in capacity?
Though we don’t know exactly how the DPA will be deployed yet, we expect to see it in the coming months, with respect to small drones.
Let’s connect.
Navigating the space between government contracts and startup communities can be overwhelming. At Guinn Partners, we have a holistic understanding of the space and use it to point you in the right direction. It’s a great time for innovation and defense to meet, and we would love to answer any questions you have along the way.
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