Disrupting Acquisition Blog
20 Defense Contracting Things to Watch in 2020
A mentor once told me that where we put our attention gets our juice—our life force to make things happen. If we begin the new year aware of certain things to watch as the year unfolds, then we are more likely to support them or take advantage of what they offer as those opportunities arise.
We will all have our separate lists of things to watch in 2020, but if you don’t have yours yet or you want to borrow some of mine, here are 20 Defense Contracting-related things I’ll be watching.
1. Roll-out of the Adaptive Acquisition Framework (AAF)
Although this list isn’t meant to be in any particular order, AAF is my #1 game-changer for the coming year. In 2020, we’ll see the rewrite of DoD 5000 published and it’s far different from all the past iterations that needed DAU classes and a couple of graybeards from the Policy Office to lead you through it. The coolest thing? Instead of trying to force-fit your acquisitions into a hardware model that takes a decade and mind-numbing rules to follow, you’ll have six pathways to choose from, and not only will you be able to mix and match the pathways but you can actually customize them to do what makes sense. Traditionalists will struggle with the freedom that this roll-out of policies allows, but if you can get out of your comfort zone, you’ll find that you can move faster and create more flexible solutions. Check out the current AAF site–major updates coming!
2. Roll-out of the Cybersecurity Maturity Model Certification (CMMC)
No one is arguing that we don’t need to protect sensitive unclassified information in the supply chain, but the conundrum is that it may be a barrier, even a temporary barrier, to small businesses and other non-traditional contractors after we’ve worked so hard to lay flat those previous barriers to doing business with the Government. I’m particularly concerned that (a) some small businesses will not have the funds/resources for this additional expense and (b) some small businesses will be caught off-guard because they aren’t aware of CMMC and it’ll be a showstopper that will slow down or stop the procurement process. Large defense contractors are already jumping on this with their supply chain, but it’s unsettling to me how many Contracting Officers and potential vendors are unaware that CMMC is coming and coming fast. If you’ve never heard of it, go devour OSD’s official CMMC website.
3. Increase in Other Transactions for Production
Thus far, outside of DIU and Kessel Run, OT for Prototype follow-ons for production are treading the more familiar path of FAR-based production contracts, but that should change this year. Like the first follower of the lone nut in the dancing guy video, what happens this year will lead to a tipping point and Other Transactions, both for Prototype certainly and a little slower for Production, will cease being “risky” and be perceived as the “new cool thing everybody’s doing.”
4. Use of precedent-setters as advisors
What happens when a trendsetter tries something new but is told “NO!” by traditionalists, the Frozen Middle, and/or inexperienced advisory staff? In the case of non-FAR-based agreements, you don’t legally have to go through all the usual review processes. However, you may be required by local leadership to have a procurement analyst review your documents and advise you…even if that person and no one in their office has ever actually touched a non-FAR-based agreement, like an Other Transaction for Prototype or Production. You could thumb your nose at them, but realistically, you might also be expected to seek advice or reviews of your work, at least until they’re comfortable you’re not going to rain down hellfire and brimstone on your leadership for doing something too risky. You could satisfy that itch by seeking advice from acquisition professionals who have actual experience in that area, even outside your organization. And yes, that might even be outside of DoD. In all likelihood, you’ve already sought out an expert opinion from an outside precedent-setter before you ever decided to blaze a trail locally, so why not use that as your official advice?
5. Increase in Pitch Days
Pitch Days have become popular over the last three years, initially through AFWERX efforts with SBIRS, and then spreading across the DoD ecosystem. Although the idea of awarding 100-plus contracts in a day is cool and sensational, a lot of pre-work goes into those successes. However, because it’s much easier for vendors to pitch the Government in a fashion similar to how they pitch venture capitalists and the relative ease on the Government to kick that many awards out the door in a short period of time, we will see Pitch Days become the standard for research contracts, to include prototypes and demonstrations.
6. Increase in Oral Proposals
Similar to Pitch Days but more complex, we’ll see growth this year in the use of Oral Proposals (aka oral presentations). For the more complex contracts/agreements, we’ll see a similar surge in the use of oral proposals as Contracting Officers and their advisors become more used to controlling evaluation teams during the presentations. Watch for my “Unofficial Oral Proposal Guide,” coming soon with around 70 pages of down and dirty advice you won’t find elsewhere, templates, and real-life samples.
7. Increase in personnel turnover in innovation organizations
Expect more turnover—or a perceived increase—in innovation hubs and organizations. The older organizations have been around for two to three years now, and that means that some of the earliest innovators have or will be moving on to new assignments, either as part of their normal rotations, retirements, promotions, or search for greener pastures. New people will mean a new flavor to the organizations, even their specific missions remain the same.
8. Expanding use of Small Business Innovation Research/Small Business Technology Transfer (SBIR/STTR)
One very bright light of innovation over the last few years has been the interpretation of SBIR/STTR programs in very different ways than previously. It’s no longer a Phase I, II, III and follow rigid guidelines. No, it’s quite creative now with Pitch Days, Direct-to-Phase-II, Venture Capital matching, and significantly larger dollar values. As these variations are tested and proven, look for those to become normalized and for more creative variations to set new precedents.
9. Rethinking Past Performance
As Acquisition focuses more on game-changing technology and technologies change faster than ever, past and even present performance will become less important because it’s hard to have experience with something when it’s never been done before. Past performance will become an ineffective way to gauge future success when it comes to new research, rapid prototyping, and dual-use tech from start-ups. This doesn’t mean that Past Performance is going away or that it should go away. It still has a place in major systems. It may still have a place for some prototypes. The change is that the Contracting Officer will have to think critically about whether Past Performance is a discriminator when it comes to vendors on the ground floor of a technology.
10. Reassessing education requirements
Around twenty years ago, services contracts moved away from dictating educational/experience requirements (a Master’s Degree, plus 5 years experience) to whatever it would take to get the job done. I’ve noticed that startups in particular are grappling with an old-school mentality in how proposals are requested and graded when it comes to research, prototypes, and new tech fields. Evaluation criteria that include a principal investigator’s bio and his/her various engineering degrees in the new field may not sound like a problem, but some of these fields are so new that the actual pioneers don’t have relevant degrees because they pretty much invented the tech. In their basements. For fun.
11. Increase in vendor-originated pathways
Look for vendors or potential vendors to initiate contracting vehicles, tools, and eco-systems. The Government will still team with industry and academia, but the model will be flipped so that a vendor (or group of vendors) is the mastermind behind a new consortium, acquisition funnel, etc, taking the concept to the Government to find the right Program Office or Contracting Officer to serve as the other side of bridge. Sorry, no links or specifics quite yet as this insight is from private conversations within my network but look for some of these new toolsets to emerge in 2020, and then others will try to emulate what they’ve done.
12. Clustering of hubs and consortia
As those once-distant beacons of light in the innovation ecosystem start to look more like a gigantic net of twinkling Christmas lights, the hubs, consortia, and other organizations will start to cluster and filter out the weaker ones. Three years ago, there was only a handful, so it was easy for vendors to know which ones were the best fit and for Program Offices to know where to go for help. Now that the field has grown and continues to grow, it’s hard to filter out the noise and figure out which are the best bets versus trying to connect with all of them. At this point, most technology areas are covered by a consortium and multiple innovation hubs. More will come this year, as it seems popular to have your own innovation cell, but this year, we’ll start to see which ones are the keepers and which ones are either in name only (what some call “pretenders”) or are weaker redundancies. Not that creating a new innovation organization isn’t a good idea—just treat it like a make-or-buy decision and if it’s more efficient to leverage what someone else has done, don’t stroke your ego by starting something of your own from scratch.
13. Increased use of 10 USC 2373
Hallelujah, people are seeing the light and using my favorite tool more! Procurement for Experimental Purposes, aka ”2373,” added “telecommunications” to their list of now nine technology areas which makes it easier to buy IT, robotics, AI, etc. I’m keeping my fingers crossed that one of these 2373’s will lead to an Other Transaction for Production in the next few years instead of OTs for Production being the result only of OTs for Prototype. This statute may be a quick method of technical evaluation of a potential solution, such as the strength of a new vs old manufacturing technique, the effect of certain types of ordnance on an experimental aircraft, or which type of laser works best on a particular platform.
14. Increasing turnover in Acquisition personnel
As if the personnel bathtub wasn’t alarming enough, what happens when the best-known innovators in Government Acquisition leave to innovate elsewhere? I see the Frozen Middle at the GS-14/15 and equivalent levels retiring in greater numbers rather than accept the coming changes. For a while, they were holding on for dear life (or their High 3) and refusing to change but now that senior leadership is pushing harder to innovate, they are starting to give way. At the same time, frustrated innovators in the field are leaving the Government almost as fast as they become well-known for their willingness to disrupt “business as usual.” They’re heading to industry, academia, FFRDCs, or to try their hand at consulting. Why? Because innovators innovate or die—it’s what they do—and if they can’t find that place within the Government, they have plenty of opportunities outside the Government. It’s imperative for leaders to remove the Frozen Middle ASAP while recruiting/retaining/empowering the innovators. As guru Jim Collins stresses, “Those who build great organizations make sure they have the right people on the bus and the right people in the key seats before they figure out where to drive the bus….Great vision without great people is irrelevant.”
15. Increased understanding of Intellectual Property (IP) Issues
For my entire Federal career, the only thing my colleagues and I really knew about IP and data rights was unlimited rights, limited rights, and Government purpose rights. I knew way more about IP from my personal copyrights than I ever learned on the job. I worked with PEOs who insisted on “unlimited rights” whether those rights could be exploited or not. In decades past, this all made sense because the Government was the main source of funding for research. Not so any longer.
Now new technologies are being funded outside of the public sector and startups have choices they didn’t really have twenty years ago. Startups no longer need the Government and can more easily pitch investors than contract with Uncle Sam, and yet the Government does need these new technologies. This year, both Government and Industry will begin to understand better that their goals are in 180-degree opposition and how to compromise. Vendors want to maintain control of their IP because it’s their future income and they don’t have a business without it, and the Government is fighting tooth and nail to keep from getting into a vendor-lock situation a few years down the road.
But all this can be negotiated, and there are many options other than all or none when it comes to the rights negotiated. This is the year that those options will be realized to the greatest extent yet. Acquisition strategies will begin contemplating the IP strategy early and creatively, and Contracting Officers will finally understand better the valuation of IP and how to negotiate creative, win-win deals, plus help and guidance from a special IP Cadre. The new IP policy was released in October 2019.
16. Increased use of overarching acquisition strategies
Too often, both potential vendors and the Government don’t think long-term enough. The focus in a research phase doesn’t always extend to production and sustainment. This year, you’ll see more Program Offices and Labs thinking ahead to getting vendors across the Valley of Death, and that requires having a strategy beyond the immediate contract. Overarching strategies should include IP strategies and may consider on-ramps and off-ramps for vendors, multiple contracting vehicles, and multi-phase approaches (study phase, demo phase, limited production phase, etc, within one living strategy plan).
17. Increased teaming in Opportunity Zones/Innovation Corridors
Opportunity Zones, a tax incentive created by the 2017 Tax Cuts and Jobs Act, was meant to spur economic development in distressed communities. Some savvy investors are combining their investment with bringing together various players for dual-use technology and creating technology-area-based ecosystems to work directly with the DoD. About two years ago, such ecosystems with or without the Opportunity Zone moniker were referred to as “innovation corridors” because they involved cities or regions of the country rather than a specific community. Regardless of what you call them or what tax code an investor might use, these industry and academia initiated ecosystems will continue to grow and team with the Government for mutual benefit. Some ecosystems will be built with the intention to service particular communities or particular Program Offices. These are a great example of proactive non-Government entities stepping in to improve acquisition and building the infrastructure that the Government might have built in decades past. Teaming is a good thing, no matter who starts it.
18. Use of Artificial Intelligence (AI) in Market Research
Think of all the databases out there. Imagine how much easier and more thorough market research would be if a Program Manager or Contracting Officer could tap into those databases, even as just a starting place for market research. If we can figure out how to talk to all those databases and make sense of it—and we’re not far from it—then it could be a useful, efficient tool for market research. Especially as we try to find non-traditional vendors with new technology we’ve not heard of, the increased quantities of potential vendors, especially ones who have the most suitable solutions to explore, could be a big advantage in which vendors we solicit and how we craft acquisition strategy to solve an emerging problem.
19. Use of AI for Pricing
Just as with databases for market research, why can’t we use databases for pricing? This is currently being explored in smaller quantities and simpler formats, but AI and Big Data could give us vendor pricing in a jiffy. For simpler procurements—think anything you might buy via Sealed Bid, which is seldom used now—the Contracting Officer could have all of the procurement priced and ready for award via AI. At the moment, I foresee a human Contracting Officer in the loop performing at least a final review and signature, but I can see an AI “Contracting Officer” eventually for the simple buys while Contracting personnel focus on the more complex actions and a better use of the limited number of trained Acquisition personnel.
20. Increased visibility of State government assistance
Some of the barriers for small businesses and other non-traditionals might be leveled by State and Local governments. For example, California has partnered with the Federal government to help California-based companies with the certification process for CMMC. Procurement Technical Assistance Centers (PTACs) are also stepping in to offer help. The extent and consistency of the assistance remains to be seen, but the point is, there may be help beyond the Federal government, particularly for small businesses.
This year, 2020, will be exciting times for both acquisition professionals and industry. Even with some new risks emerging, the trends are moving in the right direction for real and lasting change.
But hey, we don’t have to stop our list at 20! What’s on your list that isn’t on mine?
Disclaimer: The opinions expressed here are those of the authors only and do not represent the positions of the MITRE Corporation or its sponsors.
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