Commercial Solutions Opening (CSO) and Other Transaction
When Secretary of Defense Ash Carter started the
Defense Innovation Unit Experimental (DIUx) in August 2015 in a bid to re-establish DOD's once robust ties to the technology innovation of Silicon
Valley, DIUx needed to find a way to move "at the speed of business."
Silicon Valley considered the Department of Defense a bad customer, if
it considered DOD at all. The federal government's normal contracting process,
guided by the Federal Acquisition Regulation (FAR), could take six months to a
year (and in some cases considerably longer).
Silicon Valley's tech companies
expect to move from proposal to contract in a couple of months, if not weeks.
When Carter announced a refocused DIUx 2.0 in May 2017 under its new
managing partner, U.S. Air Force fighter pilot-turned-entrepreneur Raj Shah, he
also announced that he had requested $30 million to direct toward nontraditional
companies with technologies--already commercially available or soon to be
released--that could be used to meet military needs.
(Carter has since opened
a DIUx office in Boston and a presence in Austin, Texas.)
DIUX, ACC-NEW JERSEY DEVELOP CSO
Seeking ways to get DOD up
to Silicon Valley's "speed of business," DIUx, with help from the
U.S. Army Contracting
Command -- New Jersey (ACC-NJ), came up with the
Commercial Solutions Opening (CSO). Under the authority of
10 U.S.C. 2371b,
DIUx is interested in awarding funding agreements (agreements) to
nontraditional and traditional defense contractors 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 improvement of platforms, systems, components, or materials in use by
the armed forces. The information provided in this Commercial Solutions
Opening (CSO) is intended to ensure that to the maximum extent practicable,
competitive procedures are used when entering into agreements to carry out
these prototype projects.
In contracting talk, a CSO is a solicitation instrument allowing
for the award of
other transaction agreements (OTAs)
that DIUx has used to award $36 million in contracts so far.
Using a CSO,
the time from when a Silicon Valley entrepreneur with a promising company or
technology first responds to a DIUx proposal to when a contract is signed
has averaged 59 days, said Lauren Schmidt in an October interview with
Army AL&T. Schmidt is pathways director for DIUx and a former special assistant
to the principal deputy assistant secretary of the Army for acquisition,
logistics and technology.
The fastest contact-to-contract was 31 days,
National Defense Authorization Act for Fiscal Year 2017, signed in
November 2015 by President Obama, encouraged broader, more effective use of
other transaction agreements (OTAs). In late November 2017, DIUx released a guide on CSOs and OTAs to
enable other federal government organizations to set up their own innovative
"Our goal from DIUx is that more organizations in DOD can use this
type of authority and design particular processes that meet their particular
needs," Schmidt said. "It doesn't have to be exactly the way that we did the
There's lots of ways you can design a process so it meets the needs of
your particular organization."
The CSO process is fairly simple, Schmidt explained. First, DIUx
posts basic areas of interest on its website. These aren't detailed
requirements, she said, but descriptions of a problem DIUx is trying to
solve or a technology it's interested in.
Interested companies submit a
paper--fewer than five pages of text, or briefing charts--on the company or
its technology, generally required within about two weeks.
"We want to have
a low barrier of entry to companies that have not worked with DOD before,
have not put together a government proposal before," Schmidt said. "So for
this first step, they can just use information they probably already have on
hand," instead of what can often be a costly and time-consuming proposal
Next, DIUx, acting in a sort of
venture capitalist role, selects companies to pitch their technologies to
its DOD customers.
(DIUx is quick to point out that it is not a venture
capitalist.) Finally, if DIUx, ACC-NJ and the DOD customer think the company
or technology has promise, the company is invited to submit a full proposal
and negotiate an other transaction agreements.
Under a CSO, nearly all terms, including intellectual
property, are negotiable.
"This whole process is fast,
flexible and collaborative, and these three attributes are really critical
to our ability to work with a lot of these nontraditional companies,"
Schmidt said. Most important, she said, is the collaboration. "Rather than
the government issuing a detailed RFP [request for proposal] that the
contractor has to respond to behind a firewall, in isolation and without
discussions with the DOD customer, we actually burn down that firewall and
design projects together after we issue an RFP."
CSO is a pilot in the use of this type of contracting instrument, said Paul
Milenkowic, ACC-NJ executive director. "We can move quicker in that we're
not bogged down on a lot of procedural timeframes or steps that don't apply
to other transaction agreements," he said. "So one benefit is that we can
focus more on the desired outcome versus 'are we following the proper
FLEXIBILITY ALLOWS SPEED
The key to the Commercial Solutions Opening (CSO) speed is the flexibility that OTAs have as opposed to
the FAR, Milenkowic said. "The FAR's going to define steps and timeframes--a
lot of them are dictated by the regulation," he said.
"With that flexibility
in the commercial solutions opening, we've created efficiencies in the
process that we wouldn't otherwise have the ability to do under the FAR. …
The FAR is more rules-oriented versus the other transaction authority."
But moving quickly doesn't mean sloppiness, Milenkowic emphasized.
"We're not doing speed at the expense of quality." Ensuring quality requires
two things, he said.
"The first is people. … We have a mature staff here
that we've developed over the past few years at ACC-New Jersey, and to me
that's essential, as there's a higher level of engagement, communication and
interaction required and one has to feel comfortable taking this additional
The second is a solid partnership.
"The other thing that's helped us is the entire DIUx team has been highly
aligned in that we're all on the same page, we understand the process that
we laid out, and we understand the goals we're working toward. The team also
has a high degree of commitment, and that includes the staff at DIUx, the
staff here at ACC-New Jersey and our local legal support as well," he said.
Secretary of Defense Ash Carter is greeted by DIUx Managing
Director Raj Shah as he arrives at Moffett Field, California, to deliver
remarks on May 11, 2017. Carter "refocused" the experimental unit, with Shah
at the helm, on finding ways for DOD to do business as quickly as the tech
companies innovating and experimenting in DOD areas of interest.
CSOs provide an element
of collaboration that's not possible under the FAR, Milenkowic said.
"Essentially, the CSO has turned the process on its head by asking
commercial firms to provide a solution to our problem statement, and this is
typically not what the government does," he said. "We usually are dictating
a solution, and here we are asking for one. And therefore we might have
vastly different approaches to solving a problem."
also allow enhanced interaction between the stakeholder and the contractor.
Once a contractor is selected--typically a company that hasn't done business
with DOD or the government before--ACC-NJ and DIUx will help with the
content of the proposal and the scope of the project. T he collaboration with
the contractor, Milenkowic said, "allows us to adjust the project as we go
along and as we conclude negotiations. We're getting more insight and input
from the contractor in that process. So we like to think that in the end
we're going to be optimizing that solution in a better manner."
In recent years, senior leaders in
DOD and the congressional armed services committees have focused on reform
as a way to speed up the acquisition process. Their efforts have resulted in
new authorities and organizations designed to help DOD access the technology
it requires, particularly from new commercial sources.
Founded as a way to reach into Silicon Valley's innovation culture, DIUx,
with ACC-NJ's help, finds itself at the forefront of a trend in acquisition
innovation. DIUx has pioneered ways to bring in nontraditional defense
contractors to provide next-generation capabilities that would in the past
have been out of DOD's reach. Among its early agreements are plans for
unmanned sailboats to collect climate and other data; small unmanned aerial
vehicles that provide Soldiers critical situational awareness in caves and
buildings; and hands-free, ears-free, two-way removable communications
devices hidden in the mouth that integrate wirelessly with radios and offer
clear communications in high-noise environments.
November release of
DIUX's guidebook provides the means for organizations
across the DOD acquisition enterprise to break up logjams in filling capability gaps, working in timelines of days and weeks instead of months
The CSO process at a glance:
Open to nontraditional companies and traditional defense companies
under certain conditions.
A streamlined application
process requires only minimal corporate and technical information.
Flexibility to use best practices with relief from the Federal
No mandatory cost accounting
standards or reporting requirements.
and pricing data are not required.
selection timelines with most awards within 30 calendar days of proposal
Negotiable payment terms.
intellectual property rights.
Direct feedback from
operators, customers and users within DOD to help product teams develop and
hone product design and functionality.
follow-on funding for promising technologies and sponsorship of user test
cases for prototypes.
Successful products and technologies may be eligible for accelerated procurement by DOD.