Next year will mark the fourth iteration of the educational ICAP initiative, which DIU runs in partnership with the Defense Acquisition University. This fellowship is designed to provide DOD’s leading procurement professionals with hands-on experience and virtual training to help them more effectively buy in-demand commercial technologies from non-traditional military contractors. 

“We have other acquisition officers from across the department who can apply to the year-long fellowship with DIU — to learn our process, how we work with industry, and then bring that back to wherever they’re going. And [the next ICAP application] just opened today,” DIU’s Deputy Director for Commercial Operations Liz Young McNally told DefenseScoop during a panel at the Special Competitive Studies Project’s AI+ Expo.

If tapped for the fellowship, personnel will get a chance to work on a variety of real-world, military service-aligned projects alongside a DIU contracting officer, project team and commercial solution providers.

The fellows will also gain in-depth instruction on a flexible contracting mechanism designed for rapid prototyping and acquisition of commercial tech, known as other transaction (OT) authority. That mechanism, as well as DIU’s commercial solutions opening (CSO) solicitation process, helps the Pentagon operate at a pace that is closer to commercial speeds, when buying certain technologies.

Pointing to recent internal DIU stats, McNally said that for roughly 40% of the companies that win a new CSO deal each year, “this is the first time they ever worked with the DOD.”

“We’ve built all of these processes [to accelerate acquisition]. So we’re asking for a problem statement as opposed to a requirement. It’s a short response, right — like a few pages or a few slides, as opposed to something more — very rapid. And [the ICAP fellowship] is one of the processes that we have built to help not just do it ourselves, but then scale it across the department,” she noted.

Defense Secretary Pete Hegseth recently issued new guidance to inform how the Pentagon buys software capabilities. In it, he directed Pentagon officials to prioritize OT and CSO procurement options when purchasing digital assets for the military.

“[DIU is] also working very closely with [the Office of the Under Secretary of Defense for Acquisition and Sustainment] and others in the department to implement the president’s new executive order on acquisition. And programs like that fellowship are a real way that we’re going to be able to help upskill, and train, and drive the culture change required so that we bring in more commercial technology,” McNally told DefenseScoop.

Those who wish to apply for ICAP must be permanent government civilians or active component military contracting officers. Each fellow will produce a capstone project that will serve as a training plan for their home organization, based on what they learn throughout the 12-month program.

Applications will be accepted until July 31. DIU aims to notify selected candidates in September and begin the program in October.

“To ensure our warfighters maintain a decisive advantage, we need contracting professionals who are fluent in both the defense and commercial sectors, and who can help their teammates across the department to develop that same fluency. That is what the ICAP fellowship delivers, and we need to keep scaling it — and its impact — for the department’s critical needs,” DIU Director Doug Beck said in a statement.

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The department’s Software Acquisition Pathway, or SWP, was set up during the first Trump administration under then Undersecretary of Defense for Acquisition and Sustainment Ellen Lord as part of a broader push for a so-called Adaptive Acquisition Framework that enables the department to procure software differently than it buys hardware. Programs on that pathway are not subject to some of the encumbrances associated with the Joint Capabilities Integration and Development System and major defense acquisition program designations.

“Programs using the software acquisition pathway will demonstrate the viability and effectiveness of capabilities for operational use not later than 1 year after the date on which funds are first obligated to develop the new software capability. New capabilities will be delivered to operations at least annually to iteratively meet requirements, but more frequent updates and deliveries are encouraged where practical,” according to DOD Instruction 5000.87 issued in October 2020.

The instruction also requires government and contractor software teams to use modern iterative software development methods such as DevSecOps.

Now, Hegseth wants to make sure all DOD components are taking advantage of the pathway.

“Software is at the core of every weapon and supporting system we field to remain the strongest, most lethal fighting force in the world. While commercial industry has rapidly adjusted to a software-defined product reality, DoD has struggled to reframe our acquisition process from a hardware-centric to a software-centric approach. When it comes to software acquisition, we are overdue in pivoting to a performance-based outcome and, as such, it is the Warfighter who pays the price,” he wrote in a March 6 memo addressed to senior leaders, combatant commanders, and agency and field activity directors.

To address the problem, Hegseth is decreeing that all DOD components must adopt the SWP as the “preferred pathway for all software development components of business and weapon system programs.”

“This will enable us to immediately shift to a construct designed to keep pace with commercial technology advancements, leverage the entire commercial ecosystem for defense systems, rapidly deliver scaled digital capabilities, and evolve our systems faster than adversaries can adapt on the battlefield,” he wrote.

As the U.S. military pursues new AI tools — a tech pursuit which Hegseth is prioritizing as the department moves to modernize for potential fights against advanced adversaries — software is expected to become even more critical.

To get software vendors on contract faster and cut through bureaucratic red tape, the Pentagon chief also wants DOD components to leverage commercial solutions openings — a solicitation mechanism that the Silicon Valley-headquartered Defense Innovation Unit has been using to bring commercial firms into the Pentagon’s acquisition fold — and Other Transaction agreements, which allow for rapid prototyping and follow-on production contracts for new tech.

However, Pentagon officials have noted that acquisition offices and contracting officers don’t always use or aren’t aware of some of these tools that are available to them, instead relying on more traditional processes associated with federal acquisition regulations.

“Effective immediately, for efforts that meet the threshold requirements enabling the application of authorities provided at title 10, U.S.C., § 3458 or title 10, U.S.C., § 4022, I am directing the use of Commercial Solutions Openings and Other Transactions as the default solicitation and award approaches for acquiring capabilities under the SWP. This applies to any software pathway program in the planning phase prior to execution. Department Components are prohibited from implementing further guidance on this point that would set out restrictive measures, guidelines, frameworks, directives, or policies other than required by statute,” Hegseth wrote.

“The reason this works better [is that] instead of spending years writing detailed requirements and going through a rigid … one-size-fits-all process, we can tap into the best tech available right now, prototype it fast and get it to the field quickly, if it works,” a defense official told reporters during a background call Friday regarding Hegseth’s directive. “So bottom line, we’re cutting out middlemen. Software companies make software. We’re going to buy software from software companies.”

Another senior defense official noted the importance of combining SWP with the commercial solutions opening and OTAs.

“The challenge with that software pathway is that it did nothing in and of itself for how we expose commercial, nontraditional vendors who are also developing innovative software to those software programs. So when we take that software pathway mechanism and we combine it with innovation that DIU has been working in commercial solutions openings, or CSOs, and other transaction authorities, OTAs, we get to the point where now we can expose the programs, the software programs, to nontraditional and commercial software developers, while we simultaneously … lower the barrier for those nontraditional and commercial software developers to get into defense programs of record,” they said.

As an example of the effectiveness of leveraging these types of mechanisms, a senior defense official noted that since 2016, DIU has awarded more than 500 OTAs using the commercial solutions opening process. About 88 percent of those deals went to nontraditional vendors and 68 percent to small businesses. The unit’s goal is to get vendors on contract in less than 90 days.

“This … [Hegseth] memo is applied to programs that are new heading into the planning phase of the software acquisition pathway. And then for any other programs where they have a natural transition point to adopt a new acquisition pathway, that’s when this would apply” to them, a senior defense official said.

DIU and the Defense Acquisition University plan to train and educate other acquisition professionals so they can also use a CSO OT model, according to officials.

Hegseth tasked the acquisition and sustainment directorate in the Office of the Secretary of Defense, in coordination with DIU, to develop and submit an implementation plan for the initiative within 30 calendar days.

The implementation plan is expected to address efforts to train the acquisition workforce.

There’s no dollar-value limit to OTAs for software, according to a senior defense official, although there are thresholds that require A&S-level approval to cross.

“What you do have is the mechanic that allows you to go from a prototype OT in software that may exist pre-acquisition into an acquisition program of record that has an associated production OT that follows on to that prototype OT, right? So that’s a key element of these OTs is that … you can prototype an OT and then a completely different organization can drop a production OT on top of that prototype OT,” a senior defense official told DefenseScoop during the call with reporters. “So think about that in the concept of a prototyping organization transitioning to an acquisition program of record, right? You suddenly have this tool that allows you to use that OT mechanic to go very quickly between the prototyping aspect and the production aspect. And again, of course, the production OT … has to have a successful prototype OT on which to base its award.”

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The Pentagon uses this procurement mechanism to enable components more flexibility than traditional funding pathways do. OTAs are also seen as a way to support small companies carrying out technology-driven prototype, research, and production projects for the government and military.

“Nevada is at the forefront of innovation, but small businesses need more support to enter the defense sector. My bill ensures the federal government is helping new small businesses get the funding they need to succeed in this industry by bringing much needed oversight to OTA awards,” Cortez Masto told DefenseScoop in an email on Thursday.

If passed, it would mandate the undersecretary of defense for acquisition and sustainment to set up a pilot program for DOD to properly “track the number and amounts awarded to small businesses and nontraditional defense contractors performing on transactions using other transaction authority, including those carried out through consortia,” according to the proposed bill’s text, which was shared with DefenseScoop.

The legislation would require the directorate to brief appropriate congressional committees regularly over the next five years or so, on the overarching process and the awards data that the pilot program captures.

“Not later than September 30, 2029, the Department shall provide a briefing to the Committees on Armed Services of the Senate and the House of Representatives on the final data collected and shall include any recommendations to make the data collection permanent,” the bill states. 

Notably, a pilot of this type marks a key recommendation that the Government Accountability Office presented in its 2022 report that put a spotlight on needs for improving OTA management.

“As DOD continues to rely on OTAs, Congress must increase reporting requirements and oversight over the program to prevent fraud and abuse. Cortez Masto’s legislation will help DOD use its OTA tools more effectively, improve the way it tracks where OTA award dollars are going, and make it easier for small businesses to engage with DOD to foster innovation and strengthen our national security,” a spokesperson for the senator told DefenseScoop. 

Beginning Friday, both congressional chambers are in recess through Sept. 9.

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