Innovation Mindset Molds a Contracting SPARTN

In this issue we feature a column from the U.S. Army Applications Laboratory (AAL), a key element in the Army’s modernization effort. Scott Stanford, director of communications and strategy at AAL and Casey Perley, director of insights and analysis at AAL, explain how rapid, early success came by capitalizing on something often heard within the contracting community.

“There is a tremendous amount of latent ability to go faster and to innovate using the authorities we already have,” Stanford and Perley say.

In the case of AAL, one of those existing authorities is the Small Business Innovation Research program (SBIR). Over the past two years, Contract Management has published several articles exploring the flexibility of SBIRs.

In this era when attracting startups with innovations for the defense community is critical, SBIR has been criticized. SBIR has been noted for failing to provide a fast and direct route to potential customers with ready funding to sustain young companies with investors seeking rapid returns.

In addition, as pointed out in the October 2020 Innovations column, “The vast majority of SBIR/STTR … recipients had existing defense business, and most of the funding went to existing DOD vendors. Both (SBIRS and other transactions) have overwhelmingly benefited existing suppliers, and neither introduced a substantial number of new vendors into the defense market.”1

The Special Program Awards for Required Technology Needs (SPARTN) of the AAL is designed to overcome these problems, Stanford and Perley say. SPARTN makes SBIR awards faster, cutting reviews from an average of 78 days to 14.8 days. The program makes SBIRs worth more by raising the value of Phase I awards and allows companies to get up to half the value of their contracts in the first two weeks of the period of performance versus in six equal portions. SPARTN also combines Phase I and II awards for some companies to further raise the value of a SBIR contract.

Like the Air Force’s AFWERX with its open topic SBIRs,2 SPARTN shows agile and creative contracting with existing authorities can make a huge difference in acquiring cutting-edge capability that can be applied where and when it counts most.

As we enter a time of unprecedented climate events, near-peer adversaries and supply-chain and cyber challenges,3 all contracting professionals must be forward thinking and open minded. NCMA will continue providing examples and explanations of how more and more contracting organizations are leaning forward and making a difference.

By Scott Stanford and Casey Perley, Ph.D

Anyone familiar with innovation efforts in the U.S. Department of Defense (DoD) knows that the United States has fallen behind in the race to put superior technology on the battlefield. Reasons for this include a sharp inversion of government versus private R&D investment, consolidation and poor incentives in the defense industrial base, development and acquisition processes that are too slow and risk averse and a generation of low-tech conflicts.

Now there is an emphasis on reversing these trends in favor of defense innovation.

The U.S. Army Applications Laboratory (AAL) was created, along with its parent, U.S. Army Futures Command (AFC), to tackle this challenge for the Army. The AAL models join commercial technology innovators and Army experts to accelerate capability development in support of the Army’s modernization priorities and provide rapid solutions to the problems of operational units. It is the Army’s organization specifically tasked with innovation.

Formalizing Best Practices

While there is significant innovation coming from inside DoD labs and from commercial technology firms, the United States is far behind the curve. Innovation is neither the correct way to describe most of the solutions to this problem nor is innovation even required in most cases.

So much of the difference between where we are and where we need to be comes down to smart, efficient and effective business practices. These practices are not novel. Best business practices simply were not included in the canon of reforms resulting from 50 years of efforts to ensure the military-industrial complex is free from fraud, waste and abuse, and is a level playing field for all.

There is significant interest in what new laws and authorities are required to correct outdated, poorly considered policies. Certainly, there will be more changes in addition to the promising ones already delivered with Other Transaction Authorities and Middle Tier Acquisition.

The belief and experience at AAL indicate there is a tremendous amount of latent ability to go faster and to innovate using the authorities we already have. The real innovation is a mindset that enables problem owners and problem solvers to be comfortable in the world of “what if?”

Contracting immediately presented as having significant potential. There may be no more important discipline to the relationships between AAL and our commercial partners. Most of them have little to no experience with the DoD, but hopefully all will become part of a new national security innovation base. Contracting is a primary way AAL makes the Army a better business partner — one that entrepreneurs and investors now see not only as viable, but desirable.

Speed in contracting means speed of capital and for entrepreneurs the life or death of their businesses. Contracting professionals with an innovation mindset also played a big role in the ability of AAL to increase the amount, or improve the delivery timelines, of capital, which is every bit as significant as speed.

A Capital Program

An emphasis on capital is a pillar of the AAL model of working with commercial tech firms to solve Army problems. The other pillars are to always provide a transparent path to long-term revenue from the Army, and consistent access to the people and the information problem solvers need to understand the problem in detail.

In 2020, AAL launched the Special Program Awards for Required Technology Needs (SPARTN) as an application of its three-pillared model (also known as ACT for access, capital and transparency) to the Small Business Administration’s Small Business Innovation Research (SBIR) program.

According to the Small Business Administration’s SBIR website, SBIR funds “a diverse portfolio of startups and small businesses across technology areas and markets to stimulate technological innovation, meet federal research and development (R&D) needs, and increase commercialization to transition R&D into impact.”

For the DoD SBIR program, however, impact is in the eye of the beholder. The biggest success in the 40-year history of the DoD SBIR is the Roomba—a successful commercialization of a technology of dubious value in great power military competition.

The Army’s portion of DoD SBIR has been around $300 million. That investment must show real return for soldiers, but SBIR success had always been measured by the amount of money put into contracts, not return on investment (ROI). The first effort of SPARTN was a cohort to increase the rate of fire of the self-propelled howitzer. It demonstrated that just $3 million can return five solutions to top priority Army modernization problems; Army stakeholders decided to move forward through four different pathways with potential for transition to programs of record or other Army contracts. As Eric Clapton famously sang, “It’s in the way that you use it.”

Here is an example of a poor use of SBIR: nine companies combined to win more than $2.5 billion in SBIR contracts. This happened because SBIR outdated contracting practices favored businesses that were set up to do little more than win early SBIR contracts that almost universally resulted in zero new capability for the warfighter. Those practices took so long to produce nothing more than a contract that entire technologies could come and go before a company ever started work solving a problem.

SBIR offered small amounts of money that moved too slowly and on fixed timelines that did not consider the different maturity rates of different technologies (for example software versus hardware) or the basic financial needs of owners and investors.

SBIR had become a program that truly promising companies would not touch.

Potential Was Always There

With SPARTN, AAL began with the premise that contracts that are good for business are contracts that provide ROI to the Army. What became clear as SPARTN creators looked into SBIR was that the program was designed to be a fast and attractive modernization tool, like a Ferrari.

However, the Army had placed a governor on the SBIR engine that made it more like an old Ford Pinto: slow, ugly and potentially fatal to business. The restrictions were nowhere in the laws or authorities that covered SBIR. The program had just fallen victim to a bureaucratic inertia known for killing for-profit enterprises.

First, SPARTN removed multiple layers of unnecessary review that slowed contracting speed. Review timelines were cut from an average of 78 days to 14.8 days primarily by removing people from the process who could deny, but not approve, a contract.

Next, SPARTN increased the base value of Phase I contracts and made the first payment deliverable-based rather than time-based. Companies could now receive up to half the value of their contract in the first six weeks of the performance period whereas SBIR would pay in six equal increments.

SPARTN also tailors base contract award amounts based on the technologies involved. This makes the program more realistic for many companies with technologies not developed at funding levels that happen to match SBIR funding levels.

SPARTN allows companies to enter the program on higher-dollar value Phase II prototyping contracts. And SPARTN will award different companies Phase I and Phase II contracts simultaneously for the same topic. This allows the Army to pursue the most promising technologies when different company technologies are at different maturity levels.

Before SPARTN, Army SBIR made companies apply for Phase I and Phase II contracts in sequence—a waste of time for companies that invested in the maturity of their technology.

SPARTN averages just 42 days from the close of a solicitation to contract award—78% faster than previous SBIR averages. “The timeline is lightning fast compared to what we’ve dealt with at the Department of Defense,” says Aron Kain, chief technology officer at BH Sensors, a participant in the fall 2021 Robotic Combat Vehicle Sustainment SPARTN cohort. These tight contracting timelines mean companies are getting to work five times faster solving Army problems.

Innovative Contracting

The innovation mindset in contracting is taking root in the Army. The new Army SBIR office is standing up a Contracting Center of Excellence dedicated to the proposition that this critical discipline is a game changer for Army innovation. With a budget now of more than $300 million, Army SBIR emphasis on contracting can return tremendous value to the Army and spur the growth of hundreds, if not thousands, of small businesses as SBIR intends.

The innovation mindset in contracting has the potential to transform our ability to turn best-in-the-world commercial technology into real, relevant solutions for soldiers. Make no mistake, we are talking about saving lives because we write better contracts. This is a change that will have to manifest across the government, however, for any department or agency to fully reap the benefits.

Our equities overlap in many ways, whether we are trying to solve the same problems or depending on the same supply chains. The U.S. government spends half a trillion dollars a year on contracts. There may be no better place to gain speed and efficiency. CM

 

 Scott Stanford

Communications and strategy director for the Army Applications Laboratory (AAL).  Holds a B.A. from the University of Texas at Austin and a masters of international relations from the Fletcher School of Law and Diplomacy at Tufts University.  Communications experience spans 30 years in print and TV journalism, public relations and information operations.  Lieutenant colonel, Vermont Army National Guard.  Deployed to Iraq, Afghanistan and east and west coasts of Africa as an infantry and a civil affairs officer.

Casey Perley, Ph.D
Director of insights and analysis at the Army Applications Laboratory (AAL)  Holds a B.S. in Molecular Biophysics and Biochemistry from Yale University and Ph.D in Molecular Genetics and Microbiology from Duke University  A decade of experience in biodefense designing vaccines and therapeutics for emerging zoonotic pathogens

 ENDNOTES

“An SBIR Primer for Government and Small and Large Businesses,” Contract Management, September 2020. https:// www.ncmahq.org/common/Uploaded%20files/CM%20Magazine%20Issues/2020/September-2020.pdf.

“Defense Efforts to Attract Innovators are Falling Short,” October 2020, https://www.ncmahq.org/Web/Insights/Acquisition-Innovation-Hub/Web/Insights/Acquisition-Innovation-Hub.aspx?hkey=d0dc1be6-f677-49ca-a6dc-c72efb41fd7b.

Richard Dunn, “Want to Bring on Innovative Small Businesses? There’s a Tool for That,” Contract Management, July 2021. https://www.ncmahq.org/Shared_Content/CM-Magazine/CM-Magazine-July-2021/INNOVATIONS---Want-to-Bring-on-Innovative-Small-Businesses.aspx.

 

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