Insights From an Immersive Commercial Acquisition Program Fellow
Gain a deeper understanding of how the Defense Innovation Unit operates and the unique steps and flexibility that make it work well.
BY MAJOR SHAMIKA WOODRUFF, UNITED STATES AIR FORCE
Dozens of innovation organizations are working to bring technology solutions to the Department of Defense (DoD). The Defense Innovation Unit (DIU) is the only one that focuses on prototyping and scaling commercial technology by the military services and combatant commands (CCMDs).
DIU has assisted in delivering 52 commercial technologies to military programs since 2016. Those technologies are valued at more than $204.8 million in prototypes and $4.9 billion in revenue from contracts to bring prototypes into production.
DIU has cultivated a reputation as an acquisition pioneer — exercising other transaction (OT) authority and a unique commercial solutions opening (CSO) approach to develop and issue prototype agreements faster than using the traditional Federal Acquisition Regulation (FAR)-based process.
I have spent my career serving in the contracting field as an expert in operational contracting, space systems, and large-dollar service acquisitions. I am also one of the four contracting professionals selected for the inaugural cohort of DIU’s Immersive Commercial Acquisition Program (ICAP). I have been an ICAP fellow since October 2022.
As my time with DIU draws to a close, I wanted to share some insights from my recent exposure to OT agreements and commercial technology.
Former U.S. Secretary of Defense Ashton Carter founded DIU in 2015 to serve as a bridge between the Pentagon and Silicon Valley to source best-of-breed technology for the military. DIU partners with organizations across the DoD to rapidly prototype and field advanced commercial technology solutions.
DIU offices in Silicon Valley, Boston, Austin, Chicago, and the Pentagon connect DoD organizations with leading technology companies across the country. DIU focuses on artificial intelligence and machine learning, autonomy, cyber and telecommunications, energy, human systems, and space.
DIU has its own acquisition directorate, an in-house team of 10 acquisition professionals supporting the six technology focus areas. The acquisition team aims to move from solicitation to prototype contract award in 60 to 90 days; the traditional DoD contracting process often takes more than 18 months. Prototype projects typically run from 12 to 24 months using OT authority. Completed successful prototypes can transition to follow-on production as OT agreements or FAR-based contracts.
THE DIU WAY
Strategic partnerships are central to DIU’s operation. DIU leverages teams of technical professionals and former commercial executives to partner with the right organizations at the right time.
The defense engagement team (DET) connects with mission partners and conducts problem curation. DET members meet with representatives of the military services, CCMDs, and program executive offices (PEOs) to define operational challenges.
The DIU commercial marketplace dictates which dual-use technologies can solve curated problems. The commercial engagement team (CET) conducts market research and extensive outreach with nontraditional defense contractors.
This outreach informs companies of opportunities within the defense market and encourages vendors to apply to help solve DIU problem statements. All of this due diligence — identifying a need and surveying the market for viable technological solutions — sets the stage for the project decision board (PDB).
DIU is a flat organization. The path from problem curation and due diligence to execution is short. The last stop before project execution is the PDB, an internal group that meets monthly to assess projects that have gone through curation, due diligence, and market research.
The PDB — consisting of the DIU director, deputy director, all six program directors, and the acquisition chiefs — makes a go/no-go decision for the next stage in the pipeline, the CSO. The due diligence conducted prior to PDB weeds out projects that are not mature enough for execution or that won’t have impact across the department.
Some do not meet the definition of a prototype. Others involve technology that is already available and can be obtained through a FAR-based contract. Other projects don’t make the cut because the DoD is not ready to integrate the technology.
THE CSO PROCESS
DIU’s CSO is a competitive process used to award OTs for prototypes under 10 USC 4022 (see Figure 1).1 The statute also provides broad latitude to structure other transactions to suit the mission and goals of DIU.
The CSO process kicks off when DIU posts an area of interest (AoI). AoIs describe specific needs based on problem curation and provide high-level descriptions of the commercial solutions the government seeks. DIU invites companies to respond to AoIs with a five-page white paper (solution brief) or a 15-page slide deck describing how they intend to solve a problem statement.
At Phase 1 of the CSO process, DIU acquisition chiefs, program managers, agreements officers and DoD mission partners review the solution briefs, selecting only solutions that have technical merit, are innovative, and are relevant to solving the problem statement.
In Phase II, companies are invited to deliver oral pitches to the DIU program manager and acquisition team and representatives from the DoD partner. Phase II down-select decisions are based on the rough order of magnitude pricing of the prototype, the schedule, vendor data rights and/or licensing requirements, and the company’s viability.
In Phase III, the acquisition team issues requests for prototype proposals (RPPs) to the down-selectees. RPPs include DIU’s standard terms and conditions, which are modeled after industry standards and are in large part negotiable.
This is a distinct change from the experience of drafting and administering a FAR-based contract. Flexibility in negotiating terms and conditions removes barriers to partnership with new and different companies. Within the RPP period, vendors receive a statement of work; however, DIU invites industry partners to provide suggested edits for inclusion in contracts.
DIU also discusses payment milestones designed to reduce the risk of cash flow problems while performing on the agreement. The acquisition team meets with vendors before, during, and after the CSO process to dispel confusion and discuss concerns and the details of the terms and conditions. This hands-on approach ensures smooth project execution and allows nontraditional defense contractors to get comfortable working with the government.
Another notable feature of DIU’s CSO/OT process is that payment milestones, terms and conditions, intellectual property, and data rights all are negotiable. There is no requirement for an approved cost accounting system, and DIU agreements are not subject to protest under FAR Part 33. DIU does not use OT consortia, so information and competition are not limited only to members of one consortium.
Once a prototype has been completed, the work can go in one of two directions: 1) continued prototyping to refine the technology or 2) transition of the prototype to a production contract or agreement with a DoD partner.
The production contract can be FAR-based or non-FAR. Regardless of the contract type, the DIU acquisition team shares with the DoD mission partner all documents outlining the selection decision(s).
Although the DIU CSO process has been operating for seven years, the steps and the flexibility I observed are novel. As an ICAP fellow, I have been able to immerse myself in the DIU CSO process and gather useful insights:
1. To accelerate buy-in and adoption of any process or product, an organization must divide and conquer with messaging.
One of the things DIU does very well is manage its strategic engagements and form strategic partnerships. Representatives from the DET, CET, and acquisition directorate continuously participate in outreach events to curate DoD problems, drum up commercial participation, and dispel myths and misconceptions about OT authority, all in pursuit of accelerating commercial technology adoption within DoD. The team actively seeks — and takes very seriously — any opportunity to share information about DIU’s business model and the urgency of DoD technology modernization. In particular, the DIU acquisition directorate establishes formal and informal partnerships with outside organizations to increase adoption of commercial technology. DIU partners include the Defense Acquisition University (DAU), the General Services Administration, the Air Force PEO Digital, and the National Contract Management Association. At the time of this article, another partnership was in development with the Naval Facilities Engineering and Expeditionary Warfare Center.
2. We must remain flexible and strive to change the culture.
While learning the parameters in which we operate, contracting professionals also must seek business solutions that enhance our organizations’ missions. This requires critical thinking, confidence in our own research and analyses, and letting go of risk aversion. DIU has adopted and stretched familiar processes. Once you become aware of the guardrails, the roadmap is easy to pick up and understand.
3. Big problems are solved in small pieces.
Until OTs are more deeply ingrained in practice and regulation, the best way to infuse commercial technology into DoD will be to take advantage of processes honed by organizations that have had success with OT prototyping and production. Is every acquisition a candidate for an OT? No. But big problems often are solved in small pieces. As we curate and solve small problems, we can use the outcomes to incrementally increase effectiveness. While successes accumulate, our budgeting process can catch up to the acquisition process, expanding the space and resources for innovation to become common practice.
4. ICAP’s hands-on learning can be invaluable for contracting professionals and the DoD.
OT authority has been around for quite a while, but only recently have OT training discussions and use begun to proliferate. Not every contract specialist or contracting officer will need to use OTs. Those who are interested in pushing the contracting envelope will benefit from hands-on experience with OTs in ICAP’s on-the-job learning environment. Deterring rapidly evolving near-peer adversaries, means bringing leading-edge technology to the fight faster. OTs and DIU’s singular CSO approach are ways to accomplish that.
Innovation in the commercial marketplace has the power to accelerate DoD’s technological modernization. Innovation in acquisition is an equally potent force multiplier—without it, leap-ahead products won’t get into warfighters’ hands. The processes and tools contracting professionals need to make that happen already are in our toolkits if we think and act creatively. ICAP has helped me do that. It can do the same for you today if you are a defense acquisition team member, and soon, I hope, even if you work elsewhere in government. CM
Shamika Woodruff is the Deputy Division Chief at the Installation Contracting Division, Air Force Sustainment Center, Contracting Directorate, Hill AFB, Utah. She is responsible for a 102-person contracting team directing a $1.7 billion acquisition portfolio for Ogden Air Logistics Center, the 75th Air Base Wing, 388th Fighter Wing, 319th Fighter Wing and 52 tenant units. She served as an action officer for the Air Force Deputy Assistant Secretary (Contracting). She is a United States Air Force Academy graduate, holds master’s degrees in strategic sourcing from the Naval Postgraduate School and in business administration from Strayer University, and is Level III certified in Contracting and Level I certified in Program Management. She has been a member of the defense acquisition corps since 2005.
1 10 US Code § 4022 - Authority of the Department of Defense to carry out certain prototype projects allows the DoD to “carry out prototype projects that are directly relevant to enhancing the mission effectiveness of military personnel and the supporting platforms, systems, components, or materials proposed to be acquired or developed by the Department of Defense, or to the improvement of platforms, systems, components, or materials in use by the armed forces.” https://www.law.cornell.edu/uscode/text/10/4022