'Directing Modern Software Acquisition to Maximize Lethality' Memo Background Briefing

View Online 'Directing Modern Software Acquisition to Maximize Lethality' Memo Background Briefing March 7, 2025 DEFENSE OFFICIAL 1: I'd just like to say that yesterday, my renowned media colleague, Tony Capaccio, asked me if I could put this memo into plain English. So, to humor Tony here and maybe help kick this off with a little bit of context, here's my best shot.  So right now, the way the Pentagon buys software is slow, outdated and filled with bureaucracy. Meanwhile, our adversaries are moving fast. This memo is the beginning to fix that, cutting red tape, working more with private industry, getting cutting edge software into the hands of our warfighters quickly before the enemy can adapt. And one of the biggest changes is using flexible contracting tools, CSOs and OTs to speed up innovation and acquisition.  And the reason this works better — 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. So, bottom line, we're cutting out middlemen. Software companies make software. We're going to buy software from software companies. And with that, I'm going to turn it over to (Mr. DEFENSE OFFICIAL 2). DEFENSE OFFICIAL 2: Thanks, (DEFENSE OFFICIAL 1). Well done, (DEFENSE OFFICIAL 1). So, as (DEFENSE OFFICIAL 1) was talking about, this is an exciting acquisition modernization effort that we're going through here. And the title of that memo is "Directing Modern Software Acquisition to Maximize Lethality". And it takes a big step in combining tools that we have in the department to make capabilities go faster while simultaneously opening up the industry base to nontraditionals and commercial vendors. So, when I talk about those tools, what I'm talking about is the software acquisition pathway, the software pathway that was created in recognition that software can't be acquired the same way that we acquire a ship or an aircraft. So, we align modern software acquisition process with modern software development processes. And so, what came out of that was the software pathway in the acquisition community.  The challenge with that software pathway is that it did nothing in and of itself for how we expose commercial and 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 program, the software programs, to nontraditional and commercial software developers while we simultaneously lower the barrier for those nontraditional and commercial software developers to get in to defense programs of record. So, from the perspective of delivering capabilities, it allows us to leverage our acquisition tools that we have to manage programs and get capability out there fast. The software pathway program is less than a year to MVP from when funds are obligated. So, you have that acquisition mechanic now combined with the contracting and solicitation mechanics that expose you to the greater commercial industry base and allow us to get those accesses. So, from an acquisition perspective, this is very exciting. I think the combination of DIU innovation with acquisition modernization is creating a streamlined mechanic to both deliver capability faster and simultaneously open up the industry base to a broader audience. So, with that I'll hand it over to (DEFENSE OFFICIAL 3). DEFENSE OFFICIAL 3: Thanks, (DEFENSE OFFICIAL 2). Good morning, everyone. We're thrilled here at DIU to work with our A&S partners on this memo. And we really see this as a testament to the two best practices that we've worked hard to pioneer over the past few years.  For those who do not know, DIU was founded in 2015 to bring into the department the best-of-breed tech from commercial industry. What we found back then was that DOD's processes worked really well for traditional defense primes, but not commercial or nontraditional vendors. So, what we leveraged was the OT authority, or also known as the Other Transaction authority, to issue awards. The rest of the department still to this day prefers to issue other types of contracts. DIU also back then developed a solicitation process called the Commercial Solutions Opening, also known as CSO, to make it even easier for companies to understand the government's problem sets. And together combining the OT and the CSO, this is known as the CSO OT.  Some quick stats on the CSO OT. So, since 2016, DIU has awarded more than 500 OTs using the CSO process. Eighty eight percent of those contracts went to nontraditional vendors and 68 percent have gone to small businesses. Our goal to award these CSO OTs are just under 90 days.  And lastly, while back then these were workarounds to traditional process, this memo sets the CSO OT as the standard for acquiring software. And we all know that big reforms don't stop even with the Secretary of Defense memo. And the hard work to implement begins now and DIU is very excited to work with A&S on the implementation guidance. Thanks everyone. DEFENSE OFFICIAL 1: OK, now we have time for questions. If you can raise your hand in the chat, that might be helpful, or you can jump in. Do we have any questions? I see Patrick Tucker, Defense One. Q:  Hey, thank you for doing this. Can you talk a little bit about how this memo changes the way that DIU or just software acquisition out of A&S works with different service PEOs? Because I know that much of the point of what you do is to help services to accelerate and onboard new technology faster and they have some of their own processes. So how does this work specifically with services to accelerate the way they buy things?  And also, does this memo do anything to change any of the security requirements like the impact level requirements for — or how does it address any of the security expectations that the government has established for things like, for instance, cloud computing and understanding the impact levels and the requisite threshold of safety before you buy certain software in certain fields? Thanks. DEFENSE OFFICIAL 3: Thanks, Patrick. I can take the first part of your question. So, there are two models as to how this will affect — or two ways in which this will affect DIU's future. The first one is, as this memo sets the standard as the CSO OT, we expect there to be an increase in volume of where the services, the service POs will come to us and ask us to partner with them for us to do CSO OTs for them. That is what DIU is known to do. So, out of the 500 OTs that we have issued that I mentioned, all of those have mission partners or defense partners, whether they're in the services or OSD entities. So, we expect an uptick in sort of the demand for DIU projects.  The second way, which I think is actually the more important way in which this will impact DIU is that we think the real path to scale is to train and educate other acquisition professionals so that they can also use the CSO OT model rather than just relying on DIU to do it for them. And to address this specifically is a program that we have called ICAP, and I want to turn it over to my colleague (DEFENSE OFFICIAL 4) to talk a little bit about the ICAP. DEFENSE OFFICIAL 4: Yeah, sure. Thanks, (DEFENSE OFFICIAL 3). So, the Immersive Commercial Acquisition program is a program that we launched at DIU in partnership with the Defense Acquisition University where we competitively select top performing contracting officers from across the Department of Defense to come and work with us at DIU and execute DIU prototype projects — service aligned prototype projects. At the same time, they're taking DAU courses, so they're learning the textbook rules, regulations and things on how to execute the other transaction authority and other transaction agreements.  But then they're getting practical experience by sitting alongside our team and actually working and having — getting that experiential learning, which we think is what's kind of needed to get everybody up to speed and comfortable with utilizing these flexible acquisition authorities and also building up that confidence in utilizing this tool that we have. We're also going to be putting out an implementation plan which will address some of these training opportunities. DEFENSE OFFICIAL 2: And this is (DEFENSE OFFICIAL 2). I can talk from the A&S perspective. So, one of the key parts of this is that the memo signed by the SecDef directs the services and directs the department that the software pathway is the pathway for all Department of Defense software development and acquisition. So, that's step one. So, it re-emphasizes the use of the software pathway. That is not a brand-new pathway. It's something that the services have been doing. And even with the software pathway, we've seen a 400* percent increase in the use of that pathway just over the last few years. So, it reemphasizes the importance of that. What it then adds on to that is it directs the default to CSO solicitation and OT for procurement activities associated with that software pathway program. So, that effectively streamlines the access to commercial and the industry base that's nontraditional to the defense programs that opens the doorway both ways. The next part of that that A&S is currently working is the DAU training that goes out to the entire acquisition workforce. So, this isn't just a memo that goes out and we say OK, PEOs, you're on your own, figure it out. The Defense Acquisition University within the department is putting together the training curriculum that goes along with the effective use of these tools so that CSO OTs, combined with software pathways, can deliver what they're advertised to deliver. So, I think it's a combination of the tools that we're combining together with the training that goes across the entire workforce that then married together with this memo to enable it to be inserted. And (DEFENSE OFFICIAL 5), if you can cover the security part of this. DEFENSE OFFICIAL 5: Yeah, so the software pathway actually has a significant emphasis on cybersecurity, and we do encourage that folks bake cybersecurity, and really all compliance requirements, into their delivery pipeline. So, absolutely anyone participating in the software pathway or vendors being put to work here are going to have to conform to those requirements. Additionally, the software pathway also emphasizes the use of enterprise services. So, think about infrastructure and platforms that have been already authorized that they can take advantage of in their acquisition strategies and make those available where you can inherit those security controls and then focus on innovation and your mission applications and building on top of that with a smaller set of security controls. So, absolutely cyber security is an intense focus on the software acquisition pathway. Q: OK, thanks, guys. I'll have another one if there's a second round allowed, but everyone else's hands are up. So, thank you very much. DEFENSE OFFICIAL 1: OK, next we'll go to Ashley Roque, Breaking Defense. Q: Hi, thanks. I want to — first, (DEFENSE OFFICIAL 1), were your comments on the record or is that background too? DEFENSE OFFICIAL 1: Background. Q: OK, great. And I wanted to just sort of like pull out what you said, that this is sort of the start of a process of change. If someone, and all of you could like sort of walk us through what we can sort of expect, like how is the department, DIU, the services sort of going to build on this memo? And what can we look for going forward, whether with changes with software or potentially moving towards hardware? DEFENSE OFFICIAL 2: So, I can comment that over the next 30 days is going to be the development of an implementation plan on how this actually rolls out, right? So, I think that we'd be jumping ahead if we started to attempt to define that when it's the implementation plan that's going to lock that in.  One of the pieces I do want to point out is that all of the things that we are talking about are existing pieces. These are not new things that we have to figure out how to build and how to do. We have software pathway programs, we have CSOs, we have OTs.  What this memo is doing is aligning those and aligning those in such a way that we are simultaneously accelerating capability while we reduce the barrier for entry for nontraditional and commercial companies to get access to those programs of record so that effectively we get to that best of breed software development and integration and deployment structure. So, in terms of what to expect, I think the next 30 days, the implementation plan is going to lay that out. DEFENSE OFFICIAL 1: OK, next, we'll go to Tony Capaccio from Bloomberg. Q: Hi. Can you hear me? I'm on the phone; I'm not on Zoom. DEFENSE OFFICIAL 1: Yep, we can hear you. Q: OK, I cover the F-35 pretty closely, the most software intensive program you have. And you all know about its TR3 software and hardware upgrade difficulties. To what extent will this new policy help that program going forward to smooth out the way to TR3 full implementation? DEFENSE OFFICIAL 5: Sure, I'll take this. In general, the software pathway can help any program shift their culture and move to a more product- and warfighter-centric delivery model based on commercial best practices. And we've seen where weapons programs and weapons systems did move from traditional acquisition pathways where they had challenges, they had delays, and they moved into the software pathway. And once they transitioned, they were able to focus on engaging with their warfighter users to shape the requirements and features that they were delivering. And they ended up being able to achieve their milestones and delivering capability to the warfighter. So, in general, these best practices that mirror how commercial software companies deliver products can actually help any program in the department. Q: (inaudible) be directed going forward to implement your new approach in terms of TR3 given its importance? DEFENSE OFFICIAL 5: So, this software acquisition and CSO OT 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. But I'd say in general, the implementation plan is going to navigate and clarify these use cases of how to move into the software acquisition pathway. Q: OK, fair enough. Thank you. DEFENSE OFFICIAL 1: Thanks a lot, Tony. We'll go to Tony Bertuca from Inside Defense. Q: Thank you. I appreciate it. I wanted to ask about sort of who the existing players are and how they're going to be impacted. So, I heard the words middleman a little while ago. So, am I right to think then that sort of large defense primes are sort of the middlemen and that that is reflective of a big, slower, system? And what you're looking for now is a tighter, streamlined system that cuts out the large primes and goes right to — from a (inaudible) right to a smaller, maybe nontraditional, company, a Silicon Valley company, something like that, that can provide this software? DEFENSE OFFICIAL 2: This is (DEFENSE OFFICIAL 2). I think, no, in the case of middlemen here, what we're talking about is the bureaucratic red tape that gets in the way of enabling a capability development to be accessible to a program of record or a defense program of record so it can be delivered. And so, it's not the big defense prime, in fact, the OTAs — so we talk about commercial first, we talk about the value for nontraditionals. The OTA does not close the door for the defense prime. So, in fact, the OTA is tailored so that you could have — it can be a nontraditional, it can be a defense — it could be a traditional in concert with a nontraditional where that nontraditional has a, quote-unquote, significant role in the program. That also can be an OTA, it can be a collection of small businesses. So, there is no targeting of major defense contractors in this case. What this is really after is the red-tape process that prevents the nontraditionals and commercials to get into the game because they don't have the underlying requirements to respond to a CSO. They don't have the underlying requirements in terms of like their contracting structure to provide the information to a FAR-based contract. So, it effectively is streamlining the access of those nontraditionals and commercials so that they can play in the game that the defense primes are also playing in. Q: And to follow just quickly then, so do you guys have an example then of — because you mentioned that this is all stuff that is working right now, but just at a much smaller scale than you would like. Is there an example you could give us of where this was put into practice and it's working? Is there a program where it's working out? OFFICIAL 5: Yeah, we're very active in capturing the lessons learned. It's going to be important to do that so that we can show those North Stars to the rest of the department. But we do have programs that are exercising in this manner that are on the software acquisition pathway. They're using nontraditionals, they're using CSOs and OTAs that's resulting in quality software getting to the warfighter. And it's really that combination of the CSO and OT with the software pathway that sets the business conditions that allow us to innovate and more rapidly deliver. And we're seeing that combination go in to really great effect. Q: Thanks. DEFENSE OFFICIAL 3: Well, this isn't the first sort of software acquisition pathway plus OT plus CSO project. We have done them in the past. The most recent one that we have awarded is actually for Replicator software. It's a CSO called Autonomous Collaborative Teaming, which is ACT. We put out the AOI or essentially the problem statement out to industry. And from putting that out there to us making the awards, it took us only 110 days, which is much faster than sort of the traditional ways of putting out a solicitation and making those awards. We have three vendors on that contract, and they're essentially providing all the integration, the software integration as well as additional collaborative autonomy capabilities for Replicator 1 systems. And they're helping us meet the August capstone goals for Replicator 1. And we're doing those through both physical as well as virtual testing capabilities, which are best practices that we have seen in industry. So, that's one recent example of DIU using the software acquisition pathway plus CSO plus OT. DEFENSE OFFICIAL 1: Thanks a lot. OK. We're going to move on to Briana Reilly from CQ. Q: Thanks so much for doing this. Just zooming out a bit, the memo states it's a top priority for DOD to reform its acquisition process. Given that, is it right to look at this directive as the first of potentially many the department may issue to ensure existing authorities are leveraged to their fullest extent? And then following on to that, has there been consultation with lawmakers on the Hill about whether additional legislation maybe is needed to fully carry out DOD's stated commitment in this memo to acquisition reform? Thank you. DEFENSE OFFICIAL 5: Yeah, sure. So, as we implement this memo, we're going to find out where the pain points are and the bottlenecks in getting this done. In general, all of the adjacent policy owners and all the functionals contributing to an acquisition have to think, act, and do differently to meet the speeds of the software acquisition pathway. So, as we go through implementation and execution, we'll absolutely keep that in mind and work with the stakeholders and policy owners to streamline those to make sure we're optimizing business conditions for the total acquisition system. DEFENSE OFFICIAL 1: And Briana, this is (DEFENSE OFFICIAL 1). Yeah, you know what, I think it's very fair to say that we are looking at all of the available authorities to get capabilities to warfighters faster. Secretary Hegseth has been very clear in his priorities and has talked about reducing bureaucracy and bureaucratic barriers. That's what we're getting after here.  So, I think as we progress, I think it's logical to expect that you will see a series of reforms that are going to — or series of changes, updates, however you want to phrase that, that will get to the heart of the issue of making sure that we're able to go from a problem set to a solution much faster.  OK, I will move on. How about Jon Harper from Defense Scoop? Q: Hi. Thanks for doing this. I had a question just in terms of the OTs for software. Is there a dollar value ceiling for those that might potentially kind of limit when the department can issue OTs for software? And also, I know at least for hardware, oftentimes for OT's, there will be a rapid prototyping OT potentially followed by a follow-on production deal. Is that also what you're envisioning for software, or can you just issue kind of a single OT that kind of takes care of all of it where you don't have to go through prototyping and follow-on production? You can just buy the software and have it. DEFENSE OFFICIAL 2: Hey, yeah, OK. So, for the first part of that question, I think the thing that I'll point out is there isn't a ceiling, but there are thresholds at which, if you cross that budget threshold, you have to go to a higher level of authority for the approval. And I think at about $100 million, it then requires an A&S-level approval of that OT. So, it doesn't bound the amount of money, but it sets thresholds at which you have to go to a higher degree of authority to actually — to approve the award.  I think the other part of that in terms of prototyping OT and production OT, the important aspect of that, that's a key enabler, I think, here. So, I don't see us going to, oh, we don't need a production OT anymore because we've got a prototype OT. But 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 OT's is that you can prototype an OT and then a completely different organization can drop a production OT on top of that prototype OT. 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. Q: Great. Thank you. DEFENSE OFFICIAL 1: OK, thanks. And then we're going to have to tie this up, but Courtney Albon from C4ISRNET. Q: Yeah, I have two quick ones. First, (DEFENSE OFFICIAL 3), I think you mentioned you expect an uptick in service PEOs who want to partner with DIU on using some of these tools. Will there also be a staffing increase to DIU or some sort of shift of personnel to support this? And then second, sort of a broader question maybe for A&S. But can you give us a sense of how widely-adopted these tools are right now and what have been some of the bigger barriers to the services and the program offices using them to date, I guess? DEFENSE OFFICIAL 3: Thanks, Courtney. I think on the resourcing, we are essentially identifying what are the resource gaps, the staffing gaps, that DIU has right now to meet the increased demand, plus the training resources that we will need to scale up programs like ICAP. We plan to address those in the implementation guidance, effectively asking the department's senior leadership to work with us to get us those additional resources. DEFENSE OFFICIAL 5: Yeah, and on the second part in terms of adoption, so currently there are 82 programs in the software acquisition pathway, that represents nearly a 400 percent growth rate since we launched in October of 2020. And we're really seeing programs from every service, the components, Fourth Estate, Special Operations Command that are adopting it, putting it to work. And we're seeing a range of capabilities, so command and control, decision support, cyber, business, and even embedded weapon systems are starting to adopt the pathway. In terms of program size, we see a nice mix of smaller scale, medium-scale, and large-scale programs. So, I think we're seeing broad adoption of the software acquisition pathway that we now want to scale across and affect even more programs in the department. DEFENSE OFFICIAL 2: Yeah, so that software program (off-mic). Q: Got it. Thank you. DEFENSE OFFICIAL 2: Now what we're after is now we want to create — we want to combine it with these other tools, right? So, OTs, yeah, OTs have been used — I don't know, I don't have the numbers of those OTs for software pathway programs. But now we're combining it with this concept of CSO and now we're really breaking down the barriers so that those software pathway programs of record have access to commercial and nontraditional vendors in a way that we haven't seen before. So, in terms of acquisition modernization for software, this is a very exciting memo. DEFENSE OFFICIAL 1: OK, I just wanted to reach out to (DEFENSE OFFICIAL 4) from DIU. She didn't get a chance to comment. (DEFENSE OFFICIAL 4), did you have anything you wanted to add? DEFENSE OFFICIAL 4: No, I think we covered it. DEFENSE OFFICIAL 1: OK. Thanks all. Thanks for joining the call today. Look forward on communicating with you as we get the implementation plan developed, as we're looking at additional acquisitions/updates with that end goal of getting capabilities and technology to our warfighters faster, getting them fielded and decreasing testing timeline. So, thank you very much for joining today. If you have any questions, please feel free to follow up with me. That's it. * "400" percent changed from the original statement which said "300" percent — this was an error.

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