Ahead of the announcement, Army officials told reporters that they’re looking to change the software buying model.

“The direction we’re moving in right now in the Army is this is going to be one of many enterprise licensing agreements that we’re looking at entering into,” Army Chief Information Officer Leonel Garciga told a small group of reporters ahead of the announcement. “I think the big thing to think about is, as kind of we move forward, we’re finding some things, we have a lot of big software packages that are out there. They’ve been bought over several years, several program offices, several commands, [but we’re] not getting a lot of parity across the board on how they’re being delivered, right? Adding a lot of complexity to the environment. And we’ve been thinking through a couple things, right? One is, how do we reduce the complexity, right? So lower overhead to acquire capability, especially software. That’s kind of the first kind of tenet.”

The next piece, he said, is to figure out how to “make it a lot easier to acquire said software, right?” 

“I think the traditional model of, hey, we’re just buying software licenses and services … in combos kind of doesn’t work in this new environment and the way that things are being delivered,” Garciga said. “So how do we add enough fidelity, right, and an approach where folks can really get the software the way they need it?” 

The final piece, one that Garciga said he as the Army CIO cares “very much about,” is reducing cost. “How do we get better buying power across the board?” he said.

The 10-year deal with Palantir is worth up to $10 billion, although Army officials noted that they’re not committed to spending that much money. The move will consolidate 75 contract vehicles as the Army looks to streamline things, they said.

“This really has been our first kind of separate sense to go in and really get a large ELA. This is one of many. But our intent is to continue to move down this path, right, to really focus on reducing that complexity, adding agility to how we buy, right, and then the last piece … which is save taxpayer dollars as much as we can,” Garciga said.

The service is in talks with other vendors for similar types of arrangements.

“We have a couple of others that are teed up that we’re either already in negotiation with or starting the conversation to start negotiations with to do this across the board,” Garciga said.

A key aim of the initiative is to get better deals from a unit cost perspective. In the civilian side of the federal government, the General Services Administration is leading a similar effort to maximize government buying power for software licenses called OneGov.

“What I see across contracts is, hey, if I have more than one contract with the same vendor, have I bought the same thing more than once in a different way or at a different price? And just from a common-sense perspective, does that really make sense?” Danielle Moyer, executive director of Army Contracting Command, told reporters.

“Starting with Palantir and as we look at other ones, we’re looking at, hey, it makes sense to make sure … we’re getting the best discounts. So just like economies of scale buy, right? If I buy one widget, it costs X amount. If I buy 100, I should get a discount. And the more I buy at scale, the more of a discount I should [get]. And also …  just in general, across this whole initiative, we’ll look at, well, how are you selling this elsewhere? Should there be clauses in the contract that say, hey, you know, if you try and sell it somewhere else, we need to come back here and look at what the rate is on this and get a discount,” Moyer said.

She noted that the Army isn’t actually obligating $10 billion to Palantir, but the deal recognizes potential growth for the services and goods that are on that contract with the multibillion-dollar ceiling. While there is a minimum spend requirement on the contracts, the Army has no obligation to buy more than it sees fit across its enterprise. 

The Army is also trying to avoid vendor lock as it shakes up its buying practices.

“The other really important thing to note there is competition for future programs and things like that will still continue to happen. So, for example, if on all these ELAs — name the vendor — if we’re specifically talking about Palantir, if Palantir chooses to compete on, you know, whatever program or weapon system in there, the chosen awardee they happen to be at, then we would obviously leverage this agreement [to get] economies of scale discounts, buys, right, that makes the volume,” Moyer said. “We would leverage our buying power in the Army to get maximum discounts. So those are probably, from a contracting perspective, the things that … we really want to make sure that we hit home, which is robust competition is still a thing.”

The Army also wants to make sure it doesn’t overbuy and acquire licenses it doesn’t need.

Officials used a food analogy, comparing previous software buying practices to all-you-can-eat buffets or combo deals where customers essentially pay for things they might not consume.

“As we look at the way we’ve done kind of historical contracting … we typically will, kind of sometimes overbuy, because we’re trying to kind of calculate what expected growth is and whatnot. So this [enterprise agreement] is meant to help shape that, to say we’re buying just in time into that growth pattern, right? So, instead of saying, OK, I need 100 licenses, I only have to buy 50 now based on the real usage versus buy 100 because that’s where we have to fix a contract that’s meant to be for a longer period of time. So shifting that mentality is to say, OK, now we could just do just in time, kind of delivery of services,” Gabe Chiulli, chief technology officer for Army’s Enterprise Cloud Management Agency, told reporters.

Officials want a more flexible range of options, sort of like an a la carte menu where they can just pick exactly what they want.

Garciga said early efforts to set the stage for the new model began during the previous administration, but he suggested that the focus on improving software acquisition at the Defense Department under the Trump administration has provided additional momentum.

“We have been working on this since November of last year. And I think that there was just an inherent understanding, you know, almost two years ago now that we needed to start moving in this direction with a handful of our vendors,” he said. “There’s been a lot of prep work and foundation being laid to have this conversation. If anything, what I’d say is the change in the environment has allowed us to move a little bit faster than we would have normally, and I think, a willing acceptance by a lot of our commercial partners to rethink the way that they integrate and work with us in the government and what our contractual agreements are going to look like moving forward. So I think … we’ve had a little bit of a catalyst over the last like quarter and a half that’s just be able to get this like really over the hump, to get a really good deal for the Army.”

Moyer said the new way of doing things will also improve transparency into what the Army is buying.

“It’s easy [to keep track] when you buy things that you can see, right? When you buy a tank, right, you can probably see the brand of the wheels on it. It’s pretty, pretty easy. Well, when you build, you know, a weapon system that might have some software in it, and that software vendor — name the vendor — is a subcontractor, we don’t always have visibility on who those are. So I think this initiative in general will provide us visibility into how often are we buying the same software that is essentially a component or a subcontractor through somebody else,” Moyer told reporters.

The Army, as a huge organization that buys a ton of software, should be able to get better deals, Garciga suggested.

“When I look across the landscape, there’s … both software and hardware procurements that we’re doing out there with major IT companies where it would be advantageous to get an enterprise agreement just to get value at scale, right? I mean, think [about] the Army [having] 1.3 million people, right? I mean, we’ve got more endpoints than some countries do,” he said.

The Army is also looking to prevent middlemen from jacking up costs for software.

“What the enterprise agreement allows us to do is to get a much better kind of understanding when we do actually compete new work on what some of those baseline costs are going to be, because we’re kind of making it so folks have to use the enterprise agreement to buy the software, as opposed to what we’ve seen traditionally, which is like, hey, somebody’s going to go out buy this, and then a company is going to go buy it … and bump our cost up considerably for the same piece of software at scale. So I think our intent, like from especially from the CIO’s office, is to focus on where we have a considerable amount of use across Army commands and Army programs, can we engage with those companies to get value at scale, right, and in no way to get in the way of competition,” Garciga said.

ELAs are also seen as a way to help the Army keep pace with fast-moving software developments.

“We don’t want to be in the business of just buying this big block of software and then, you know, three years from now, we’re trying to figure out how to modernize that. No, on the contrary, I think this puts us in a much better position to be able to get that refresh happening organically from the commercial space. And again, it’s about flexibility too, right? It’s having that CLIN [contract line item number] structure that really allows us to as things grow and shrink, have the opportunity to adjust those levers and those rheostats to get us to kind of a baseline,” Garciga said.

He continued: “The next big step, right, and I think we’re going to see this with a lot of our vendors, is this idea of, like, hardware as a service and hardware subscriptions. I think we’re going to see that come in, too. That’s one that we’re working especially for fixed and garrison locations, is where do we have opportunities to rethink where traditionally we’ve done bulk buys and then, you know, five years later, we’re trying to figure out why we can’t lifecycle maintenance it. Now we’re going to kind of as a service, right? And we’ll work with the vendor to make sure that happens. But on the software side, yeah, definitely this is a lot easier.”

Moyer said under the enterprise agreement framework, the Army would be in a position to negotiate better deals over time.

“The other thing that you know we’re working across all the enterprise agreements we’re looking at is, once we get to X number every year … then we’re going to potentially negotiate on all these either A, a true up, or B, a discount for the next year,” she said.

Garciga noted that in the past, the Army has sometimes lost the space to negotiate.

“What we’re seeing right now is, how do you build a vehicle that allows you to … true up, true down, right as the environment changes?” he told reporters. “The larger we get, the bigger the discount. And we may be here for, like, you know, X amount, and then, you know, if we go to the next level up, we’ll get an even bigger discount, right? So I think that that’s going to be the big thing, is continuing that negotiation.”

Another important aspect of the enterprise agreement framework is that it will give the Army flexibility to jump around from a capability-acquisition perspective, he noted.

“If we want to move to the next major … platform that we want to do an enterprise agreement with, and we want to get off the one we’re on, we can gracefully exit that without having kind of put a lot of capital in front that we can’t recover,” Garciga said.

Moyer said the enterprise agreements will have minimum guarantees.

“Once you meet that, you don’t ever have to use that contract again. So if any point it doesn’t make sense … to use that vehicle, there’s somebody different or better, we could always do something different,” she told DefenseScoop. “But … just using my own common sense, why wouldn’t I try and get the best deal for as long as possible and write things in there like maximum discount buys, matching commercial prices, right? So, like, not necessarily for this specific EA, but just a general EA.”

There are many vendors out there that the Army could have enterprise agreements with, officials told DefenseScoop. And, there could be opportunities for the other services or DOD writ large to pursue these types of agreements.

“The service CIOs are all talking and we’re talking with DOD CIO,” Garciga told DefenseScoop. “If you’re already a year into your negotiation, like, we’re gonna put our requirements in and you finish up. If we’re a year into our negotiation and we’re like about to award, like, hey, we’ll get your requirements agreement. So I think we’re really at this point, I think the whole department is really pushing harder to move in this direction. So this [deal with Palantir] is just one of our first off the chute kind of big ones.”

The other services could potentially piggyback off the Army.

“There are discussions that are currently ongoing and … they’ll figure out what makes sense for them,” Moyer told DefenseScoop. “But we will position ourselves to make sure that, you know, if we can use taxpayer dollars in the most efficient way possible to get the biggest discount for any of these enterprise agreements we’re working, that is what we’re going to do.”

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Hegseth issued a memorandum last week mandating all Defense Department components to use the Software Acquisition Pathway (SWP) — initially rolled out under the first Trump administration — when purchasing software that supports business and weapon system programs. The new directive also calls on DOD personnel to prioritize commercial solutions opening and Other Transaction authority as the default solicitation and award options when procuring these types of technologies.

DefenseScoop viewed an internal unclassified email delivered to senior department and military leaders on Tuesday that further emphasized the strategic imperative of the new SWP instruction. 

“The operational landscape is changing rapidly. Our adversaries are leveraging technology to adapt at unprecedented speed. We must do the same,” wrote Robert Salesses, the official performing the duties of deputy secretary of defense, who penned the email.

“To ensure success, we will provide the necessary training, resources, and guidance to acquisition professionals at all levels. I encourage active engagement between leadership and acquisition teams to understand how this shift affects your respective missions,” Salesses wrote. 

Detailed timelines for the delivery of those support materials were not shared in the correspondence. However, Hegseth stated in his March 6 memo that the undersecretary of defense for acquisition and sustainment, in coordination with the Defense Innovation Unit chief, would develop and submit an implementation plan for his directive “within 30 calendar days.”

“By delivering secure, scalable software capabilities at the speed of relevance, we will enhance lethality, readiness, and adaptability across the force,” Salesses wrote in the email.

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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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Officials published a new directive in March that aims to streamline and standardize the Army’s approach to developing software — an extensive policy outlining how it plans to develop requirements, perform testing, procure, sustain and manage personnel for software-based capabilities. The Army later posted a notice to Sam.gov in May which sought industry feedback on a multiple-award contract vehicle for its software efforts, estimated to be worth more than $1 billion over a 10-year period of performance.

Not long after, members of industry — mainly non-traditional and venture-backed defense contractors — began publicly sharing their concerns with both the directive and the request for information (RFI). Many took issue with the Army’s push to use cost-plus contracts for software “to the maximum extent possible” while minimizing firm fixed-priced models, as stated in the service’s software directive.

Several company executives, who all spoke to DefenseScoop on the condition of anonymity to talk candidly, claimed that the contract language showed preference for large, traditional defense prime contractors and would cause smaller, non-traditional vendors to avoid bidding on future Army software programs.

“It’s not worth trying to bid or convince them if what they’re stipulating as sort of a requirement to even enter isn’t something you can meet,” one defense tech executive said. “I think they would see a lot less innovation in their responses, and it sort of starts leading down the path of custom-build, services-companies approach — which in some cases could be appropriate, but we find it a little affronting for the Army to say, ‘You must agree to this as a condition to even participate.’”

Cost-plus versus firm-fixed-price

During a roundtable with reporters Sept. 5, Army acquisition lead Doug Bush emphasized that the service never planned to exclusively use cost-plus contract types for its future software programs. Rather, he said the organization is committed to customizing acquisition strategy to each specific capability and is open to using hybrid-contract approaches.

“Every contract needs to be tailored to the task, and it’s not a simple world of cost-plus versus fixed-price,” Bush said. “Those are ends of a spectrum. In between those things are a vast array of hybrid approaches that are tailored to different things.”

Under cost-plus contracts, the Defense Department agrees to pay contractors for a project’s expenses — including labor hours, materials and any other costs accrued while under the contract’s terms — as well as an additional fee to account for profit once the project is completed.

While cost-plus contracts do guarantee reimbursement for contractors and mitigate risk to them, the model requires companies to use government-approved cost-accounting systems that track their software engineers’ hours and other expenses for the contract. One defense tech executive explained that implementing and approving the necessary infrastructure is a time-consuming, expensive effort — especially for smaller companies.

Others shared that overall, cost-plus contracts have made development cumbersome, are contradictory to the culture of how non-traditional defense companies operate, and do not value software the way that it should be.

“Through a cost-type contract, it is valued through what the government can count,” a source told DefenseScoop. “It can count the number of people working on it, it can count the number of hours that they’re billing — and that is almost antithetical to how value is generated in software.”

On the other hand, many software-focused companies prefer contracting using a firm-fixed-price model, in which the Defense Department and vendor agree on a set price for products at the start of the contract. This means companies do take on added risk if there are cost overruns during the program, but they would not have to implement additional infrastructure to track labor hours.

“I think startups and more innovative companies — because of our model and how we’re valued in the market — we’re willing to eat some of the costs to make the changes and deliver the best thing where necessary,” one defense tech executive explained.

When asked why the service intended to maximize use of cost-plus contracts for software, an Army spokesperson told DefenseScoop that agile software development and continuous delivery hinge on iterative requirements based on user feedback. Therefore, assessing the price of a software capability before awarding the contract award becomes “impossible,” they said.

The Army has since clarified that it won’t solely be using cost-plus contract types for its software capabilities. In response to industry feedback, the service has added all contract types to the IDIQ in order to provide flexibility, Jennifer Swanson, the Army’s deputy assistant secretary for data, engineering and software, told reporters at the roundtable.

In an upcoming RFI set to be released in October, the Army will also update how it differentiates labor-category costs that will allow the service to better understand how industry pays its software engineers, she said. Where the government historically uses education degrees to differentiate, industry has largely moved away from that practice, she added.

The Army is also looking to initiate a pilot program that would allow the service to not specify contract types upfront in a task order requirement for the IDIQ. Rather, vendors can pitch software solutions and a proposed contract type they believe would fit best, giving both the service and industry more flexibility, Swanson said.

“The reason we’re doing that is so that we are able to consider all solutions that are out there,” she said. “There may be a commercial solution we’re not aware of, and so this would allow a company to bring that forward with a firm-fixed-price contract type that would make sense for a commercial solution.”

Although the Army is now considering all contract types moving forward, the service will use cost-plus models in some cases, Bush said.

“There will be times when a cost-type contract of some flavor is the appropriate thing to use to protect the government’s interest. I’m not going to apologize for that,” he told reporters. “This is the American people’s money. Our contracting approaches are gauged to both achieve the capability, but also make sure funding is not wasted.”

Remaining concerns

In the software directive, the Army noted that “[c]ustomization to commercial software solutions will be minimized to limit risk to the government. Where appropriate, microservices will be used to add capabilities not present in commercial software solutions. Customization to commercial software should only proceed where potential cost and technical risks are understood and mitigated.”

Defense tech executives told DefenseScoop that they believed the policy would steer the Army away from commercial products and services in favor of custom-built solutions — shutting themselves off to large segments of industry. Many non-traditional vendors have existing software products sold commercially that can be customized with new tools so they can be sold to the government as well, they said. 

“You can think about bringing into an architecture some software that was commercially developed that you are accessing by virtue of a license or some other type of agreement — a fixed-price contract agreement of some kind — because it’s already built, you only have to modify it,” one defense tech executive said.

The Army spokesperson said the service still fully supports customizing commercial software, but previous experiences in doing so have resulted in cost increases and cybersecurity risks to their systems, while also decreasing the capability’s quality and ability for the Army to update to newer versions. 

Because of those experiences, the service plans to “maximize configuration of commercial software while limiting customization” for systems using commercial software products at their core — such as most of the Army’s business systems, they said.

“This will reduce costs, increase capability and encourage more widespread use of commercial software while allowing the Army to leverage firm-fixed-price contracts,” the spokesperson said. “Commercial-off-the-shelf software products will remain the Army’s primary choice. The Army will only develop software when no viable commercial capability is available.”

One defense tech executive said that while they understood concerns with commercial software customization, industry must realize that not every software tool can meet the Army’s requirements — especially for military-specific capabilities.

“The easiest way is you use what is out there, but I think it’s incumbent upon industry to recognize that industry hasn’t created every piece of software that the government is going to need,” the defense tech executive said.

Despite some negative opinions, Bush emphasized that a majority of industry’s feedback to the RFI was positive. He said the Army continues to field industry’s responses and will reasonably address any concerns companies still have moving forward, adding that it’s okay for people to not fully agree with what the service is doing.

“Of course there’s always going to be some people who have concerns. And that’s fine,” he said. “I think we’ve listened to a lot of it. But if some companies don’t want to bid on a contract, it’s a free country. Don’t bid, others will. My goal is simply to get the capability for the Army, not to make everybody happy.”

A final request for proposals for the IDIQ contract vehicle will likely be published before the end of 2024, Swanson said.

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The far-reaching policy — which addresses requirements, testing, procurement, sustainment and personnel — immediately went into effect, and it comes amid a broader push for accelerating digital modernization across the U.S. military.

“We’re learning from current conflicts — including in Ukraine — that the Army’s success on future battlefields will depend on our ability to rapidly update software and disseminate it to the operational force,” Secretary Christine Wormuth said in a statement. “Software development must be a source of our military advantage and the Army’s new software policy will ensure we have the right processes in place to inject innovation quickly and achieve a digital transformation of our warfighting capabilities.”

Undersecretary Gabe Camarillo added that traditional approaches aren’t up to snuff.

“This policy represents a significant effort to comprehensively adjust our legacy software development processes in line with private sector best practices,” he said in a statement.

According to a release summarizing major elements of the new directive, software-based systems “will no longer follow the traditional process in which a system transitions to sustainment once development is complete. In line with industry best practices, these systems will instead plan for continuous improvement and development over the entirety of the lifecycle. This change recognizes that modern software development is never complete.”

The policy also calls for maximizing use of the Pentagon’s software acquisition pathway — which was instituted in 2020 by then-Undersecretary of Defense for Acquisition and Sustainment Ellen Lord — flexible strategies such as “modular contracting,” and contract types that allow for “refinement of the requirements as the software evolves and user needs change.”

Soldiers are expected to have major input in the development of those requirements, which are to be written as “high level needs statements” rather than “prescriptive requirements documents.”

The Army intends to streamline testing of new capabilities and cybersecurity validation processes, including for obtaining authority to operate on the service’s networks.

Meanwhile, the service is looking to boost its organic software development know-how and make it more widely available across the department.

To that end, the Army is standing up a new Digital Capabilities Contracting Center of Excellence at Aberdeen Proving Ground, Maryland, that is expected to be fully operational in September.

According to a release issued last year by the program executive office for enterprise information systems, the new center of excellence is expected to serve as a model for agile procurement of digital tools and be tasked with “sharing playbooks” on best contracting practices with other contracting organizations.

Additionally, a new “software management and response team” at Army headquarters will aid enterprise-wide efforts.

The Army also has a software factory in Austin, Texas, which is a pilot effort that allows soldiers to train other soldiers in coding.

The service will explore additional ways to recruit, retain and upskill people with software talent, according to the policy announcement.

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The ability to rapidly develop and deliver software is a key element of the Pentagon’s modernization plans to respond to adversary threats. The department’s Software Modernization Strategy from 2022 notes that these efforts will require a shift in the DOD’s workforce, and that developing, training and recruiting employees are “critical aspects of software modernization.”

A GAO report published Thursday noted that “building a workforce — with critical skills and competencies — that can implement these reforms is foundational to all of DOD’s planned actions. Until DOD determines when and how it will conduct effective workforce planning for its software workforce, its ability to implement its planned actions and meaningfully transform its software acquisition practices as intended remains in question.”

The Defense Department has taken initial steps in planning for the future software workforce by identifying and defining key software engineering roles necessary for the Pentagon’s plans to swiftly deliver capabilities, the report said. 

A DOD official told the watchdog organization that they are collecting data to identify department-wide information on its current software workforce composition, expertise and skill sets, but added that these efforts are challenging because these employees work across a wide variety of occupations. 

It’s estimated to take from 12 to 18 months to collect this data, which will be used to help determine what resources the Defense Department will need to stand up a robust software workforce, officials told the GAO.

The report emphasized, however, that identifying the workforce is only the beginning of a longer process to ensure the Defense Department will have the people needed to carry out its plans for software modernization. With the current focus on collecting internal data, the department has not yet determined how it plans to execute a broader strategic workforce planning process, it said.

“Strategic workforce planning for software modernization efforts is likely to take a number of years and will need to involve the coordinated efforts of management, employees, and key stakeholders across DOD,” the report said. “Developing a department-wide strategic workforce plan for DOD’s software workforce—including strategies tailored to address gaps in the critical skills and competencies—will help position DOD to execute next steps in this planning process and achieve future software modernization goals.”

Once its existing software workforce is identified, the GAO recommends that relevant entities use that information to develop a department-wide software workforce plan.

The Defense Department “partially concurred” with the recommendations, adding that the Office of the Undersecretary of Defense for Acquisition and Sustainment plans to work with the Office of the Undersecretary of Defense for Personnel and Readiness in developing a “targeted strategic workforce plan that will address any identified skills or competency gaps,” the report said.

The findings within the GAO report aren’t the first time red flags have been raised regarding the DOD’s software workforce. Separate reports from the Defense Science Board and the Defense Innovation Board released in 2018 and 2019, respectively, called on the Pentagon to develop a cadre of software developers, as well as relevant training curriculums.

The GAO report did acknowledge that the Defense Department has taken several steps in recent years to transform how it develops and buys software. For example, the Pentagon has embraced acquisition strategies that promote agile development and stood up its software factory ecosystem.

The watchdog is also suggesting that the department take other actions, including finalizing implementation plans for future software modernization efforts, to ensure it is poised to implement its goals. 

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Their proposals come as lawmakers are working on fiscal 2023 National Defense Authorization Act (NDAA) legislation — and as software is considered increasingly critical to ensure military advantage in modern conflicts.

In a three-page letter penned to the House and Senate Armed Services Committees on Wednesday, the executives spotlighted some of what they deemed to be “key challenges in the defense acquisition process that slow the cycle time and impede innovative software companies’ ability to quickly deliver” capabilities to the Pentagon. 

“Software is critical in the new battlespace to ensure proactive defense, responsiveness, and adaptability when competing with near-peer adversaries,” they wrote in the letter, which was obtained by FedScoop on Thursday.

In particular, they called for a better Defense Department pathway for buying readily available Software-as-a-Service (SaaS) offerings. SaaS capabilities essentially provide a means of delivering technology applications remotely over the internet — as opposed to locally. 

“We recommend funding and authorization to allow military services to contract directly with SaaS product providers for software capabilities within programs of record for the acquisition of hardware platforms,” the executives wrote. 

“Fortune 500 companies today routinely use SaaS-based systems to stay competitive in the commercial world,” they noted. The U.S. “national defense community urgently needs to leverage SaaS products, so we can stay ahead of our adversaries in the rapidly-evolving digital battlespace.”

Further, the group called on policymakers to standardize the application of existing acquisition pathways across all of the military branches. They’d also like to see the reauthorization of the Small Business Innovation Research (SBIR)/Small Business Technology Transfer Research (STTR) program and the institution of “targeted reforms to assist small businesses in scaling contracts with the government from prototypes to production.”

Additionally, the executives urged the establishment of a clear pathway for extensive use of continuous Authority To Operate, which is the formal declaration that authorizes products to be used by agencies.

They wrote that they believe these recommendations “would significantly ease barriers to entry and allow small businesses dedicated to building mission-focused software the opportunity to break through the valley of death more quickly, thereby increasing innovation and technological superiority for the Department of Defense.” The term “valley of death” in the federal acquisition world refers to struggles to transition promising technologies into large-scale procurement.

The companies involved aimed to inform NDAA conference discussions before Congress’ August recess, FedScoop confirmed.

Those signed on to the correspondence include: Rebellion Defense, Recorded Future, Copado, Fiddler AI, Percipient.ai, Keeper, CalypsoAI, Interos, SandboxAQ, Nuvolo, LeoLabs, SparkCognition Government Systems, Second Front Systems, Tricentis, Aqua, Armis, Devo Security, Corelight and Jama Software.

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Douglas Bush, who was sworn into the top Army acquisition job Feb. 11, said that increasing the speed and agility of how the Army buys software is a top priority. Achieving that will depend heavily on using recent authorities granted by Congress, including one that allows the Army to pilot a new way to purchase software outside of standard acquisitions practices.

“I believe we have the authorities we need — it’s a question of using them well,” Bush said Thursday during a call with reporters.

Bush said the main issue when buying software is the lack of flexibility in the way the Army is allowed to spend money. Traditionally, the Army is authorized to use specific types of funding — also known as a “color of money” — for certain types of programs, like research and development or production procurement.

The rigidity in that construction often slows down programs that cut across those areas, especially software-based tech, Bush added.

“I don’t believe the private sector distinguishes between [research and development] and the procurement of software, but we do,” he said. “Does that make sense anymore? I’m not so sure.”

Congress allowed the Pentagon and military services to test a new budget activity specifically for software called Budget Activity 8 in the fiscal 2021 National Defense Authorization Act. That’s a new lever Bush says he wants to pull, and he hinted that he hopes the flexibility it offers might increase.

“The funding might have to be more flexible,” he said.

Bush used to work in Congress, most recently as a senior staff member of the House Armed Services Committee. He stressed that he plans to include Congress in key decisions he makes and will consult with members closely on budgetary matters. His plan for boosting software acquisition agility has yet to be finalized, he said.

“I can’t say I’ve got a master plan, but I want to develop a plan … to get us better than we are,” he said.

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