All Agencies Can Now Buy Innovative Tech at Shark-Tank Speed

Have you been watching enviously as the Defense Innovation Unit Experimental (DIUx), the Homeland Security Department’s Silicon Valley Innovation Program and various other exceptional entities have been able to snap up new technological wonders from Silicon Valley and elsewhere? Using what’s known as “other transaction agreements,” a blessed few government agencies have been able to circumvent onerous acquisition rules to quickly purchase innovative technologies.

Well, envy no longer.

The General Services Administration’s new AAS Express Program just opened fast-buying capability to all agencies. Express offers high-speed, streamlined source-selection for innovative commercial items and processes—for a fee, of course. But the opportunity—known as a commercial solutions opening, or CSO—to lay hands on fast-evolving, mission-critical new tech and processes in as little as three months or less may be well worth the money. Especially if your department or agency doesn’t already have OT authority.

In the 2017 National Defense Authorization Act, enacted Dec. 23, 2016, legislators permitted Defense, Homeland Security and GSA to test CSOs as a new way of making the federal market at least tolerable, if not inviting, for advanced technology companies and entrepreneurs. GSA seized the opening to offer the option governmentwide.

While the GSA AAS Express website still features a “Coming Soon” notice on its CSO website, according to a May 22 FedBizOpps notice, it has begun “seeking proposals for innovative, commercial items, technologies and services.” Express will post open solicitations for such projects on its site on behalf of other agencies. So far, no CSO areas of interest or solicitations are live.

Express will work with agencies to solicit white papers from suppliers about solutions that meet their needs. If Express and the agency are interested in a paper, Express will invite the supplier to submit more information or come in for an oral presentation. If there’s a match with the client agency’s needs, Express will invite the provider to submit a full proposal, the first step in negotiating all the terms and conditions of a proposed contract.

Express promises that its average procurement action lead time is between 30 and 120 days due to its streamlined, customized workflow process. It also pledges that client agencies will determine the requirements for and manage their own projects. For this, Express will charge a flat fee of 3.5 percent of the acquisition value.

The CSO pilot program is “to be implemented outside the normal FAR requirements to engage traditional and nontraditional government contractors,” but Express notes that the GSA CSO is different from OT authority, which GSA does not have.

Innovation Defined

While some may grouse about GSA’s exclusive ability to offer sought-after buying speed beyond the 11 agencies with OT authority, its CSO likely will be welcomed by left-out organizations seeking a rapid route to innovation. The more creative among them no doubt will note that the word “innovation” is defined broadly enough to permit a huge number of uses, as long as they observe the $10 million per transaction limit imposed by the law creating the CSO pilot projects.

For the Express CSO, innovation means any “new or new application or adaptation of an existing technology, process, or method as of the date of submission of a proposal.” And it isn’t limited to emerging technology from startups. Innovation “includes existing items within the production/commercialization phase (i.e. after design or development, and before widespread government adoption) as well as adaptations of existing commercial products,” according to Express.

DOD’s CSO pilot is bigger than the one granted GSA and DHS. DOD’s is good for up to $100 million per transaction, and military organizations already have been testing it through the DIUx, which began applying its CSO simultaneously with development of the 2017 NDAA provisions.

DIUx opened its CSO in June 2016 and its initial CSO award took just 31 days from first contact with a supplier to award. From June 2016 to February 2017, DIUx awarded 18 OTAs worth $42 million using CSO, averaging 96 days.

Spurred to the Cutting Edge

DOD has been spurred to rapidly acquire innovation and invention by the alarming build-up in technology acumen by Russia and China.

But other agencies also feel the need for speed to the cutting edge. For example, the uptake of blockchain and robotic process automation and artificial intelligence in industry is leaving federal financial and other regulatory agencies outgunned. And government needs those capabilities to modernize its information technology, as the white House has ordered, and to make services digital, as Americans increasingly demand.

The problem is that no one can keep up with the pace of industry innovation anymore, perhaps least of all federal agencies. So how can the government know even what’s available, let alone what the best new solutions for its specific needs might be?

OT authority allows 11 agencies and departments to craft OT agreements with nontraditional suppliers outside many of the requirements of the Federal Acquisition Regulation, enabling them to quickly tap U.S. innovation centers like Silicon Valley. DOD even has come up with a special model under which more than 20 consortia have been awarded OTAs to help defense organizations attract an array of small, new providers, along with traditional contractors, to propose solutions that best fit programs’ specific areas of need.

But until GSA opened its CSO, buyers thirsty for novel solutions at agencies without OT authority were mostly out of luck.

Every Program Manager an In-Q-Tel

The Defense, Homeland Security and GSA CSO pilots run until 2022 and essentially allow program managers to “adopt the role of In-Q-Tel,” said Victor Deal, a former analyst with the office of Defense Procurement and Acquisition Policy, during a May 2017 Defense Acquisition University program on CSO.

In-Q-Tel, the CIA’s venture catalyst, seeks out early-stage technologies, vets them against a set of challenging intelligence community mission requirements, and then invests in the best fits to ensure that the IC’s needs get built into the commercial products.

Similarly, with CSOs, “for those companies developing something that don’t care for DOD because they have a 98 percent commercial market, the program manager can tap them on the shoulder and say, ‘Hey, we have a way to do business with you,’” said Deal, who is credited with developing the CSO model.

Using CSOs this way puts the onus on program managers to get out of the office to learn and interact with the markets to find capabilities of interest. “The [traditional] government source selection process is linear,” Deal said, “we only get what industry submits. Our market research is point-to-point versus having multiple endpoints.”

“With CSO, source selection no longer is a linear process in which, if a provider missed the solicitation, they’ve missed out on winning a government contract.” CSOs can remain open for proposals for years,” said Deal, now contracts director for the Universities Space Research Association, a nonprofit corporation chartered by the government to advance space-related science.

CSO is not synonymous with sole source, Deal explained. Instead, it is a process for selecting merit-based solutions, based on a review of proposals by scientific, technological, or other subject matter experts. It keeps continuous competitive pressure on awardees because the government can easily cancel an award if it finds a better supplier of a capability or a provider that offers an improvement to or a replacement for that commercial solution.

Traditional contract termination requirements don’t apply under CSO, nor can suppliers protest. The government must negotiate its termination expectations, Deal said, because either party can walk away from a deal, so agencies cannot force performance, though providers aren’t paid unless they deliver.

Unlike many existing rapid acquisition processes, CSOs are aimed not just at early-stage companies and emerging technologies, but primarily at innovations—new uses for or adaptations of existing technologies or commercial products already in production or broad use. With imagination, this could apply to almost any tweak of a commercially aimed or sold item.

These innovations are not to be evaluated in comparison with others, but rather based on their individual merits. That moves CSO out of the world of best value and tradeoffs, according to Deal. Price can be evaluated, but given that these are novel products and processes or adaptations of existing ones, pricing can a challenge. DIUx suggests using published price lists, previous contracts, parametric or cost estimation, comparison with similar items, expert analysis, subject matter expertise or anticipated return on investment.

CSOs Don’t Dictate Contract Types

“You have to really do your own homework,” Deal said, “and not rely on the resources that have traditionally been available to a contracting officer, which is ‘I have commodity I need, so I will buy it from whoever has the lowest price.’” CSO users will have to be able to identify fads that may be interesting today but not have the outcome they will want in the future, he said.

Deal also emphasized that CSO is a source selection mechanism, so it does not dictate what type of contract or agreement a program uses to buy an innovative product or process.

Now that GSA has opened CSOs to all, the “DIUx Commercial Solutions Opening How-To Guide” likely will move up on the government bestseller list. As it should for many reasons, including readability. It exhorts program managers and procurement professionals to be bold and use the freedoms they’ve been given.

“While it is important to be good stewards of taxpayer dollars, we must also be careful not to sacrifice project results and incur opportunity costs for the sake of removing all project risk via involved process,” it says. Government “must move at the pace of commercial innovation or risk being left behind not only by the commercial marketplace, but by our adversaries as well.”

Anne Laurent, former Executive Editor of Government Executive magazine, runs The Acquisition Innovators Hub, a procurement innovation intelligence collector. Brian Friel, co-founder of BD Squared LLC, a federal business development firm, contributed to this report. The Acquisition Innovators Hub and BD Squared will deliver a webinar on OTAs and CSOs on June 21.