This column was originally published on Roger Waldron’s blog at The Coalition for Common Sense in Government Procurement and was republished here with permission from the author.

On Nov. 3, Jeff Koses, the General Services Administration’s senior procurement executive, posted an article on LinkedIn announcing that the “RFO is in play.” The article highlighted that GSA, the U.S. Department of Agriculture, and the Department of Homeland Security had issued all the deviations with Nov. 3 as the effective date for the changes. A new era begins for the Federal Acquisition Regulation as agencies and departments continue to work towards implementing the RFO deviations and updating their supplemental acquisition regulations. The procurement policy teams responsible for drafting the deviations, the Practitioner’s Albums, and the FAR Companion deserve praise for the thoughtful, integrated, and comprehensive effort. The streamlined RFO is an improvement on the FAR, providing a clear, concise, and coherent acquisition framework for government and industry.

As we know, the next phase of the process, the public rulemaking, is critical to the long-term success of the RFO. The rule making process provides the public, including key stakeholders across the procurement community, with the formal opportunity, consistent with law, to comment on the deviations in the form of proposed or interim rules. A robust, transparent process will ensure that the deviations become final rules, cementing the RFO. The Coalition for Common Sense in Government Procurement’s members look forward to the start of the public rule making phase and the opportunity to formally comment on the revised FAR.

The RFO is central to improving the efficiency and effectiveness of the procurement system. The FAR establishes the ground rules for government and industry transacting business in support of agency missions. The RFO streamlines and clarifies the ground rules thereby increasing competition and access to the commercial market.

Leveraging the RFO to deliver best value mission support for customer agencies and the American people centers on three critical elements: (1) requirements development (2) the acquisition workforce; and (3) operational commercial best practices. 

1. Developing Sound Requirements

Clear, concise, and well communicated requirements are foundational to successful procurement outcomes that deliver best value mission support. Program offices must play a central role in developing requirements. In this regard, coordination between senior program managers and contracting officers drives effective requirements development for complex requirements. Part and parcel of requirements development is market research. Understanding the capabilities and technologies in the commercial market will inform sound requirements. Too often, government requirements reflect a “Hail Mary” approach that seeks a capability well beyond what is currently commercially available rather acquiring the 80 percent commercial solution that can meet mission needs. As with most “Hail Marys” these requirements often end unfulfilled and undelivered.

Finally, today’s outcome-based contracts are yesterday’s performance-based contracts. The administration rightly has identified outcome-based requirements as a strategy that can increase competition, improve performance and achieve greater savings. The long-standing challenge of outcome-based contracting is the articulation and implementation of clear outcomes and associated measures to support contractor performance and government contract administration. It all starts with the statement of objectives. Management focus on and investment in outcome-based requirements development is a commercial best practice. The government should look to emulate this commercial best practice to unlock the positive potential of outcome-based contracting. Perhaps leveraging technology (e.g. artificial intelligence) for data analysis and analytics can support the government’s requirements development process.

2. Embracing The Acquisition Workforce

The RFO vests greater discretion to the contracting officer. Some of the commentary around the RFO has raised the potential of increased inconsistency in contracting operations due to greater discretion. The Practitioner’s Albums, FAR Companion, and Category Management Buying Guides are the starting point for the acquisition workforce. As the implementation of the RFO moves forward, translating real life experience with the revised ground rules into a set of operational best practices will be important in fostering consistency. Further, consistent, strategic investments in acquisition training and professional development will enhance sound decision making. Finally, management support and corresponding lines of authority in contracting operations will foster consistency and accountability in the process.

3. Adopting Commercial Best Practices in Procurement Operations  

The hallmark of the RFO is its leveraging of the commercial market. The RFO reduces the number of clauses applicable to commercial contracts, strengthens the preference for commercial products and services, and streamlines the overall procurement process. As a policy statement, the RFO recognizes that access to, and competition from the commercial market drives innovation, efficiency, and increases value for the government mission.

Adopting commercial best practices in procurement operations is the third key element in leveraging the RFO to deliver best value mission support for the American people. For example, as mentioned above, it is a commercial best practice to invest significant time and resources in requirements development. Sound outcome-based requirements are the blueprint for success. Vigorous competition for sound requirements is the single most effective way to drive value for the taxpayer. Avoiding government-unique, noncommercial practices is the other side of the coin. Operational practices that overregulate or reregulate the procurement process will limit competition, reduce access to the commercial market, and undermine mission support. It will be incumbent at the operational level to embrace commercial best practices while avoiding/eliminating noncommercial practices that undermine the efficiency and effectiveness of the procurement process.

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Interview transcript

Terry Gerton You’ve got an interesting story about a protest this morning from a company who actually won the bid. Tell us about that.

Zach Prince Sure. So this involved a Department of Homeland Security procurement from ICE for detention services for folks detained for immigration law violations. So the protester here is a company, Active Deployment Systems. They’re a Texas-based company that markets itself as specializing in rapidly deploying and operating temporary facilities — so, exactly what ICE is looking for for this procurement. So ICE said that they were going to be issuing five or more IDIQ contracts, and then task orders would be competed for particular tasks. Each of the offerers would bid on only those types of tasks that they want to be considered for going forward. ADS, Active Deployment Systems — they received an award, but they were one of 42 offerers that received the award. And you get the sense reading the protest that they don’t like the fact they’re competing now with fewer, slightly fewer than they were competing with for the IDIQ award, but not many. So it’s still gonna be big, big competitions going forward. Maybe they’re trying to level or eliminate some of those competitors.

Terry Gerton So this was an IDIQ contract, right? Does this what does this tell us about the structure of these? Was ADS’s expectation reasonable in terms of the number of winners that they would have?

Zach Prince No, and in fact this is happening pretty commonly where agencies have these very large IDIQ awards that they might issue 50, 100+ individual IDIQs that, it does narrow the playing field a little bit going forward, but what it really does for the agency is speed along the competition for that next stage when they actually have the identifiable requirements that they’re going to have bids on.

Terry Gerton And you can kind of understand ADS’s perspective. I guess the fewer the competitors on — or the fewer the awardees — on the actual contract, the more likelihood they have of winning those orders and the higher their revenue might be. So their projections might have been off a little.

Zach Prince Yeah, that’s right. And you know, I think the better arguments that they had here, and maybe their real concern was about the price structure of this IDIQ. But the problem was that they raised these challenges while also submitting a bid for a contract they received, right. So to tell you a little bit more about that, for each of the objectives that you could bid on for this IDIQ, there was a set pricing volume that contained the government’s independent government estimate for what prices should be to be fair and reasonable. Among those estimates was a hard cap, essentially a hard cap on prices per bed per detainee. ADS argue that this harms them if they’re stuck with this because it might put them in a losing position going forward for the actual task orders.

Terry Gerton So the court kind of said that, well, the time to challenge that is not after you’ve won, but before you’ve won, right?

Zach Prince Yeah, that’s right. And they did try, to give ADS credit. They challenged this at the agency level and an agency level protest. But agency level protests don’t actually stop anything. They just tell the agency, hey, we think this is unworkable. You’re hoping the agency looks at it and says, Oh, yeah, you’re right. But here they didn’t. So, you know, ADS took a contract based on this price structure that they think isn’t proper. And as the court noted, they don’t have to bid on any task orders. So if they really think that this is a losing proposition for them, first of all, they shouldn’t have bid on the contract. And the same thing is true for the 50 something other offerors. But now they don’t have to take losing contracts. They can do the analysis on a task order basis and say, we don’t want to be part of this. Whether it’s good business for the agency, well, maybe not, but I think the agency was moving quickly and just wants to get this thing done for urgent needs to be fulfilled.

Terry Gerton I’m speaking with Zach Prince. He’s a partner at Haynes Boone. So we talked a little bit about ICE’s strategy and you’re seeing this more often in these IDIQs, where agencies will bring on a lot of winners and then use this as a means to simplify later competition.

Zach Prince Yeah, we are seeing quite a lot of this. And I think there are a couple reasons for it. One is perhaps strategically, from a protest perspective, that this — if you just issue contracts essentially to everyone who submitted a reasonably responsive offer, then you’re limiting the IDIQ level protests, which generally can be heard at various forums, Court of Federal Claims, GAO. Maybe then you could have protests of the task order competitions, but those are limited only to GAO and only when they’re above certain dollar values. So the protest possibility becomes much more limited. You also can only have protests for whoever bid on the initial IDIQ or from whoever bid on the initial IDIQ. So it might be a management of protest strategy. It might just be because if you can get a framework in place from the agency that has the pricing mechanisms and the ordering mechanisms, it makes it a lot faster to buy what you need later on.

Terry Gerton So do you take any lessons from this particular protest resolution on how the court views these kind of arguments?

Zach Prince Yeah, I think in general, even if you haven’t waived an argument because you didn’t bring it up before, which it usually is the case. That is, if you submit a proposal and you have arguments that the solicitation was ambiguous or otherwise flawed, you can’t then complain later. That’s not always the case if you’ve launched agency level protests like ADS did here or there’s some other exception. But you really can’t have your cake and eat it too in this regard. And contractors are in a tough position, because you don’t want to be kicked out of competition for choosing not to bid. You don’t want to annoy the customer by protesting, perhaps unnecessarily, in advance. But if you don’t have clarity on terms or you’re gonna have to accept terms you don’t like, the protest mechanism is what’s there for you.

Terry Gerton Then should contractors change the way they approach these large IDIQs? Is there a different competition strategy that they should be employing to be more competitive going forward?

Zach Prince I don’t think there really is, unfortunately. I think — I have this conversation with clients all the time where there is a very ambiguous RFP, RFQ. I don’t know what it means. The agency won’t respond to questions and it makes a significant difference for the business on how they put their proposal together. But if they don’t bid, then they’re totally out of the game. If they bid making assumptions that prove to be unwarranted because the agency thinks it means something else, they might take a loss. So they could protest and annoy the customer and potentially delay the procurement. They can’t always protest because the protest rights are not so sweeping. And it also costs a lot of money. Or they just proceed and hope for the best.

Terry Gerton Or as the court told ADS, don’t take an order.

Zach Prince Yeah, that’s right. And I think ADS is likely going to take orders. I mean that was what they told the court. They want to keep this contract.

Terry Gerton This is an interesting case, Zach. Thanks for sharing it with us today.

Zach Prince Sure. Thanks for having me, Terry.

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Interview transcript

Terry Gerton Timely payments, rescinding stop work orders, and monitoring long-term impacts are top priorities as agencies restart operations. We’ll also look at key takeaways from PSC’s Vision Conference with CEO Jim Carroll. Jim, thanks for joining me.

Jim Carroll Terry, thank you so much for having me on.

Terry Gerton You are coming off two days of the PSC Vision Conference. Let’s start there. What were the biggest insights that you heard over those two days of discussions?

Jim Carroll Well, I’ll say three insights. One was it was a brutal way to start the Monday after Thanksgiving holiday … But, we had to accommodate the really great speakers on — including really some wonderful keynote speakers. Next year it will not be the Monday after Thanksgiving. So for all of our members, you know, for this event, we’re thankfully able to get a better date. But more importantly, as I mentioned, really was hearing from some of the leadership in the administration about, what is their projections for 2026 and how the money, as being appropriated by Congress, as the budget request and where they expect it to go. And so, one was just the amount of money, which is something worth talking about. The other thing and is really the use of AI and how the embrace of AI by the federal government is rapid, but it’s also a bit unknown. We’re moving forward in this space of the government using AI without everyone necessarily understanding all the implications. So I think so far those are the two big takeaways that we’ve been able to summarize. And, it’s a great event for our members and a few guests.

Terry Gerton What did you hear about this administration’s take on industry partnerships?

Jim Carroll You know, I think we have to sort of look back at DoD. I think DoD with Secretary Hegseth is a good example of that. As you recall, in November, Secretary of War Pete Hegseth met with our members and the folks that do defense contracting and said that they really do want to do a radical revolutionary overhaul of the FAR, and especially, in the sense of producing deliverables and measuring outcomes based on performance and getting this done right and how the military, how the branches within DoD have been tasked with coming up with orders … by mid-January, 60 days, in terms of how they think we can best streamline the process. And our hope is that this proposal really has legs. And we think it does. There’s support in Capitol Hill. There’s support in the administration. And of course, we — the leading trade association for companies that do business with the federal government — we’re completely supportive of most of these changes. There are things that we’ve been asking for for years that would really expedite the awards. Hopefully, with the grace of God, cut down on the number of appeals following an award, which seems to be a bit of an epidemic of companies now just expect there to be an appeal. And so we’re really very hopeful that this will stick and we’re optimistic that it will. And so that’s one of the major things, and then of course, as I mentioned, the amount of money in government services. And there was discussion about that … this week from the assistant secretary of war, that you know, there really is going to be an extraordinary amount of money, $850 billion at DOD with at least $180 billion toward services. And that’s what our very, and I’m proud to say, patriotic, companies that want to do the right thing for the war fighter and the taxpayer are eager to jump on board.

Terry Gerton Speaking with Jim Carroll, CEO of the Professional Services Council. Jim, tell us more about what you heard about the deployment of AI from the government agencies and within the contractor community.

Jim Carroll Yeah, so within the government we had speakers from across the government. As I said, Assistant Secretary of War, Michael Cadenazzi, who handles the industrial base policy, talked about an initial $180 billion, $200 billion in services, and how the use of AI and services can change and how there needs to be flexibility because of AI, that when some of these contracts call for a hundred seats to be filled, that there is enough flexibility that contractors can come back to the government and say, hey, we’re gonna use some, you know, AI, some other advanced technology. We can reduce the number of personnel from a hundred to eighty people. And in the past there’s been some resistance. Both the Department of War and some of the other departments, you know, really stressed that they want flexibility because of AI. I’ll say one thing that was interesting, and we’ve seen and heard this from members, is that there are a fair number of new companies who have never put in bids for government work that are using AI to not only write their proposals, but as I mentioned, also the use of AI to appeal. I mean, it just seems like it’s a press of the AI button, if you will, and an appeal is generated. And we need to get away from that, you know, for valid, justifiable awards, let’s move forward and deliver good results. And so we’re very optimistic. The recognition that AI has some limitations to it, but that it can deliver fast results is something that will be very interesting to see in 2026.

Terry Gerton Jim, one of the things that you and I have talked about, we’ve talked about it with a lot of contracting folks on the show is the uncertainty about the federal government workload for contractors. I’m wondering what you heard from your members over the course of this conference, especially as we’re sitting right now just post-shutdown and possibly pre-shutdown in January. What what are you hearing and what is PSC’s advice?

Jim Carroll Terry, don’t jinx us. No more government shutdowns. No, we’re tracking January 30th very closely. We had very senior meetings in the White House in the West Wing with a couple different meetings because of the shutdown to talk about the impact that it is having on results and the impact it is having on protecting the homeland. And so, what we told them in addition to the impacts is when the government gets up and running, because shutdowns end. This was a record-breaking one, but shutdowns do end. And as soon as they end, you know, it’s to tell the individuals in the departments, immediately start processing these invoices, get these payments out the door. You know, there are a fair number of companies, especially in the small to mid-size, that really did not have stable cash flow. They really were hurting. We saw some layoffs or at least, you know, sidelining of key employees, and it really presented a huge financial strain on the companies, which flows down to the employees, which flows down to the communities. And so that’s what we asked for. We asked, in addition, that the momentum on getting contracts, new contracts out the door, be, you know, jump-started as fast as possible. Historically, it takes quite a while after a shutdown for things to resume sort of a normalcy. And, we don’t have time for that. In addition to the financial impact, truly the impact on national security. The world is facing new and dangerous threats that seem to be magnifying every day. And our contractors are able to deliver world-class results and protection. And unless they get up and running immediately, you know, those threats are very real.

Terry Gerton Are you seeing that kind of activity coming out of the government agencies now a couple of weeks on from shutdown?

Jim Carroll You know, we’re actually pleasantly surprised. And I hate to say that word surprised, but in the past, it does seem to be a bit of a lag. Our message seems to be delivered. We’re getting payments out quickly. Maybe not all and not every department, but it seems to be beating historic records in in terms of getting payments out. Obviously, some companies are still hurting, you know, waiting to get paid for work that they performed. But we’re happy so far. But Terry, I can’t believe you brought up January 30th of next year. You know, is this a lull between shutdowns? I hope not. I hope that they’re able to resolve, you know, some of the significant issues, healthcare, things like that. But as we’ve talked about, there’s not a lot of workdays up on Capitol Hill, and we just cannot have another shutdown.

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The Defense Department wants to shake up how it works with value-added resellers.

In a draft memo obtained by Federal News Network, the Pentagon would place a 5% cap on most fees charged by resellers starting with a specific special item number (SIN) for IT products. This cap would only apply to IT products sold through the General Services Administration’s schedule contract.

DoD says it spent about $2 billion in fiscal 2024 through the GSA schedule on these technology products.

The draft memo is one of two expected from the administration to address what it believes are higher than normal costs when buying IT products and services through resellers.

GSA initiated this review and proposed overhaul of the reseller market earlier this year. It started in June with a letter to 10 value-added resellers to collect data to better understand the role of such companies and what it would take for original equipment manufacturers (OEMs) to sell directly to the government. Then in early October, sources said GSA was close to issuing a memo that would establish such a cap on resellers.

While GSA has yet to issue such a memo, this undated draft memo from the undersecretary of Defense for Acquisition and Sustainment, Michel Duffey, offered more specifics into what this market cap and oversight process would look like.

Duffey references GSA’s plans in his draft memo.

Duffey wrote the initiative would “initially entail GSA contracting officers’ use new control measures to support their determinations of price reasonableness for products offered for sale under IT Special Item Number 33411. Specifically, GSA will more closely scrutinize pricing from entities that hold themselves out as resellers.”

It would focus on SIN 33411, which is for the purchasing of new electronic equipment, including desktops, laptops, servers, storage equipment, routers and switches and other communications equipment, audio and video equipment and even two-way radios.

Since this cap would only apply to purchases off the GSA schedule, DoD is returning to the idea that these prices are no longer automatically considered “fair and reasonable.”

This harkens back to 2014 when both DoD and NASA issued deviations to the Federal Acquisition Regulations that said schedule prices shouldn’t be automatically considered fair and reasonable. Several years later, DoD and NASA removed that deviation.

“When placing orders on IT contracts, I expect the department’s contracting officers to independently determine fair and reasonable pricing by considering the unique factors of a given acquisition in the same manner as GSA,” Duffey wrote in the draft memo. “Finally, and in general, we will apply the same common-sense approach to avoid paying excessive pass-through costs and avoid paying non or low-value added price markups across the complete range of the procurement.”

A third change DoD would require is for vendors to disclose in their price proposal the manufacturer or dealer price, the percentage markup from the OEM price. DoD also will require a description of the value provided that compromises the markup amount. Any markup more than 5% would require additional vendor justification and a higher level management attention. The memo doesn’t describe what either of those will look like.

Multiple emails to DoD seeking comment were not returned.

DoD’s reasoning for price caps questioned

Federal acquisition experts and resellers questioned the DoD’s rationale for applying price caps.

Three different executives who work for resellers as well as a former federal acquisition official, all of whom requested anonymity for fear of retaliation and to talk about a pre-decisional memo, said this approach flies in the face of what the Trump administration has been trying to do since January to relieve the burden of federal acquisition and encourage more vendors to participate.

One executive at a reseller says the first thing that DOGE went after was cost plus contracts. Now, DoD wants to take what this person called clean and simple transparent firm fixed price contracts for commercial products and turn these into cost plus type contracts, which the executive said makes no sense.

“Audits, narratives, justifications, additional steps and time, how is this simplifying acquisition and growing the industrial base?” the executive asked. “Are they going to cap gross profit on other items they buy like cars, furniture, office supplies, building materials, heating, ventilation and air conditions (HVAC) systems, lighting, plumbing, tools, safety gear and maintenance supplies next?  Where does it stop? Why are we being targeted?”

The executive says there seems to be a big misunderstanding about the role of resellers and even how the market works.

“It’s competition, not price controls, that drive down price. If that’s the ultimate goal,” the executive said. “Capping margins would drive out the best, service-oriented partners that invest in engineering and innovation — leaving behind low-touch resellers who only process orders. This reduces competition, supplier diversity and access to expertise.”

Another executive at a reseller says determining what constitutes an “excessive mark-up” is subjective. The source said for an administration that wants to keep things moving in a timely pace, giving contracting officers discretion about what is an excessive mark-up will cause more problems than it will solve.

“They are assuming that the contracting officers have the appropriate knowledge and training to do that,” the executive said. “Unfortunately and frequently that isn’t what the contracting officers have. There is a lack of understanding that will end up causing confusion and delays.”

VARs solve problems

A third executive questioned how DoD, or any agency, would oversee this entire initiative.

They asked whether the resellers would not need a cost approved accounting systems? If so, that would add significant costs and burdens.

Finally, the former federal acquisition executive, who spent more than 25 years in the federal government, says resellers provide a lot of value to agencies, partly because OEMs traditionally don’t sell directly to the government nor do they want to, but also because the resellers solve problems for the agency.

“They know the technology. They know the OEMs and can tell you what will work or what will not work. Resellers are invaluable,” the former executive said. “In terms of their markup, you just have to negotiate better. If you get at least two resellers to bid, you will get a good price.”

Is capping profits even legal?

All the sources agreed that if DoD or GSA wants better prices, they should do two things: ensure there is competition at the task order level and train contracting officers and other acquisition workers to be better negotiators.

“If you don’t have contracting officers who can push for better pricing at the task order level, then how are you going to have contracting officers who can make these determinations of the value of the markups that are over 5%?” asked the third executive. “You are better off training contracting officers to go after better prices at the task order level. GSA has ways to help like the 4P tool that combs all over for publicly available prices. But applying caps on fees or profit goes against capitalism. It goes against common sense and it will be detrimental to the government and its industrial base.”

Aside from just questioning the rationale behind the price caps, experts also asked whether the memo would violate the FAR and even some federal laws.

One of the reseller executives highlighted five FAR provisions and/or laws this idea seems to violate.

The executive says this requirement seems to violate the Truth in Negotiations Act (TINA) in the sense that commercial Items are not subject to TINA, which requires contractors to provide certified cost or pricing data to the government during negotiations for other items because the commercial marketplace is presumed to be a competitive environment and should drive a reasonable price.

Another part of the FAR this initiative may violate is Part 2 for the acquisition commercial items. The executive said if the government is obtaining a “fair and reasonable” price, then the focus is not about contractor costs, reasonable mark-up, or profit, it’s about the price the agency is paying.

A third section of the FAR this may violate is under Part 15. This includes a prohibition on obtaining certified cost and price data for commercial items.

Cy Alba, a procurement attorney with the firm Piliero Mazza, said if the government is buying through a firm fixed price contract, then they are not supposed to be asking for cost or price information. He added if it’s awarded through the GSA schedule and it’s below the maximum order threshold then prices are determined to be fair and reasonable by GSA.

Alba also said if it’s a commercial item, or really anything that has adequate price competition, the market is supposed to make that determination that the price is fair and reasonable. He said if the government thinks the markup is too high, then they don’t have to buy the product or service from the vendor.

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Since January 2025, the Justice Department has been aggressively holding federal contractors accountable for violating cybersecurity violations under the False Claims Act.

Over the last 11 months, the Trump administration has announced six settlements out of the 14 since the initiative began in 2021.

Sara McLean, a former assistant director of the DOJ Commercial Litigation Branch’s Fraud Section and now a partner with Akin, said the Trump administration has made a much more significant push to hold companies, especially those that work for the Defense Department, accountable for meeting the cyber provisions of their contracts.

“I think there are going to be a lot more of these announcements. There’s been a huge uptick just since the beginning of the administration. That is just absolutely going to continue,” McLean said during Federal News Network’s Risk & Compliance Exchange 2025.

“The cases take a long time. The investigations are complex. They take time to develop. So I think there are going to be many, many, many more announcements, and there’s a lot of support for them. Cyber enforcement is now embedded in what the Justice Department does every day. It’s described as the bread and butter by leadership.”

A range of high-profile cases

A few of the high-profile cases this year so far include a $875,000 settlement with Georgia Tech Research Corp. in September and a $1.75 million settlement in August with Aero Turbine Inc. (ATI), an aerospace maintenance provider, and Gallant Capital Partners, a private equity firm that owned a controlling stake in ATI during the time period covered by the settlement.

McLean, who wouldn’t comment on any one specific case, said in most instances, False Claims Act allegations focus on reckless disregard for the rules, not simple mistakes.

“We’ve seen in some of the more recent announcements new types of fact patterns. What happens is when announcements are made that DOJ has pursued a matter and has resolved a matter, that often leads to the qui tam relators and their attorneys finding more matters like that and filing them,” said McLean who left federal service in October after almost 27 years. “It’ll be interesting to see if these newer fact patterns yield more cases that are similar.”

Recent cases that involve the security of medical devices or the qualifications of cyber workers performing on government contracts are two newer fact patterns that have emerged over the last year or so.

Launched in 2021, the Justice’s Civil-Cyber Fraud initiative uses the False Claims Act to ensure contractors and grantees meet the government’s cybersecurity requirements.

President Joe Biden signed an executive order in May 2021 that directed all agencies to improve “efforts to identify, deter, protect against, detect and respond to” malicious cyberthreats.

130 DOJ lawyers focused on cyber

Justice conducted a 360 review of cyber matters and related efforts, and one of the areas that emerged was to use the False Claims Act to hold contractors and grantees accountable and drive a change in behavior.

“The motivation was largely to improve cybersecurity and also to protect sensitive information, personal information, national security information, and to ensure a level playing field, so that you didn’t have some folks who were meeting the requirements and others who were not,” McLean said.

“It was to ensure that incidents were being reported to the extent the False Claims Act could be used around that particular issue. Because the thought was that would enable the government to respond to cybersecurity problems and that still is really the impetus now behind the enforcement.”

McLean said the Civil-Cyber Fraud initiative is now embedded as part of the DOJ’s broader False Claims Act practice. It has about 130 lawyers, who work with U.S. attorney’s offices as well as agency inspectors general offices.

Typically, an IG begins an investigation either based on a qui tam or whistleblower filing, or a more traditional review of contracts and grants.

The IG will assign agents and DOJ lawyers will join as part of the investigative team.

McLean said the agents are on the ground, interviewing witnesses and applying all the resources that come from the IGs. DOJ then decides, based on the information the IGs bring back, to either take some sort of action, such as intervening in a qui tam lawsuit and taking it over, or to decline or settle with a company.

“They go back to the agency for a recommendation on how to proceed. So it’s really the agencies and DOJ who are really in lockstep in these matters,” she said. “DOJ is making the decision, but it’s based on the recommendation of the agencies and with the total support of the agencies.”

Many times, Justice decides to intervene in a case or seek a settlement depending on whether the company in question has demonstrated reckless disregard for federal cyber rules and regulations.

McLean said a violation of the False Claims Act requires only reckless disregard, not intentional fraud.

“It’s critically important for anyone doing business with the government, especially those who are signing a contract and agreeing to do something, to make sure that they understand what that is, especially in the cybersecurity area,” she said. “What they’ve signed on to can be quite complicated. It can be legally complicated. It can be technically complicated. But signing on the dotted line without that understanding is just a recipe for getting into trouble.”

When a whistleblower files a qui tam lawsuit, McLean said that ratchets up the entire investigation. A whistleblower can be entitled to up to 30% of the government’s recovery, whether through a decision or a settlement.

Self-disclosures encouraged

If a company doesn’t understand the requirements and doesn’t put any resources into trying to understand and comply with them, that can lead to a charge of reckless disregard.

“When it comes to employee qualifications, it’s the same thing. If a contract says that there needs to be this level of education or there needs to be this level of experience, that is what needs to be provided. Or a company can get into trouble,” McLean said.

“The False Claims Act applies to making false claims and causing false claims. It’s not just the company that’s actually directly doing business with the government that needs to worry about the risk of False Claims Act liability, because a company that’s downstream, like a subcontractor who’s not submitting the claims to the government, could be found liable for causing a false claim, or, say, an assessor could be found liable for causing a false claim, or a private equity company could be found liable for causing a false claim. There are individuals who can be found liable for causing and submitting false claims.”

She added that False Claims Act allegations can apply not only to just the one company that has the direct relationship with the government but also to their partners if they are not making a good faith effort to comply.

But when it’s a mistake, maybe an overpayment or something similar, the company can usually claim responsibility and address the problem quickly.

“DOJ has policies of giving credit in False Claims Act settlements for self-disclosure, cooperation and remediation. That is definitely something that is available and that companies have been definitely taking advantage of in this space,” McLean said. “DOJ understands that there’s more focus on cybersecurity than there used to be, and so there are companies that maybe didn’t attend to this as much as they now wish they had in the past. The companies discover that they’ve got some kind of a problem and want to fix it going forward, but then also figure out, ‘How do I make it right and in the past?’ ”

McLean said this is why vendors need to pay close attention to how they comply with the DoD’s new Cybersecurity Maturity Model Certification.

She said when vendors sign certifications that they are complying with CMMC standards without fully understanding what that means, that could be considered deliberate ignorance.

“Some courts have described it as gross negligence. Negligence would be a mistake. I don’t know if that helps for the for the nonlawyers, but corporations which do not inform themselves about the requirements or not taking the steps that are necessary, even if it’s not through necessarily ill intent, but it’s not what the government bargained for, and it’s not just an accident. It’s a little bit more than that, quite a bit more than that,” she said.

“The one thing that’s important about that development is it does involve more robust certifications, and that is something that can be a factor in a case being a False Claims Act and a case being more or less likely to be one that the government would take over. Because signing a certification when the information is not true starts to look like a lie, which starts to look like the more intentional type of fraud … rather than a mistake. It looks reckless to be signing certifications without doing this review to know that the information that’s in there is right.”

Discover more articles and videos now on our Risk & Compliance Exchange 2025 event page.

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A new forecast projects that defense spending will keep rising through 2035, while civilian agencies face years of flat or shrinking budgets, continued cuts and growing pressure to scale back. 

The Professional Services Council’s latest federal market forecast, compiled with input from more than 400 industry volunteers and subject-matter experts, predicts that in an environment where legislative logjam is likely to persist, defense spending will continue rising at roughly 2% annually after its first $1 trillion budget in fiscal 2026 — a one-time spike driven by reconciliation —  while cuts will “continue to fall disproportionately on civil agencies until elections change the balance of power.”

“What this means in practical terms is that the fiscal environment for the next decade will be tight, competitive, highly dependent on supplemental funding, reconciliation and prone to crisis-driven appropriations. Base budgets alone will struggle to drive new initiatives, especially on the non-defense side. In this environment, as one of our interviewees suggested, it’s best to keep your customers close and your congressional supporters and lobbyists closer,” Mike Riley, a volunteer for PSC’s Vision Federal Market Forecast told reporters last week.

In the defense space, PSC volunteers said their discussions with defense stakeholders revealed a shift, or “strategic realignment,” in the Pentagon’s priorities. While the Indo-Pacific Command remains of “elevated importance,” the Northern Command and Southern Command are gaining new emphasis as the department puts greater focus on homeland, border security and expands its presence in Latin America and the Caribbean. 

“This year was a bit of an interesting year for us. A lot of defense folks acknowledge the growing importance under this administration, but also a lot of consternation about the directions the administration might be going and just kind of the lack of clarity. There’s some continuing trends — deterring China, integrated deterrence, that pivot to the Pacific — that’s an ongoing thing that didn’t change from the previous administration. Of course, border security, the Department finds itself in an uncomfortable position,” Jason Dombrowski, a volunteer for PSC’s Vision Federal Market Forecast, said.

“They are getting a little bit more heavily involved in domestic politics than they would otherwise prefer to. Certainly, they always reiterated their intent to be responsive to the commander in chief. But historically, of course, the American military has tried to avoid a domestic role,” he added.

The department is also placing greater emphasis on the Golden Dome missile defense system, shipbuilding and munitions under this administration.

“I think everyone’s been paying attention to the news that there has been some very notable plus ups and focuses of this administration, most notably around shipbuilding, but also to include things like nuclear modernization, which in previous years we had highlighted as a potential toss up, but this year definitely moved into the winners category,” Dombrowski said.

Acquisition reform

The Defense Department also moves to implement Defense Secretary Pete Hegseth’s sweeping acquisition reforms, which emphasize greater competition, faster delivery and making commercial technology the default option. It’s unclear whether the department has the ability to implement those changes given deep personnel cuts across the contracting workforce.

“The contracting professionals — there seems to be a large reduction. How do we get this done? That fundamental capacity to get things done is really going to make a difference, whether you’re putting out contracts, supply chain, workforce throughput … It’s going to affect how we can actually help out the government. Adaptability is the name of the game,”Jim Kainz, a PSC volunteer, said.

In addition, the department’s new acquisition strategy promises to lower barriers to entry to encourage startups and non-traditional vendors to join the defense industrial base. Dombrowski said that while stakeholders are cautiously optimistic about the reforms, there is also a “healthy cynicism of saying, ‘How is this time any different?’” 

“This administration has made a big priority of trying to attract new people, and we looked at the pros and cons of it. It’s probably worth noting that, aside from a few very notable successes that we can all figure out, there hasn’t really been much movement in this regard,” Dombrowski said. 

“We’re very excited, certainly [Commercial Solutions Opening] and [Other Transaction Authority] and just a variety of things that should provide a lot of flexibility, but let’s see it,” he added.

Winner and losers

Dombrowski and Kainz said several areas emerged as clear “losers” in this year’s defense outlook, including the department’s buying power, which continues to erode as inflation and reshoring efforts drive up costs across programs.

Legacy systems and advisory and assistance services are facing cuts, and U.S. Africa Command and Central Command are being pushed lower on the priority list as resources shift toward European Command.

There is also uncertainty around operations and maintenance funding, which Dombrowski and Kainz said remains a major concern for both think tanks and potential customers. Sustainability initiatives appear to be split — the “green side of sustainability” will most certainly lose ground, while efforts tied to energy resilience may gain momentum. 

Contested logistics, once considered a toss-up, is gaining traction as a priority, and scalability — the ability to rapidly increase production in a crisis — is emerging as a clear winner across the department.

Overall, research and development spending is increasing, but only in areas related to advanced weapon systems, technologies, drones and energy. 

“However, there’s a belief and a growing expectation that the contracting community will bear more of those responsibilities,” Dombrowski said. “It’s really unclear where that line is going to be drawn between things that are really government exclusive where DoD is willing to pick up all costs associated to it. There are things we can all imagine, like fighter jets. But what about things that are more in the gray areas? Avionics, business process systems, back-office systems, things like that — definitely more of a sense that we are going to have to be developing those on our own.”

If you would like to contact this reporter about recent changes in the federal government, please email anastasia.obis@federalnewsnetwork.com or reach out on Signal at (301) 830-2747.

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As the Defense Department moves to implement Defense Secretary Pete Hegseth’s sweeping acquisition reforms, Space Force leaders warn that the depth of workforce cuts is threatening to cripple the service’s ability to execute them.

“You have to have a strong, vibrant workforce to do the work and we’re in a really interesting time and a troubling time. There is a strong, motivated force but there have been an incredible amount of pressures on them this past year,” Maj. Gen. Stephen Purdy, acting assistant secretary for space acquisition and integration at the Department of the Air Force, said Nov. 20 during a Center for Strategic and International Studies event. 

“We have a looming increase in acquisitions coming down the pike, and so that presents us with a really difficult situation of where we need to double down on our acquisition workforce, our acquisition training. We are in a situation where we barely have enough acquirers to do all of the work that we have now,” he added.

Purdy said the service has spent the last few years implementing the acquisition tenets set by Frank Calvelli, who stepped down as assistant secretary of the Air Force for space acquisition and integration in January. Calvelli pushed the service to “build smaller satellites and smaller ground systems and minimize non-recurring engineering or new design.” He also preferred to use fixed-price contracts when possible. Calvelli’s “tenets” were a back-to-basics formula meant to fix chronic problems in space programs.

“We’ve built upon that this last year. We haven’t let grass grow under our feet as we’ve kind of taken over in January. And we’ve built upon that foundation and moved on out and really done a lot this year that kind of foreshadowed [Hegseth’s] acquisition reforms. But the workforce question is really the key piece,” Purdy said.

The Trump administration push to reduce the size of the federal workforce through initiatives such as the deferred resignation program and voluntary early retirement has had an “outsized impact” on the Space Force. In May, Chief of Space Operations Gen. Chance Saltzman told Congress the service had lost nearly 14% of its civilian workforce — much of it coming from Space Systems Command, the Space Force’s acquisition hub.

“I’m worried about replacing that level of expertise in the near term as we try to resolve it and make sure we have a good workforce doing that acquisition,” Saltzman told the Senate Armed Services Committee at the time. 

When asked about the acquisition workforce, Saltzman told reporters that these workforce reduction efforts have taken civilian experts “out of play,” leaving gaps in the institutional knowledge and technical skills.

As the Space Force begins implementing Defense Secretary Pete Hegseth’s acquisition overhaul, which calls for using commercial technology as the default option, great competition and faster delivery, Purdy warned the service may not have the workforce needed to shift to the new way of doing business. 

“If you look at [Hegseth’s] acquisition reforms that he’s laid out, a bunch of great initiatives and things we need to get after. But … you need the numbers of people, and you need the quality to understand. If you say ‘go commercial,’ and if you say, go after ‘new manufacturing mechanisms’ and take advantage of all of the new space companies that are out there, you need a larger number of people just to even track that activity. You need to be able to understand all that’s going on. You need to understand the incentive structure,” Purdy said.

The strain is particularly acute in contracting since the service simply doesn’t have enough contracting officers to handle a much larger workload created by recent acquisition reforms.

“In the past, if we had an acquisition program and we would go 20 years and it would be with one prime, we would maybe have one or two contracts, an R&D contract and a production contract. Pretty simple. One prime, a couple contracts. Now, with some of our programs there’ll be a five-year program, but we’ll probably have 20 contracts because I’m dealing with 10 or 15 different contractors in industry, which is literally what acquisition reform is telling us to do,” Purdy said.

“We have a serious issue here at a federal level on contracting and it’s just the numbers of folks. We do not have the numbers of contractors that we need at a federal level. Every federal agency has problems, and so we do not have the right numbers that we need,” he added.

Saltzman said the service is trying to ease the strain by requesting waivers to the hiring freeze that has been in place since the start of the Trump administration, as well as hiring authorities to fill essential acquisition and contracting roles.

The service also recently launched its first acquisition training course.

Kay Sears, vice president and general manager of space, intelligence and weapon systems development at Boeing, said that while the Space Force acquisition community is more open and collaborative than ever, it is also apparent that the service’s workforce is stretched thin.

“You can tell that they’re stressed. You can tell that they’re overworked. And then when you get into that contracting element that’s really where I see the slowdown, the, ‘Hey, I’ve only got one playbook — I’m going to go follow the playbook,’ and we really start to lose sight of the mission objective,” Sears said.

Acquisition experts have said that while the proposed acquisition changes could meaningfully reshape how the Pentagon buys capabilities, the success of Hegseth’s reforms will hinge on whether the department can equip the workforce with the skills needed to operate differently. 

“Scores of case studies have shown, there has to also be an aggressive, intentional and holistic approach to change management, prominently including how the relevant workforces are developed. Absent re-aligning those processes, real change will remain elusive,” Stan Soloway, president and CEO of Celero Strategies and federal acquisition expert, told Federal News Network.

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Interview transcript:

 

Elizabeth Curda The disability exam process is an important component in the decisions that VA has to make about a veteran’s claim for disability. So for example, if a veteran was injured during their service in Iraq and they have ongoing hearing problems, but they don’t have medical records to substantiate that, they might be asked to do a medical disability exam to establish that they have that condition and it’s connected to their service.

Terry Gerton How much does the VA spend on this, and do they do it all in house?

Elizabeth Curda It’s a very costly program. It used to be done within the VHA hospital systems, Veterans Health Administration, but in recent years they have shifted most of the work to contractors. And VA spends about $5 billion, that was the expenditure in 2024, and the contractors do over 90% of all the disability exams.

Terry Gerton So as GAO got into this report, what motivated you to start it and what did you find?

Elizabeth Curda Well, we had a request from the chairman of the House VA Committee’s subcommittee on disability and memorial affairs, Chairman Luttrell, to look at the quality of these exams. When you have a contractor performing a function for the government, your toolbox in terms of keeping that contractor accountable — you have to be able to assure you have oversight over the quality of the work that they’re doing, in addition to things like timeliness. And so they wanted to know, what is VA doing to oversee the quality of these exams? We took a comprehensive look at all aspects of their oversight, and we found that overall they had a lot of processes in place for oversight in areas such as preventing errors, detecting errors that occur, and correcting them after the fact. So a lot going on, but we did find some areas for improvement and made recommendations.

Terry Gerton I can imagine that the distribution of contracted providers for this service is nationwide, so that oversight is especially critical in helping to ensure that a veteran in Indiana has a similar experience and quality as a veteran in Texas or California. What were the sorts of challenges that you discovered?

Elizabeth Curda Well, we made five recommendations that cut across three broad areas. And those broad areas were, as we found, breakdowns in some of their procedures for identifying and correcting the most frequent or complex issues with exams. We found issues with financial incentive payments that they make to the contractors. We found errors that resulted in overpayments. And we also saw a gap in an important source of feedback, which is the examiners themselves. VA gets feedback from all different parties: the contracting companies, the veterans, but they didn’t have any way to get direct feedback from examiners who are doing the day-to-day work.

Terry Gerton The part of VA that administers this is the Veterans Benefit Administration, not the health administration portion of VA, is that correct?

Elizabeth Curda Yes.

Terry Gerton And so VBA not only manages these exams but also the full disability determination requirement. They must be stretched pretty thin.

Elizabeth Curda That is correct. We have been reporting for years that they are in our high-risk list for managing their workloads. And that is basically the influx of claims and being able to handle those on a timely basis. So yes, they have been historically stretched pretty thin.

Terry Gerton I’m speaking with Elizabeth Curda. She’s a director in the education workforce and income security team at GAO. So Elizabeth, then tell us more about the recommendations that you made particularly.

Elizabeth Curda We made recommendations over two years. Our initial report on this was last September in a hearing, and we had a recommendation for a process that VBA conducts in which they feed to the contractors on a quarterly basis the most frequent errors. The contractors are required on a quarterly basis to write a report to VA on what they’re going to do to correct those errors. Now we found that VA did not have complete and effective practices for how to review these reports. So the quality review people would get these reports back from the contractors, and then everyone would write a little summary based on sort of what they thought they should be doing. But there wasn’t any procedure for, what should they be looking for in these reports? And the two things that we found that were missing were nobody checks to see if the contractors go back and actually do these actions. So there’s no checking to see if the contractors are fixing things. And there’s no effort to determine if those actions were effective or not. Are they seeing the errors go down? What’s the outcome of all this work? So that was one area.

Terry Gerton It sounds like that might be an opportunity to deploy AI. If you’re getting all of these reports in, maybe an AI reviewer could help streamline those and tell you about trends and where to follow up.

Elizabeth Curda Well that is another topic because that is very complex. And VA is really, I mean, we’ve discussed some of their efforts with AI and it’s really kind of at its very beginnings. But yes, potentially.

Terry Gerton And so what was the second recommendation?

Elizabeth Curda The second area also had to do with oversight of exams and it has to do with what they call “special focus reviews.” And these are three areas where they’re very complex and they tend to have a high error rate. It’s traumatic brain injury, military sexual trauma, and Gulf War illness. So they had a procedure to do these every two years. And they had done one round of the reviews, but they were late — over a year late — doing another round of reviews. And so we recommended that they basically do the second round of reviews on schedule. We subsequently, in the course of our work, learned that their staff have been cut by about 50% of the folks who were doing this particular function. And so they said in response to us that they will be switching to a three-year cycle, which in our view was, it’s better than no years. But we think the two-year cycle would be ultimately better because then you identify things that are working or not working and can take corrective action sooner. They also have begun negotiations on their new contracts for these contractors, which are long term, you know, they were multi-years, and things that they’re finding from these special focus reviews could be built into those contracts. But only if they’re done in a timely manner.

Terry Gerton Did you get any feedback from the providers themselves about how this process was working?

Elizabeth Curda We checked in with the people who do the disability exams, we call them the examiners, and we randomly selected examiners to talk to. And what we found is universally they felt they wanted opportunities to provide feedback about the exam process directly to VBA. Currently the process is, because they work for a contractor, all that feedback would go through the contractor up to VBA. And VBA basically told us, “we get all that feedback, the contractor gives us feedback.” But what we heard from the examiners is, you know, they don’t always feel they’re being listened to, they don’t always have their problems addressed, and they also sometimes get conflicting information if they work for more than one contractor. Different contractors will tell them to do things differently, and they don’t think that both can be right. But they have a hard time resolving these things themselves.

Terry Gerton So better communication, more checking. What else was on the list?

Elizabeth Curda The last area had to do with these financial incentive payments. The way VBA incentivizes good performance is they have these three areas: quality, timeliness, and customer satisfaction. And they measure, for each of the contractors, how well they do in those dimensions. And they feed that into a formula that will produce a bonus payment to contractors that score particularly well and penalties for those that are not meeting basic thresholds. And what we found was the way they calculate these is on a spreadsheet with a lot of manual data entry, and they were doing manual calculations as well. And there wasn’t a procedure in place to double-check the numbers, the data entry. They were doing some checking, but it wasn’t formalized. And so when we reviewed the numbers, we found that VBA had caught some of its errors on its own, but we found some that they hadn’t caught. And it was about $2.3 million worth of errors — bonuses that went out to contractors that did not earn them. And that really just sends … it’s the wrong message. You’re getting paid and you didn’t actually earn it.

Terry Gerton Exactly. How has VBA responded to your findings and recommendations?

Elizabeth Curda VBA agreed, or they use the term agree in principle when they sort of agreed, with all the recommendations. They actually have reported that they’re taking action on all of them, and some I think are very close to being implemented, such as the one on financial incentives. They told us there was a hearing on this last week, and they said that they actually have gotten the money back from the contractor and they are putting in place these new procedures. We just haven’t seen that documentation yet. But you know, when we do we’ll evaluate whether we can close that one or not. But all of them are sort of in the works, you know, in various stages of completion.

Terry Gerton So will you be following up with VBA to check how they’re doing?

Elizabeth Curda Oh, certainly. And we always follow up on our recommendations at least annually, but sometimes more than that, just depending on when they have updates for us.

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Interview transcript:

 

Bob Venero As we look at AI in in the federal government, but also in the companies that support the federal government — like the Northrop Grummans of the world, the Raytheons — AI is extremely important in helping them accomplish mission. Whether that mission is for the warfighter or whether that mission is for the Veterans Administration or any of the other areas within the government. And what we’re seeing is there’s a tremendous amount of pilots that are happening within those government agencies. At the end of the day, AI means something different to everybody, right? And really if you look at it, what is going to be the business outcome of some type of AI strategy or AI automation that you, as an agency or as a federal systems integrator, are trying to accomplish? That’s the key factor. I don’t want to say there’s no magic behind the curtain as it relates to what AI is — it’s things that are going to happen at speed and scale, tied to incredible technologies from companies like NVIDIA. I look at them as the grandfather of AI. And actually, I think next week is NVIDIA’s GTC event in DC, right? Really geared towards the government and you know what AI is doing for them. So as we look at different areas within the different government spaces, automation is key. Having the proper large language models to support what those agencies are trying to do, and then really protecting the security around what those AI models are going to do, and the guardrails that the government has to have, which is different than the bad actors around their AI testing processes and procedures.

Eric White That’s one thing I’ve been curious about as large language models and other AI tools start being implemented and the idea of contractors competing for different jobs. How are government officials going to judge who has the better large language model or who’s piggybacking off of who? Just getting your thoughts on what the future in that realm will look like.

Bob Venero Well, when you look at that … people are saying, hey, prove to me that you didn’t use an AI model to do that, right? And I look at it and say, if I’m smart enough to use that AI model, you should be looking at me because I’m going to be innovative and smart to help accomplish the goal. I don’t necessarily look at it as a bad thing. Who is going to leverage the proper tools that are out there to accomplish the job in the most efficient, effective and cost-based area? And I think that’s key for people to start to look at. You’ll see now when people actually do interviews, they’re asking them, are you doing this interview with AI or not with AI? And they have to attest to that. But to me, that goes counter to what AI is looking to do for everybody, right? It’s about speed, accuracy, and automation. And if someone knows how to leverage it better, that’s probably the person that you want, because those tools are going to be in your environment. It doesn’t necessarily mean that it’s a bad opportunity or they’re a bad contractor or there’s a bad comparative against large language models. It’s who’s using the technology to the best of its ability to accomplish the goals and the business outcomes? That’s the answer.

Eric White How much help will it provide on the bottom line, do you think, as far as budgets are getting tighter and tighter? How much more will this provide?

Bob Venero As we look at what AI can accomplish, automation is a lot of that AI conversation. Because when you can do automation, then you can take people out of the mundane tasks that are just labor-intensive and have them focus on better things to do, that are more thought-provoking, within their environment. So, it will make a difference as far as cost is concerned. Because if I have an individual that we’re paying $150,000 a year, and we had him doing tasks that were mundane because it was a part of his job description and now we can automate that and have him do more thought-provoking things? That’s better for the environment that we’re going to put him in, but it’s also better for the bottom line. Because now I can do things quicker, more efficient, and more effective. And now I can come in under budget potentially. So as budgets become more and more strained, AI becomes a much better tool. But you know, the big fear … am I going to lose my job to AI? That’s a very broad question. You shouldn’t lose your job to AI, and if you do lose your job to AI, then you weren’t focusing on really what your career was in your future. Because if AI can just take the job away, then you haven’t built value for yourself as an individual. It’s about how AI can help you do your job better, faster and right now the question is accuracy, right? Because there’s a lot of mistakes that happen within that model. Whether it’s Grok or ChatGPT, and you ask it a question that you know the answer to, and you know that the answer they gave you is wrong, and then you just say, are you sure? And you prompt that in, and they’re like, oh you’re right, actually, I did make a mistake. Now that I thought about it, here’s what it is. So it’s not even a question of oh, is that model 100% accurate? If you’re taking that as the rule of law, then you’re going to be in a situation where it’s going come back and bite you in the butt.

Eric White We’re speaking with Bob Venero, he’s the president and CEO of Future Tech Enterprise. That’s been the selling point of this technology, faulting whatever the doomsdayers say about loss of jobs, that you know it will help automate and free you up from those mundane tasks. Are we already seeing that or when is that going to kick in? Because I still find myself doing a lot of data entry here, Bob.

Bob Venero I think it’s definitely happening. Not as efficiently and effective as it should, and that’s because we haven’t been educated properly on prompt engineering. If you don’t know how to ask the AI model the question the right way, it’s going to take you longer sometimes to get to the end result. So there’s a whole education cycle that needs to happen on how to create the right prompting, to ask the right questions to get to your end result and goal. And I think that’s going to develop over time. So right now we’re in the infancies of it. I can tell you that it definitely helps in some of the mundane tasks that are tied to, hey, I want to write a brief about something, here is my topic. It gets you 80% there, and then you have to go in and adjust it. But that 80% has saved you a lot of time and effort, from starting it from the beginning to the end. But then you need to validate what it is, the end result, and make sure your answers are correct. So, we’re not quite there yet. I think in the next 12 to 18 months you’ll see a big difference as these models become more and more intelligent in supporting the businesses that they’re handling, the government agencies that they’re handling, whatever the area that it is, because it’s all about the data. And you know … [garbage] in, [garbage] out, right? And that is, from a data perspective, extremely important as these models become trained.

Eric White Let’s zero in on the defense side of things. Where, from a warfighter perspective, could this technology even work out for the Department of Defense? In the procurement contract world, could this technology be of assistance?

Bob Venero Oh, without a doubt. So a lot of times when the agencies like the DoD put out an RFQ for some type of solution, they’ve got criteria that they need to look at and vet each time the respondent is doing what they’re doing. And that criteria now can be handled by AI versus an individual having to compare hundreds or thousands of pages of response, going through it, pulling out the key areas in there, and then evaluating them across each other. And I think that’s very important. As you take a look at the speed of getting things done, what we’re seeing in the organizations, the systems integrators, speed is so important to them. Now to be able to respond to something accurately, efficiently, and be there first versus somebody else who maybe isn’t leveraging those tools is key. If the Department of Defense can use those same tools to evaluate and compare and contrast versus the human eye, it’s a game changer. It really, really is. And it can give you weighted results against each of the potential bidders on there and pick what it believes is the right solution based on your criteria. But then you still have that human intervention that says, okay, let’s really weigh the results here. Thank you for giving me the information. I see it this way, but Northrop Grumman performed better than BAE did on this, or vice versa, and there’s historics that you can take a look at from a DoD perspective. So I think the more and more it’s adopted within that space, the more efficient those agencies can become, the quicker they can give awards, and the better the cost base will be. They it’s going to reduce their costs as well.

Eric White And the bidders may be able to use it if they have to go through a lengthy RFQ, right?

Bob Venero Which without a doubt. Future Tech as a company, we do a lot of RFQs because we support a lot of the federal systems integrators. And we have an AI tool now — we’ve been in business 29 years, so 29 years of responses — and we fed it into the large language model. So now when something comes across the plate, I don’t have to have a team of seven: “Hey, pull from this, pull from that, pull from here, pull from that.” The AI goes in, it looks at the criteria, it then pulls it in and helps us write a draft of what the response is, the key things that we’ve had. And that’s been amazing from a time-reduction perspective and from a personnel and skill perspective.

Eric White Yeah, pointing it back at yourself, you gave that example. What are you having those seven folks do now that you don’t have to have them digging through all of that paperwork?

Bob Venero Here’s a perfect example. The person now who heads up our RFQ team, she wanted to expand and be a part of the onboarding and training for individuals that come into the company. And so now she has a dual role in the organization. That role wasn’t there before, but now we created this additional role, she’s got both of them, she has the time to do it based on the tools that are there. And now from an onboarding and training perspective, we’re going to bring in an AI module that’s going to help her with that as well. So if you’re embracing it properly, it is going to take you to places that are good. I always use this analogy. I’m a boater, right? And years ago, you had two sticks when you had two engines, right? You had sticks for left and right and back and forth, and then they came out with a joystick. And the joystick is just like we know, you turn the joystick left, it goes left, turn it right, back, forward. All intelligence built into it. The key and smart thing about what that has done — I used to get yelled at, “you’re a cheater, you’re a cheater, you know, you’re not learning the old way.” I’m like, no, I’m actually smart — it’s a lot easier to do it this way. I can get to my route quicker and I can park a lot more easy. It’s the same thing with these tools, right? Embrace them. Bring them into your environment, leverage them out there, and it’ll help you as an organization. But also any of the agencies that do it, it will help them be more efficient, effective, and that’s important right now, tied to costs and cost reduction.

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Interview transcript:

 

Stephanie Kostro It is the end of the calendar year, beginning of the government fiscal year. And this is the time of year when a lot of companies take a step back and evaluate their business strategy and their planning for the next few years. We see a lot folks having off-sites in December or in January to do some of this strategic planning and I’ll be frank with you, I think a lot people will be happy to see 2025 end. And they will celebrate the new year in all sorts of ways, just because of what they’ve been through this year. If your listeners can harken back to earlier this year, the efficiency initiatives really did a number on a lot of the business plans that had been developed among government contracting companies. Some of them had massive de-scoping of their contracts. Some of them had contract terminations. Some, particularly those who worked for agencies like U.S. Agency for International Development, and the Department of Education, some at Health and Human Services really saw a diminution of their planned objectives for throughout the year. And so as we go into the December and January planning cycle for these companies, what they’re really looking for are signs from the government that there is work coming as they start to think through what calendar ’26 looks like. And they start to do their resource planning for personnel and for bid teams to put together proposals. That’s really what they are looking for. And I will have to say, Terry, earlier this year. PSC, the Professional Services Council, we represent services and solutions providers. And typically every year we put together something called our business forecast, which looks at our scorecard, which looks at all of the web-based procurement forecasts put out by agencies. And we would look at tens of agencies and their forecasts and we would rate them based on 15 key attributes, which we developed in industry, about what is useful for those forecasts. This year in 2025, we made the decision that instead of putting out our seventh annual forecast, we skipped this year. The forecasts just weren’t there, and they’re still not there.

Terry Gerton So how is it that agencies put those forecasts out, and what do they base it on? And I guess the third part of that question is, why aren’t they there?

Stephanie Kostro This was a mandate from, among others, from the Office of Federal Procurement Policy, which is a White House office that said, hey, agencies, to the extent that you can, put out forecasts on your websites. And it was really to help drive new companies to join the federal marketplace and to keep those companies that are part of the GovCon community interested. If you could look at a website and say, okay, there is an opportunity coming up in Q1, Q2, Q3, and let’s build towards that opportunity. What happened earlier this year is a lot of those websites went dark. I think it was because as part of the efficiency initiative, it was no longer a useful tool because things were moving very, very quickly. What I find interesting though, is that those websites are still dark. They’re still not there. And so I’m not entirely sure how our government contracting community can put together a reliable business strategy for 2026 and beyond in the absence of that information.

Terry Gerton Well, some estimates are that the contracting workforce itself has been reduced by over 25%. Are we just missing the people who used to do this?

Stephanie Kostro I think that’s part of it, Terry. We’re missing some of the folks who took that deferred resignation or the “fork in the road” option. Some of them did the voluntary early retirement programs. I would also say in many agencies, and I’ll use the phrase “OSDBU”, but I’ll actually speak out the acronym here, the Office of Small and Disadvantaged Business Utilization. Those were usually the offices that had the lead on publishing these websites, and those offices have sort of been dismantled in some agencies. They are certainly de-emphasized in a lot of the agencies. And so it might be … they’re missing the people, that is true, but it’s also they’re also missing the offices that have the lead on putting together these forecasts. And it really is a shame because, you know, the business community uses these forecasts in so many different ways. It helps them do, I mentioned the business planning, but helps them figure out who they want to partner with, who’s going to be their subcontractors or their suppliers, their vendors, etc. This is a real gap in understanding of what the federal marketplace can offer companies. And I do think it will have effects on whether commercial companies want to get involved in government work. They just don’t know what the opportunities are.

Terry Gerton I’m speaking with Stephanie Kostro, president of the Professional Services Council. Stephanie, one more question on this. I mean, GSA has gone through a lot of work to centralize procurement and forecasting. Would you expect that GSA will take this over perhaps and share their forecast?

Stephanie Kostro I love that you asked this question, Terry, because as I mentioned the last time we put out our forecast, it was in 2024 and we had actually at PSC highlighted GSA as a model for putting out these forecasts. We mentioned that GSA has something called their Acquisition Gateway, which sets a high bar for government business forecasting and it encourages the migration to the GSA tool for other departments. So Department of Labor, Department of Justice, they were using the GSA Acquisitions Gateway. So I think this is a fantastic opportunity to go back to that gateway and have GSA take the lead.

Terry Gerton Speaking of forecasts, PSC’s got a big session coming up starting on December 1st. Your vision federal market forecast. Tell us about that.

Stephanie Kostro I love that our entire segment here is devoted to forecasting, because the procurement dork in me is celebrating here. So PSC has this conference and it’s actually run by our foundation, which is our 501c3 nonprofit affiliate dedicated to education. And so it is a year-long process where we have so many teams come together. There are 21 different study teams, they focus on things like Health and Human Services, or Customs and Border Protection as part of the Homeland Security team. And this year of agency discussions, they speak to think tank folks, they speak procurement officials within the government, and it culminates in this conference and it’s happening in person on December 1st. It’s a virtual day for December 2nd and 3rd. It is where these 21 different study teams present their findings. So it’s not just tied to a web-based procurement forecast, but rather these discussions that they’re having with officials. We had over 400 volunteers as part of this process, and I’m just very excited. It is a great opportunity to really hear what’s going on in the procurement world, not just for opportunities, but what the dynamics look like, what impact inflation is having, etc. And to be honest, what impact these efficiency initiatives have had on the federal marketplace. So I highly recommend this conference. Again, it’s December 1st through the 3rd, and December 1 is the only in-person day here in Arlington.

Terry Gerton It sounds like in the absence of the agency forecast that we were talking about at the beginning of our conversation, this may be a great opportunity for contractors, those who are considering government work, to find out from inside sources what’s going on.

Stephanie Kostro It’s a perfect opportunity to get some business intelligence. It’s also a great networking opportunity because we do have government folks come to this conference as well to hear about what other agencies are doing. And so I highly commend it to folks who are listening, but I’m certainly going to be there and soaking up all of the knowledge that I can. I’m particularly looking forward to the Defense Services presentation in light of the Secretary of War Hegseth and his arsenal of freedom speech that he gave about transforming the processes for requirements and acquisition. I’m really looking forward to that. And I always look forward sort of to the top-line and the IT modernization teams as well. So if I were going to recommend three sessions, those are the top three. But they’re all very, very interesting and I’m looking forward to it.

Terry Gerton So how do people who want to attend find out about it and register?

Stephanie Kostro They can go to PSCouncil.org, and you can also search for Vision Federal Market Forecast and the sessions will pop up. There is a fee, obviously, for this, but it is open to the public. It is a widely attended gathering which allows government folks to attend. That is how they can connect with this conference.

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Interview transcript:

 

Travis Mack Over the years, you know, growing a small business is kind of an iterative process. You learn a lot of things along the way. And we had done very well in the small business vertical, but when we got to that point where we were trying to make that inflection, that turn to trying to be a large business, there were a couple things that we were considering. Were we going to remain a small business or were we just going to blow right through it? And we decided to kind of blow right through the small business threshold. And with that, we had to do a few things differently. We certainly had to upgrade our talent, which was really important, right? We had to also look at trying to drive additional revenue streams, trying to create additional value for the federal government. And so we decided on, not only were we going to grow organically, we were going to grow inorganically as well, which kind of led to our strategy of mergers and acquisitions and incorporating that into our organic growth.

Terry Gerton Well as you say, growing past that small business to large business zone can be really, really challenging. But you’ve kept Saalex as an employee-owned company. How did that decision factor in to your growth strategy?

Travis Mack It factored in because as we were making the transition, we had to figure out how we were going to attract the best and the brightest. And it was actually one of our core strategic decisions on us trying to go and become a large business. It has been the kind of the pillar of us trying to grow. So us becoming and transitioning into an employee-owned organization was really something that I thought of and I said to myself, “if you were going to be asked to work 80, 90 hours a week, what would you want, Travis?” I said I’d probably want equity. And hence, you know, the employee-owned building blocks that we utilize today in order to attract the best and the brightest for Saalex.

Terry Gerton Is that a strategy that you think is sustainable as you continue to grow the company?

Travis Mack Absolutely. We’ve seen it demonstrated before. We think it’s an excellent strategy for us to continue to scale and for those who are willing to put in that work, put in that extra effort. We think it’s something that … because it’s not only the top of the spectrum that’s gaining, it’s the entire organization, because everyone at Saalex has equity and we want that community.

Terry Gerton So you mentioned a little bit about your growth through acquisition strategy. You’re clearly not trying to blend in, you really want to set yourself apart. How do you set yourself apart from the other big primes in the defense and federal space?

Travis Mack We think it’s part of certainly, you know, being an ESOP, having that equity component. We also think it’s from us being unique. We’ve really embraced automation, we’ve really embraced AI, we’ve really embraced security in order to give ourselves a differentiating feel to the organization. And so we think, at our size, being agile than maybe some of the larger primes, being more efficient than maybe some of the larger primes, and really just trying to understand what the core problem is and then solving for that, we think that is a differentiating vertical for us, and we’ve leaned into that. So, you know, we’re an AI-first organization building in automation and AI through every single business system, every single component, and then that efficiency, that effectiveness really translates very seamlessly to the federal customer.

Terry Gerton So that strategy through mergers and acquisitions can really shake up company culture as you’re bringing in different organizations. How have you managed to build an organic Saalex culture and hold on to that through that growth cycle?

Travis Mack It’s a process. And you know, it takes time. It really does, especially now with all the new changes, with how you implement artificial intelligence efficiently, bringing in different organizations within one culture. We’ve launched an initiative called One Saalex, really just trying to focus everyone on — it’s one infrastructure, which is backed by an AI-first mindset, and bringing everybody in and just trying to demonstrate the efficiencies of the platform and how we are supporting our end customers. So we take it day by day. We try to talk about what the benefits are; and it’s a lot of training, Terry. It is truly a lot of training and a lot of — I kid, every single day, half of my battle is changing hearts and minds. And I’ve got to show up every day changing hearts and minds and showing the innovation and showing how, at the end of the day, it’s actually better.

Terry Gerton And you’re bringing in folks with some really amazing technical talent, clearance capability, high-tech roles. How are you finding the job market, and then how do you find the integration once you get them on board?

Travis Mack The job market right now is something that we focus a lot on, right? I mean, the lifeblood of what we do is with individuals, with people. And true enough, we’re trying to scale that with AI and things of that nature. But really it’s about us being out there in in the community. It’s about us being active. It’s about us defining and identifying roles that, you know, we can fit individuals into very, very seamlessly. I think we’ve been certainly very forward-leaning with the mechanisms by which we hire. Traditional ways of hiring isn’t necessarily something that is at the top of the mind these days. So we try to be flexible, we try to be nimble, we try to be innovative, we try to do all those things that we think will entice individuals to come and work with Saalex.

Terry Gerton And one of those things, as you already mentioned, is being an AI-first company. So how do you deploy that kind of fast-moving technology, both in Saalex and then for your customers to keep them on the cutting edge?

Travis Mack Well, we’re not going out building large language models for the federal government. That’s not what we’re doing. We’re going to let them handle that. You know, ours had to be from a services perspective, right? And so we had to figure out, how do we engage and utilize AI from a services perspective? First we thought about, hey, okay, what does that look like? Our journey with AI actually started about two years ago and we really started to focus on AI functionality within all of our business systems. We took that and then we put in the digital connectors with RPA, with robotic process automation, you’ve got to have that digital connection, and then at the end of the day, trying to deploy that from a federal perspective and integrating that with the customers and the uses and creating digital workforce agents and the whole nine yards. And so we’ve tried to be innovative. We think that utilizing AI gives us an agile advantage, you know, than some of the larger competitors that we have. We’re able to move a little bit quicker as a mid-market federal contractor, and so we’re excited about, what are those new use cases, what are those new concepts that we’re delivering? We’re thinking about the work differently, Terry, every single day, and that requires a total mind shift.

Terry Gerton Well speaking about thinking about the work differently, we’ve talked about your growth strategy, we’ve talked about your workforce culture and training, we’ve talked about your tech approach. But the world of federal contracting and defense contracting is changing very, very rapidly. So as you look forward, say five years, what do you see for Saalex, and how are you positioning them to take advantage of the opportunities you see?

Travis Mack I’m going to try to pull out my magic ball here, put my Nostradamus hat on. Difficult question because of how fast things are changing. And what we’re trying to do is just be iterative. What we don’t want to be, Terry, is late. That is the thing. And we know we’re going to have some false starts. We know we’re going to not get it right as we implement automation and AI and efficiency throughout the organization. Government agencies right now want speed, they want agility, they want efficiency, they want security, the whole nine yards, as they are trying to change how they do the work as well. Five years out, we really think that it is about the iterative process, it is about changing how we do the work, it’s about identifying where we can drive efficiencies, and it’s about how we can, in my thoughts, do more with less, honestly. Because that’s where we’re headed to. So we’re excited about building an infrastructure, building a capability that the federal government and government agencies can utilize with some of our technical services, right? We’re supplying software development, we’re doing test range management, a whole bunch of technical stuff with the Department of War. So we’re excited about, how do we deliver those services differently? And what does that look like? Because I think that’s what everyone is struggling with. What does that look like? We’re trying to help get some visibility and we know it’s iterative. We know it’s going to innovate, we know it’s going to continue to expand, but we just didn’t want to be late.

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Interview transcript:

 

Terry Gerton A lot has happened over the last few weeks and as people in the contracting world get back to their desks and start things back up again, they’ve got a lot to touch base on. Just before the shutdown we had the publishing of the FAR overhaul and defense has come out with a lot of new priorities. How can people start to put all these pieces together and make sure they’re working with the whole picture?

Emily Murphy It’s a really complicated picture right now. I want to go back and say — GSA, DoD, NASA, OFPP did an incredible job in getting that FAR overhaul done and published. And they even got the updated FAR companion out during the shutdown, which I know has to have been a struggle. So they did a wonderful job with it. USDA, Department of Homeland Security, and GSA have all adopted the entire new set of standard deviations. That means, however, that no other agency has. So if you’re a contracting officer right now or you’re a contractor, there’s not a standard set of rules you can go to. You have to be looking at which deviations did this agency adopt? How does that interface with what contract vehicle I’m using? And what about this other policy that’s happening over at the Department of War? There’s not a clear one-size-fits-all answer to the problem anymore. If you think of GSA, for example, assisted acquisition has always said that they follow the rules of the funding agency. So, money and requirements coming into GSA’s assisted acquisition service, they’re going to follow that agency’s money and the rules that come with it. Well, that might mean that they’re adopting, if it’s coming in from Department of Energy, one set of rules; Department of War, another set of rules. If it’s coming in from the SBA, it might be a third set of rules. So I keep thinking that if I’m an 1102 right now, a contracting officer, I want more monitors. Because I’m going to have to have so many different versions of rules and guidance up until we can make it through this. I think the standardization is going to come, but I think it’s going to be a really tough few months — as the new rulemaking takes effect  as more and more agencies adopt those standard deviations, and as we get more clarity on what the Department of War’s new announcement from the 7th of December actually means in the application, so that we know what to expect with those contracts.

Terry Gerton How much more complicated does the continuing resolution make it? Because now some agencies have full-year appropriations. We have a CR in place for others through the 30th of January. And on top of that, we have all these new rules that you’re talking about.

Emily Murphy So if one thing contracting officers are used to dealing with and contractors are very used to dealing with, it’s CRs. I don’t think that that’s going to be the hard thing. It does slow down new starts for the agencies that have a continuing resolution. For the agencies that actually have their appropriations, it means that they can get started. It actually may help balance the workload out a little bit, because you can start the new starts for agencies that have the authority while you’re still working on the continuing resolution and continuing the existing contracts for all the other agencies. But the sort of mosaic of rules and regulations out there is going to make things tougher … it’s one more complication thrown into the mix. And the irony is that this is all really intended to make things simpler, faster, cheaper, better. And I think ultimately it will, but it’s going to be a little bit painful for the next couple months.

Terry Gerton Well, speaking of simpler, faster, better, cheaper, what’s the perspective of contractors? We’re talking first about the contracting workforce, but contractors and especially small business organizations who might not have a big contracting shop to help them navigate all of this. What should they be looking at and thinking about in this new, sort of interim period?

Emily Murphy So they need to be really carefully looking at not just their contracts, but the agencies they’re doing business with and seeing where the changes are coming. For example, if you’re an 8(a) firm, you need to be looking at the new competition rules that are in part 19. If you’re a service-disabled veteran or a woman-owned small business or hub zone company, it’s opening up the realm of what you can compete for, because things that were previously in the 8(a) program are now available if an agency chooses to take them and compete them amongst those other socioeconomic categories, they can. That’s just looking at the small business programs. They also need to be looking at the clauses. Right now, their contracts probably have the old clause matrix in them. Part 12 reduced for commercial type contracting, reduced the number of clauses by about 30%. Which clauses are changing? Which ones can they get, and what does that transition look like for them? What can they stop doing? And what do they have to change how they’ve been approaching? And it’s going to be a sort of a contract-by-contract answer. Someone’s going to deal with their flow-downs. And then we’re also hearing — I think Jason Miller, your colleague, reported on it — that there’s going to be maybe some changes to how IT value-added resellers are being treated. So that’s not even in the current regulations, but it’s something that’s sort of looming out there over the community that they that they’re going to need to be paying a lot of attention to, because limitation on subcontracting is becoming more important. Compliance with contracting terms, frankly even the move towards OTAs and CSOs and all sorts of alternative contracting, they’re going to have to become masters at a whole other set of contracting options — or award options, I should say, not even contracting options at that point.

Terry Gerton I’m speaking with Emily Murphy. She’s former administrator of the General Services Administration and senior fellow at the Baroni Center for Government Contracting at George Mason University. Emily, along with all of these changes, you’ve been a strong advocate for training of 1102s. But with all of this happening, and we have Secretary Hegseth announcing a complete shift in focus for DAU, now the Warfighting Acquisition University, what do you see as key to keeping 1102s current and keeping their mindset focused on these new ways of doing business?

Emily Murphy So we’re giving the 1102s, the contracting community, a lot of new tools. I mean, you’re seeing GSAI, the Department of War is rolling out new tools as well. Everyone’s got new tools. We’ve got new regulations, we’ve got new authorities. What I haven’t seen is anyone budgeting for the time to train the workforce on how to use these and how to use them properly. There are some very powerful tools out there and very powerful changes in the regulations themselves that give that workforce a lot more authority. But you’ve got a realignment of who the your contracting officers are going to be reporting to within the Department of War, so that they’re going to be reporting instead of up into a contracting organization, they’re going to be aligned with the program instead. At least that’s what’s been stated. We haven’t seen the reassignments happen yet. So how is that going to change day-to-day business? Who’s taking the time to sit down and explain you can now do a simplified acquisition procedure for commercial items up to $9 million? What does that look like? How do I do it? How do I do it well? If I still have to get a senior-level approval for an award above — and choose your threshold because it varies from agency to agency — $100,000, $50,000, $250,000, $1 million, what advantage is there to these new simplified tools that I’ve got if everything’s still going to go through an enhanced level of review that’s imposed at the agency level? How does that play itself out? And where should I be spending my time and prioritizing to get that best deal? There’s so much more data. How do I use it? How do I make sure that it doesn’t create a conflict of interest, also? If I’m educating an AI model, how do I make sure I’m educating it appropriately and then using it in a way that it doesn’t create its own organizational conflict of interest or its own problems with inherently governmental? How do I make sure it’s not hallucinating?

Terry Gerton Who should be thinking about that training and who should be funding it since so many of these changes are centrally driven?

Emily Murphy  I know that GSA has been thinking about this. Clearly the Department of War, with the rebranding and renaming of the BAU to WAU, is thinking about training. The problem is time. You’ve got a workforce that has been under enormous pressure to get things out the door. And training isn’t something that happens … they lost over 40 days, they lost over six weeks of opportunity that they couldn’t go and take that training. And there is a backlog of work. Training, unfortunately, gets frequently put on the back burner at that point when it needs to be prioritized first so that you’ve got the ability to actually execute better on what’s waiting on your desk. But that’s easy to say. It’s a lot harder to do when your desk is overflowing with work.

Terry Gerton Contracting shops are a lot leaner after all the DRPs and downsizing. We’ve got lots of new confusing rules. Do you anticipate that this is going to pose a problem in terms of oversight and then potentially protests as this plays out?

Emily Murphy I think it is. I think it’s interesting. I heard the other day that it’s about 25% of the acquisition workforce that’s gone. I couldn’t point to the source of that statistic, but that’s a substantial reduction at a time when we’re not seeing a reduction in contracting actions or in spending. And when you’ve got different rules and different interpretations of those rules and guidance that can be changed regularly, that doesn’t have the same effect as a actual regulation, it leaves open the possibility that contracting officers or program offices or others can be interpreting things in different ways. And a difference of interpretation is ripe for oversight. And I don’t mean that in a in a negative way; that oversight can actually help highlight where you’ve got discrepancies if it’s done appropriately. It can also, though, turn into a game of “gotcha.” And for a workforce that’s already stretched pretty thin, playing “gotcha” with them just doesn’t seem very fair right now.

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Interview transcript:

Terry Gerton: ERT works on, I guess, some of the most complex space and earth science missions. Tell us about maybe one breakthrough that’s really changed the game for how you support your defense clients.

Mark Lee: It’s actually a variety of defense and civilian clients. But a lot of what we have been focused on is this pivot to more focused on solutions. And a lot of the business that we work in, services has been sort of the name of the game. And that’s sort of, at this point, has connotations of just people in seats, just sort of staff augmentation. And there’s been a shift that’s happening in the industry, really shifting to more of a solution focus. And that’s really driven how we’re thinking about driving innovation, even reworking a lot of the processes in the company to be around a solution orientation, so making sure that when we’re thinking about what tools make sense to bring to a problem, everybody’s talking about AI and machine learning and all these things, those are extremely valuable tools and still sort of maturing and coming into their own. We’re really starting with the customer’s needs first because I think there’s a risk of so the tail wagging the dog, you see this set of tools and you want to apply it everywhere you can and we really want to come out the other way, like what are our clients’ problems? What tools are the most appropriate to those problems? And that’s really led us into addition to thinking about artificial intelligence, a lot around digital engineering, because in the areas that we work in, there’s all these applications, and by applying some of those principles, you can accelerate how quickly things can be done. You don’t have to wait. In the old days, they would build like two copies of a satellite so they could use one to test and one to launch. But you can now do that within a computer and that extends to the whole IT system to support the satellites and all that. So that’s really a place that we’ve been leaning in a much bigger way. And I think it really flowed directly from this focus on really our client’s problems and focus on what solutions to those problems will be most appropriate.

Terry Gerton: As you think about and build out that solutions approach, is there a particular move that’s helped you achieve scale without losing your technical edge or your mission focus?

Mark Lee: Coming into a company, when I joined ERT, they had been around for around 30 years, founder-owned, founder-led, and we had investment from Macquarie Capital, and that was when they brought me in. And we had a great team already at ERT, but I also had the opportunity to bring in a few leaders and, to me, building for scale is all about having the right people in the right seats and making sure that the new people understood the role. The existing people sort of knew where we were wanting to head and then building out processes. I’ve been in a much larger company and have kind of seen how they operate. Well, all right, well, what can I do to get ERT ready for that kind of scale? So it’s building in new business development processes, new operational processes, those types of things. That’s really been what we’ve been doing to sort of build so that you kind of want to build the infrastructure for where you want to be because if you get there and you don’t have it, then that’s when delivery can suffer and you put a lot of pressure on your staff to sort of make the impossible happen and there’s so many times you can go back to that well.

Terry Gerton: You talked about having the right people in the right seats. Your work requires some seriously specialized talent and often those folks need security clearances. What’s your strategy for finding and keeping those right people?

Mark Lee: I think some of it is my leadership style is a certain type of person that I want to have and it’s really finding the right people for the organization. I am not a command and control leader, which it sounds great, all that. But there’s actually different implications of that where if there are folks that are expecting to be told, ‘All right, here are the next five things exactly as you need to do,’ that’s not the way it’s going to happen. I will more lay out, ‘OK, what’s the output? What’s the result that we need?’ And you’re a professional, you sort of figure out how we’ll get that done. So making sure that’s clearly communicated and you’re hiring the people that are going to want to do that. Now, the people that like that kind of management style are really drawn to that and I really try to be super approachable. And I think when that all that drives the culture. And I, for example, we have these town halls that we do once a quarter. And I want staff to ask anything. I said, ‘No, don’t give me any questions ahead of time. No prepared remarks.’ And the harder the question, the better. And I’ve learned over time that type of approach, when you’re willing to be vulnerable and actually sometimes be, ‘Well, I’m not really sure,’ and being able to say that you might not have the answer or it may be a question that is a little bit sensitive. Watching me navigate that, I have found the staff trust you more and you build a culture that really, they’re telling their friends, ‘Hey, look, you should look at this opening.’ And certainly, where we always want to start is referrals. But you also have to be doing really cool work. And if you’re seen as a commoditized player, then the top-down are a little less excited. So I think some of it also is about the work that we pursue. You want to pursue the type of work that will attract the staff that you really want to have.

Terry Gerton: So let’s follow up on that because you’re in a space where you have a lot of competition. So beyond your culture and your people and the type of work that you do, what really makes ERT stand out to your clients?

Mark Lee: Our competition tends to fall into two big buckets. I kind of see there’s the much larger, multi-billion dollar firms that we go up against and then there’s companies that are more our size or even smaller. I think we try to do the sort of the best of both worlds approach. I think relative to the bigger companies, we offer more customer intimacy, we can offer more flexibility and a little bit more ability to adapt quickly because we don’t have this big, huge infrastructure that has to adapt with the customer. So I think that gives us some advantages. I think relative to companies that are our size or maybe smaller, we’ve got a lot of executives that have been at big places and been successful at big places and we’ve the backing of a really good private equity firm, we got a great banking group led by JPMorgan so that we can be much more able to respond to big challenges, ‘Oh they’ve got this huge project that they want to launch.’ I think we should have a little more faith that we can pull it off, given kind of the leadership we have and the kind of backing that we have. And I think you’re trying to find that balance, like I’ll come back to solutions, that really plays a key role. If you can be flexible and you have the client intimacy, but then you also have the heft behind it, you can really drive some outstanding results. And I think given where we are, that’s really where the team is really aimed at.

Terry Gerton: So those are three really important topics: the relationship, your own team and then the solutions-based approach. So tell us more about how you bring those three threads together to really deliver modernization of technology or the solutions that matter for your clients and you still help them stay compliant and secure.

Mark Lee: Yeah, I see technology as a key to making those things happen. I think some people think about all this technology modernization, all this great risk. Well, the risk is trying to keep doing things the way you’ve always done it. So part of what we’ve tried to do is to build teams that are encouraged and actually incentivized to constantly push the envelope. We’ve got a innovation team where their whole job is figure out what are the newest tools that out there, how can they be applied to our clients’ problems and then what are the implications of applying them or are there other risks? Does it create cyber concerns? Does it address cyber concerns? How scalable is it? Is it going to lock us in or lock our client into a single vendor? So we’ve really had, and those folks are not sort of bogged down the day-to-day client, so they can sort of be a little bit more creative and focused, but at the same time, and we joke about it all the time, is that we don’t do science fair experiments here. So they know that whatever they’re working on has to be practical, has to be applicable and has to be really client-driven. And we’ve worked really hard to build a really close connection between that solutions team and our business development team so that all the things that they’re doing are being informed by what we’re seeing in the market, what things we’re chasing so that then we’re arming our business development team with really great solutions that just put them in a much more competitive position to win the work.

Terry Gerton: And as you look ahead, say, five years, how do you see your competition space changing, and how are you preparing ERT to meet those challenges?

Mark Lee: Well, I think there’s two different sides. I think on the overall federal landscape, I think you’re already seeing it happen, that this shift from people talking about services to talking about solutions. We’re not the only ones thinking that way. And with the government talking about rewriting the FAR, I think that there will be some incentives in that in terms of less of the cost-based pricing and more of fixed price, things like that, which provide the contractors an incentive to drive innovation. So I think you’ll see that happening. Within the space market, we couldn’t be more excited about all that’s happening there. I think it will be much larger. You’ll continue to have the big folks that have been there a long time. I think they’re sort of almost an extension of the government in a lot of ways. They’re critical to how things happen. But I think there’s going to be some non-traditional players that are going to come in. Within civilian space, you’re seeing a big push to commercialization, using more commercial services. And I think that opens the door to new entrants. We’re looking at those as really good teaming partners. And I think part of what makes ERT special as well is that we’re all about the best solution for our customer. Sometimes we can do that all ourselves, but sometimes there’s somebody that does a part of that better than us. And we’re not going undermine our customer by trying to do the things that we are not great at. We’re going to go bring in the best in breed and being able to bring in some of these non-traditionals puts us in a much more competitive position, but it also is really fun because they’re doing some really interesting stuff. And I think you’ll see more of that over the next five years.

Terry Gerton: Lots of opportunities ahead then.

Mark Lee: Absolutely.

The post This federal contractor is reinventing itself by shifting from services to solutions first appeared on Federal News Network.

© Courtesy Mark Lee

Defense Secretary Pete Hegseth’s acquisition system shakeup is being met with cautious optimism from acquisition experts who say the changes could meaningfully reshape how the Pentagon buys capabilities, manages programs and integrates emerging technologies — if the department can avoid repeating the mistakes of the past.

Stan Soloway, president and CEO of Celero Strategies and federal acquisition expert, said by and large the changes make a lot of sense — they could help to break down entrenched silos across the department’s acquisition enterprise and drive greater coordination and integration. They also expand on initiatives the department has tried before. 

“There have been a lot of reform efforts over the years — and this one both incorporates similar themes and/or reflects a natural extension of them — and all faced similar challenges in both implementation and sustainability,” Soloway told Federal News Network.

But the success of Hegseth’s reforms will hinge on whether the department can change its culture and equip the workforce with the skills needed to operate differently. Otherwise, the system can quickly revert to its old ways.

“Change is not something that happens by dictate. As they and scores of case studies have shown, there has to also be an aggressive, intentional, and holistic approach to change management, prominently including how the relevant workforces are developed. Absent re-aligning those processes, real change will remain elusive,” Soloway said.

Hegseth’s new proposed structure, Soloway said, somewhat resembles the Integrated Product Teams the department created in the 1990s as part of a major acquisition reform push. There were early successes, but they eventually faded, mainly because the workforce and culture never fully adapted.

And whether the department has the workforce to support such a sweeping overhaul remains an open question. DoD has already lost 5% to 8% of its civilian workforce since the start of the Trump administration through various means such as the Deferred Resignation Program and the Voluntary Early Retirement Authority.

“I’m excited about what [Hegseth’s] speech will do to attract the interest of high talent — folks who might want to come in and help us do this job. We’re certainly always looking for good people to come in and help. We do have some need for additional personnel, at least in my office, and I suspect across the acquisition workforce,” Undersecretary of Defense for Acquisition and Sustainment Michael Duffey told reporters Monday.

In addition, while the new structures and consolidations seem promising, there is always a familiar risk that the reforms could end up adding new layers of bureaucracy rather than eliminating old ones.

“It will take particularly strong, forward leaning leadership on both the civilian and military side as well as new levels of collaboration between and among the services and, importantly, [the office of the secretary of defense],” Soloway said.

And then the reforms Hegseth is proposing will require significant funding — but there is very little mention of resources in the strategy the department recently unveiled.

“That’s one place where the rubber hits the road,” Soloway said.

“The next big thing will be the 2027 budget submission, because some of these things require prioritization, and prioritization requires resourcing. Some of the initiatives like a focus on exportability, focus on developing multi-sourcing for parts and components — these things require resourcing. Where are they going to be in the 2027 budget submission? Because that will show how important it is for the administration,” Jerry McGinn, the director of the Center for Strategic and International Studies’ Center for the Industrial Base, told Federal News Network.

‘Speed to delivery’

Hegseth emphasized that speed will be at the center of this sweeping transformation the department is embarking on. 

“The core principles of this transformation are simple: instill the warrior ethos in the acquisition workforce and enterprise, inject a sense of urgency and relentless focus on speed by empowering those directly responsible for delivery to make and own decisions, cut through unnecessary layers to focus the [Warfighting Acquisition System] on speed, accountability and mission outcomes, and prioritize flexible requirements and resource trades to enable timely delivery at the speed of relevance,” he wrote in a memo.

The focus on speed, Solloway said, may be more critical now than ever. But speed alone isn’t the point – the department has spent the past decade chasing speed through tools like other transaction agreements  and rapid prototyping, but the real measure is whether capabilities are actually fielded.

The post DoD acquisition reform: What will it take to make it last? first appeared on Federal News Network.

© The Associated Press

Interview transcript: 

Eric White Let’s start from the FAR overhaul perspective. They were able to get that out right before the shutdown occurred. I wanted to see what your initial thoughts were and what you’re hearing from industry folks who are going to have to comply with these new rules.

Emily Murphy So it’s really interesting, very last minute, obviously they got everything out, they wanted to meet that deadline. And I’ve got to commend the folks at OFPP, GSA, NASA, DoD, who all got that out and they worked really hard to get that out so that it would be out there before, frankly, many of them ended up getting furloughed. They got Part 15 out, Part 16 out, so they’ve got a lot of stuff out at the very last minute, and there’s a lot there to still digest. Part 16, which is type of contracts, was really interesting because it created BPAs against GWACs, which was something we haven’t seen before. Lots of sections came out with even just PDFs, and they’ve now been updated to include the actual downloadable, the actual text. But there was a lot there. One thing that contractors should be paying attention to right now is that even though these have all gone out, if you go to the Revolutionary Far Overhaul site, you’ll see that not all of them have been adopted at every agency. And so that’s something that you should be very, very aware of, depending on where they’re contracting. So, some of the deviations have only been adopted by two, three agencies. Others have more than 30 agencies that have adopted them. But when you consider how many agencies there are, that still isn’t a very large number, and so it becomes a question of, are the agencies considering these to be just adopted by, in absence of them taking any action, is it that they are still thinking through the deviations, they need to do some additional modifications to a deviation they would be doing, because these were model deviations, they were not agency-specific deviations. And then, this was the FAR Council putting these out with the intention of doing it as a deviation that agencies could adopt and start implementing right away as they started an official rule making process. And the expectation was that official rule making would start sometime mid-November. Now, I don’t know if that’s gotten slowed down by the shutdown or not. But it raises a lot of questions. You still can go on to the acquisition.gov website and give informal comments. And I would suggest anyone who’s thinking of doing so do that, but then start coming up with what they want their real comments, their official comments to be on those rules. What did the FAR Council get right? And then, where are there areas that need changes, that need some adjustments? And I trace it with both, because frequently, at least back in the days when I was actually working on the FAR Council stuff in the Bush administration, we would frequently get comments back from people only about what they disliked. They wouldn’t tell us what was good. And when you don’t tell agencies what is good, they may actually get rid of what it was that you liked in the FAR changes because they’re not hearing people step up and say, that was a good change, that’s going to make things better, please keep that. If all they hear from is people saying we don’t like anything, you never know what’s going to then survive that comment period. So it’s very important to comment, not just on what you think needs to be changed, but also on what needs to be retained.

Eric White I think any Amazon reviewer will cite the same experience if they have that. They only tell me what they don’t like. They titled it the Revolutionary FAR Overhaul. Is that, I want to get your opinion, is that an inappropriate title? Is this really revolutionary or is this a bit of labeling that we’ve seen from the Trump administration in the past?

Emily Murphy I’m not sure that they could be truly and utterly revolutionary in terms, because there were statutory constraints, but they did about everything they could within that statutory framework. They got rid of a third of the clauses that affect commercial contracting. They got rid of the reps and certs, lots of them, and it’s going to be much easier to register as a federal contractor going forward. The commercial type contracting, they broke it down into commercial type contracting for under simplified procedures versus non-commercial, so we’re dividing the world there. It’s the only place where we saw new regulations coming in. Part 15 got rid of the old discussions and replaced it with negotiations. There is a lot of change. Part 8, taking the schedules ordering procedures out of the FAR and putting them back into the GSA Acquisition Regulations, that’s pretty revolutionary. So there’s a lot in there that is very much worth noting and is going to change how agencies operate and how vendors have to comply. It should streamline things, it should speed things up. It really does push decision-making down to the lowest level possible. And it will be interesting to see, since the FAR Council noted on the website that things that require a statutory or regulatory statutory changes or changes to executive order would be addressed with the second round of this, with the official rule making. So whether there’s even more up their sleeve, if there’s going to be more that happens. But I think that they did a lot to make this fairly momentous and they did it really fast. You remember the last time they tried to rewrite Part 15, it took years. They did it this over the course of a summer while they did every other part of the FAR as well.

Eric White We’re speaking with Emily Murphy, former GSA administrator and senior fellow at George Mason University Baroni Center for Government Contracting. Let’s get to the vendors themselves. Shutdown is still ongoing, as of this recording. What are you hearing and seeing from those vendors that have long-term contracts that are coming to a close, or they’re going to need some help operating in this new FAR environment and they may not have the necessary guidance that they could use at a time like this?

Emily Murphy So the first thing I’d say to companies that are operating, have a contract that’s about to lapse, read your contract, make sure you know what’s in it. Most contracts have a provision in there — it’s usually in 52.217, sometimes dash eight, sometimes dash nine — on how to extend that work. Make sure you know which clause you have or what clauses you have, what options are there. I’m hearing some talks about taking a no-cost extension. And that’s a decision agencies and vendors are going to have to make. But the vendors should be aware of when they do that, they’re performing at risk. That there is a good chance that they may not ever have that option exercise. They may not have that ability to get reimbursed for that. They certainly won’t get reimbursed for a no-cost extension, but they may not have something happen once the government shutdown is over. So it’s got to be a business decision they’re making at that point in time. But ultimately, know what’s in your contract, know to the greatest extent possible who it is you’re dealing with at the agency, what set of rules they’re following at this point in time, and have options in a strategy you’re willing to propose to the government to make it easier for them, because whether we’re back from the shutdown by the time this airs or we’re still on a shutdown, you’ve got a very small workforce dealing with a lot of work. And the easier you can make it for them, the better it’s going to be.

Eric White We’ve seen these shutdowns now popping up every couple of years or so, usually right around this time of year. Do you see any adjustments coming down the pipeline by vendors of putting provisions into contracts or taking necessary precautions, maybe waiting until they are messing with the extensions or deadlines before they hear whether or not there is going to be one or not? Especially, like I said, around this time of year when shutdowns seem to occur.

Emily Murphy Well, the last major shutdown that happened happened December of 2018, and it went through January of 2019, so it was the 35-day shutdown, it was the longest shutdown we’ve ever had. So while in the past it was fairly, you thought right after the fiscal year there being a risk of shutdown, the fact that it was a long shutdown that didn’t start until just before Christmas, I remember because I was at GSA at the time and people had gone home for the holiday before the shutdown happened. That made it a tough time. There’s never a good time for a shutdown, so I shouldn’t say that, but that was a tough time for people to be shutdown on Christmas. I don’t know that they’re trying to time a shutdown. It’s sort of reading tea leaves or trying to do some fortune telling. I think that smart companies, though, are planning to know that government shutdowns do happen and they have a plan for their workforce when that’s going to happen, whether it’s mandatory training that they need their employees to be taking, to maintain certifications, to comply with a government requirement, whether its the upskilling of that workforce, whether it’s working on strategic planning documents or other things, they’ve thought about how they’re going to use their workforce if the workforce isn’t able to show up. We talk a lot about what’s going to happen to federal employees and will they be paid for the work for this time that they have been furloughed. The contractors don’t get paid, and good contractors try to do everything in their power to keep paying their employees, but they’re never going to be made whole for that. And there’s a limit to how long a small business and midsize business can continue to pay people to not work. And we need to be very aware that this hits the industrial base, not just the federal employee base, and that both sides of this are feeling a lot of tension right now and a lot stress.

Eric White Wanted to finish up here by getting your thoughts on the East Wing renovation happening at the White House. People were obviously going back and forth about the actual move itself, but people like you and I were probably thinking, huh, I wonder how that contract was structured. What are your thoughts, and who do you think was handling it? We’ve got really three choices, the Executive Office of the President, GSA, your former camp, or even the Park Service, as the White Houses i actually designated as a national park.

Emily Murphy It is, and what’s interesting is when I was the GSA administrator, we were looking at doing renovations in the West Wing and that very much would have been a GSA contract. It would have in the Public Building Service doing that work. The East Wing, though, probably it’s going to fall into either the National Park Service or the [Executive] Office of the President that would be doing that work. It’s not a GSA building once you hit the East Wing. It’s fascinating when you look at the White House complex. There is an agreement that tells you down to what brick along the sidewalk is managed by GSA versus by Interior versus whoever else and who’s got responsibility for what. East Wing would definitely be either the, what they call room one or would be a National Park Service.

Eric White And when a private donor enters the picture, I imagine that that can add some complications to the paperwork, as you shake in your head now for those of us not watching on video. What does that entail, and did you ever have any experience with a private donor paying for something that the government usually does?

Emily Murphy I never had that experience at GSA. When I was at SBA, SBA had a lot of gift authority and we did occasionally get sponsorships or things along those lines that would come into play. It will allow them to go a lot faster because they’ve got private funds. But my recollection is that when they did the renovation at the White House years ago under Jackie Kennedy, that that was also funded a lot through private donations. And so there is precedent for private donations going in and assisting with paying for these things. And it’ll be interesting to see when the contract details come out, and I’m sure they will, how it’s all been structured and how it’s proceeding. And you look forward to getting a chance to look through those documents someday.

The post When the FAR gets a revolutionary overhaul and the government shuts down, who’s reading the fine print? first appeared on Federal News Network.

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Interview transcript

Terry Gerton The SBIR program channels federal R&D funding to small businesses with high-risk, high-reward technologies, fueling innovation in areas like defense, health, and energy. Some groups want to pair that reauthorization with reforms to improve oversight and commercialization. Here with one set of proposals is Eric Blatt, executive director of the Alliance for Commercial Technology and Government and a partner at Scale LLP. Mr. Blatt thank you for joining me.

Eric Blatt Thanks so much, Terry. It’s a pleasure to be here today.

Terry Gerton It’s about time to review and reauthorize the Small Business Innovation Research Program. Why do you wanna make sure that that happens?

Eric Blatt Well, the SBIR program… Is a tremendously important tool for a number of things, including funding nascent high risk technology, but also transitioning that technology to the federal government and particularly to our national security system. So, the SBIR program annually awards about $4 billion a year to startups and small businesses. About half of that is awarded by the Department of Defense, and the DOD uses this program for a number of things, including to identify startups, commercial technology startups, that would not ordinarily think to work with the federal government, but they have technology that has a national security application. And this program provides a great front door entry point for companies to come in, get a contract, start working with the federal government, prove out that that technology can advance our national security, and then contribute to the mission.

Terry Gerton But you represent a company that’s part of a coalition that doesn’t just want to reauthorize SBIR. You wanna make some changes to it. And as I understand it, one of the arguments is that a significant portion of SBIR funding goes to companies that never commercialize their products.

Eric Blatt Yeah, so I represent the Alliance for Commercial Technology and Government. This is a trade association. We have about 75 members. Our members are commercial technology startups that want to come in and work with the government, and they don’t want to come in as sort of dedicated defense contractors. They have products that have real national security applications, and they want to sell their products as products and contribute to national security but also not completely upend the way they do business. They want to sell their product as product. So we do believe that the SBIR program is a fantastic program.  Particularly in recent years where we’ve started getting open topics, reducing barriers to entry, making it easier for those types of high performing technology startups to come in and work with the federal government. So we certainly don’t want to see a lapse in the program, however, the program is not perfect. There are real problems in the program. It’s still too hard for new companies to get into the ecosystem. There are barriers to entry. And the other really important category is there are barriers to exit. It’s very difficult for companies to transition their technology and move from these sort of smaller research and development contracts to real procurement contracts where the technology is actually being delivered and actually being used in the real world to make an impact, advance our national security and be commercialized. So, our top goals are to Yes, reauthorize, but also make sure that we are addressing those barriers to entry and those barriers to transition. And yes, it’s true that there are companies in the ecosystem that have for years encountered that resistance, that barrier to transition, and some of the companies have wound up sort of pivoting their business model. So instead of trying to do research and development, turn it into product, and transition it, and build a product around that transition product… what they’ve said is, that’s too hard; I want to just do phase one, and then phase two, and then go back to phase one. And I’m going to do thousands of these research projects, and if the government comes to me and sort of pulls one forward, I’m willing to let them pay me to transition it, but I’m not going to put my own private capital and my own effort into building those transition pathways myself. So we do have some companies in the ecosystem that really haven’t invested in transition and commercialization the way they really should have, and we think that’s a problem.

Terry Gerton Well, one of the recommendations that you all make is calling for a formal phase three program. As you just sort of mentioned, people get stuck in the phase one, phase two, but you would suggest that there’s a particular funding cycle, the phase three cycle, that would help companies get over that valley of death. Explain how that would work.

Eric Blatt The SBIR program has been around for about 40 years and there’s phase one and then there’s phase two. There’s something called a phase three, but there really is no phase three program. So we have, you have companies coming in and then they complete their prototyping, the technology works, it solves the government need, but there’s no process on the other end and companies wind up getting stuck. And so we have advocated for a formalized phase three program. The way that that was implemented in the bill text in Sen.[Joni] Ernst’s (R- Iowa) Innovate Act is something called the Strategic Breakthrough program. What the Strategic Breakthrough program does is it allows a company to essentially match. So you go to your customer in whatever component you’re working with, the Air Force, the Navy, the Army, Special Operations Command, whoever it is; you go to your customer and you say, I have technology that I have developed under the SBIR program. Here it is, here’s why it advances your mission — but I know that you have all sorts of pressures on your budget. If you can contribute a certain amount of money, say, if you can buy $5 million of my product, through the Strategic Breakthrough program, I’m going to be able to match that with SBIR funds, the Strategic Breakthrough funds, and potentially also with private capital sources. So you can say, if, you can find $5 million in your budget to purchase this from me, I can actually deliver $20 million of value to you because it’s going to be matched by other funding sources. So that can become a potentially very powerful tool for companies to get across that line and start actually selling their product to that customer that they can support.

Terry Gerton I’m speaking with Eric Blatt. He’s the executive director for the Alliance for Commercial Technology and Government and a partner at Scale LLP. So in addition to that phase three funding proposal that you have, you also emphasize the open topics opportunity. Tell us a little bit more about that and how you think it would benefit the program if it was more widely used.

Eric Blatt Sure, so the open topics, this is an innovation that is coming up on maybe seven, eight years. But, essentially the way the SBIR program had historically worked before the open topics is you would have various folks across the government and say, hey, I have this particular problem that I’m hitting — the bolts on my Joint Strike Fighter are falling out and I need some way to get them to stick in a little bit better. Or, the components on my mine are not working properly, and I want to improve how those are working. And there’s a certain type of company that responds to that… If you are a research and development service contractor that is dedicated to working with the Department of Defense, you’ll comb through all of these narrow, niche-y topics, and you’ll find the ones that interest you. You’ll put it in a proposal, and you will win some percentage of them. But compare that to a commercial technology startup that might be working on high impact technology and AI, cyber security, chips, space technologies, quantum, all of these different areas. If you are one of these companies, you are required by your investors to focus very, very intently on your specific technology domain so that you can create the best technology in the world in that particular field because you have to be able to compete on a global scale. You have to focus very intently. So, if you’re that type of company, you’re not going to come through thousands of topics, the vast majority of which are irrelevant to what you’re doing. What the open topic does is it says, if you have technology that has a credible mission application, you can come in on our solicitation and just tell us. Tell us what the technology is, tell us why it meets a mission application. And if you are persuasive in doing that, you can have a contract and you can start working with us. So that’s what the open topic does. It winds up bringing all these companies in that otherwise wouldn’t contract with the Department of Defense at all and wouldn’t participate in the program at all… In 2022 [as] a requirement, all the agencies were told you have to have at least one open topic. You don’t have to use all of your funding for open topics but you have at at least one. Some of the components since that time have really embraced that. Others have sort eschewed and circumvented that requirement by taking the sort of same niche legacy topic that they would have otherwise used and just appended the word open in front of it. I can give you examples if you’d like. Essentially what that does is it eliminates the open topic and sort of avoids that requirement, and so companies don’t come in. The Innovate Act would propose to fix that by just by providing a clear definition for open topic, which I think should be uncontroversial.

Terry Gerton That’s really helpful. What are you hearing about Congress’s perspectives on reauthorizing it?

Eric Blatt Everyone I’ve spoken to on the Hill has been clear that they want the program to be reauthorized. The gap is whether we should do a reauthorization with some of the reforms to sort of reduce barriers to entry, improve transition, or whether we just preserve the status quo. We got a little bit of a late start this year, and there has been sort of a central disagreement about sort of that multiple award-winner issue or SBIR-mill issue in terms of, should we be requiring them to commercialize more aggressively? So that’s been the primary blocker. Based on my conversations with folks on the Hill, I think we’re starting to see some progress there. It really took the pressure of that deadline, I think, to sort of bring the sides together. I think people are working earnestly to find a resolution that will keep everyone happy.

The post Is it time to reauthorize the Small Business Innovation Research Program? first appeared on Federal News Network.

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Interview transcript

Jared Serbu Jere, let’s start with some big picture issues here. Bring us up to speed on — now that we’re pretty well a month into the lapse at this point, what we know about where things stand with the overall program and what kind of work can and cannot proceed at this point.

Jere Glover Well, all phase-one and phase-two contracting process and solicitations has [coverage] by the labs. If you have an existing contract, you’re allowed to continue working on those contracts. And phase three follow-on contracts, which have gotten bigger and bigger over the years, are now several billion dollars a year — these are contracts that follow on to government work, but did not include SBIR/STTR funding. Those are allowed to continue. That’s a recent change. Any previous lapse, they’ve always said it wouldn’t continue, but phase threes — and we’re talking about huge amounts of money now — more money goes out in phase three contracts than is actually spent on the SBIR program. So that is allowed to continued.

Jared Serbu And was that a surprise? Did people see that coming when the program first lapsed? The fact that phase threes were going to allow it to be able to continue.

Jere Glover No, we were concerned because previous times they had said no, and General Council Office and DoD put out a guidance memo that said that they were going to be allowed to, making it also clear that existing contracts could continue as well. So, [both came out at the same time].

Jared Serbu As we get into the discussion here, I want to talk about some recent work you all have done on drugs, specifically, but just sticking with the broader big picture of the program, what have you all been hearing from members about what this lapse has meant to them in the real world?

Jere Glover Well, it’s a serious problem. As you probably know, cash flow is a horrible problem for all small businesses, but especially in the technology world, where you’re hoping to expand, and thinking you got a great program, and you’ve borrowed enough money from family and friends and others to get through a few months. Well, months delay, several months delay, not only does it take that time, but it takes the time to gear back up and get things back underway. So for example, a solicitation that had a closing date during this period of time: it takes a while for the government to go back on, republish when the solicitations can be received. It creates not only time, but confusion, delay, and uncertainty. It’s really bad for small businesses because cash flow is critical. And often these companies have put everything they have [into it], mortgaged their houses, borrowed money from their family and friends, and expect an award. And then suddenly [they] find out that the award doesn’t come through. But they also run into the situation [where] it’s not just the period of time, it’s how long it takes to start the process back up. And the uncertainty is just horrible for companies, especially new companies.

Jared Serbu I know it’s hard to set aside those cash flow issues in particular, but whenever we come out of this, how much of this lost time is recoverable? Can program offices within the government work through whatever backlogs are building up right now and kind of get things up to the point where this lapse would be, sort of, otherwise unnoticeable or are we losing unrecoverable activities here?

Jere Glover It’s hard to say because we don’t know how long the lapse is going to be. You know, the longer the lapse, the harder it is to recover, the more time it takes and the more is lost.

Jared Serbu Fair enough. Jere, I want to get into some very specific research that you all have done that you and I were just talking about off the air around pharmaceuticals. Not an area that, frankly, I’d think of as the first thing being associated with SBIR, but you found some major impacts there. Tell us what you found.

Jere Glover In 2022, the National Academy of Sciences issued a study looking at the SBIR program. What they found was that of all new drugs approved in the last 20 years, 12% came from the SBIR/STTR program. What we did recently is look into — we finally got the list of those drugs, looked into those drugs, and found that those drugs have annual sales of $36 billion a year. Nine of them had sales of over a billion dollars. And these drugs are pretty remarkable. And the reason is that they treat diseases like Hodgkin’s, multiple myeloma, Parkinson’s, smallpox, multiple sclerosis, and HER2 breast cancer. When you lose time on developing these critical new drugs for public health, it’s hard to make that back up. And some of these companies have great ideas. It’s amazing that this SBIR program, as great as it is, and as conscious as it is allowed to lapse and go silent.

Jared Serbu Was it surprising to you to see how much small business involvement there is and has been in the pharmaceutical field and these innovations period?

Jere Glover Yes, I was surprised because, quite frankly, you don’t expect pharmaceuticals to come out of small business and for this program to be so successful. We knew from the National Cancer Institute study a few years back that it was phenomenally successful in treating cancer and developing devices and technology for cancer, but to find out in drugs — which we ordinarily think of as a billion-dollar industry [with] millions dollars to get a drug to approval — that SBIR in particular played an important role in this in this program

Jared Serbu Let me wrap up with just kind of another big picture question, you know, and I know the hope right now is let’s just get the program reauthorized and back up and running, but looking a little bit further down the road, what sorts of reforms and changes should Congress be considering as they look toward a long-term reauthorization?

Jere Glover Well, the first thing they ought to do is increase the size of the program and they ought to make it permanent. These stop-starts every few years really do disrupt the program, and the idea that every year we can do it — and in this case, one senator alone can say, I don’t want this to go out, I’m going to let this program lapse — that’s hard to have a program that does this much good in a situation where it’s subject to the whims of one particular person.

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The founder and executive chairman of Govini, a provider of acquisition data and software to the government, has been arrested and charged with four felonies, including multiple counts of unlawful contact with a minor.

Eric T. Gillespie, 57, of Pittsburgh, allegedly used an online chat platform to attempt to solicit sexual contact with a pre-teenage girl.

The Pennsylvania’s Attorneys General Office says at arraignment, a magisterial district judge denied Gillespie bail, citing flight risk and public safety concerns.

The attorneys general says one of their agents “posed as an adult in an online chat platform often utilized by offenders attempting to arrange meetings with children, and engaged in a conversation with Gillespie. Gillespie then made attempts to arrange a meeting with a pre-teenage girl (in Lebanon County).”

Govini said in an updated statement late on Wednesday that it had fired Gillespie.

“On November 12, 2025, the Govini Board of Directors terminated Eric Gillespie from the organization, including as a member of the Board, effective immediately. Mr. Gillespie stepped down from the role of CEO almost a decade ago and had no access to classified information,” a company spokesperson said. “Govini is an organization that has been built by over 250 people who share a profound commitment to America’s national security, including veterans, reservists, and people who have dedicated their lives to causes greater than themselves. The actions of one depraved individual should not in any way diminish the hard work of the broader team and their commitment to the security of the United States of America.”

Poplicus Inc., which does business as Govini, had 26 contracts with the government in fiscal 2025 worth about $52 million, according to the USASpending.gov platform. The vast majority of the awards came from the Defense Department, with two other smaller contracts coming from the departments of Commerce and Energy.

Govini’s main DoD customers include the Army, the Defense Information Systems Agency and the Navy.

Since 2021, Govini has won 107 awards worth more than $255 million.

The company said in October that it surpassed $100 million in annual recurring revenue (ARR) and secured a $150 million investment from Bain Capital.

Gillespie launched Govini in 2013 after launching Recovery.org back in the early days of the American Reinvestment and Recovery Act.

If convicted, Gillespie would spend at a minimum seven years in jail and face up to $15,000 in fines. After serving time, he would have to register as a sex offender for at least 10 years under Pennsylvania law.

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Interview transcript: 

Terry Gerton You, I’m sure, paid very close attention to Secretary Hegseth’s speech last Friday on the arsenals of democracy. What was your takeaway?

Stephanie Kostro Thanks so much for asking, Terry. And not only was I listening with bated breath, I was actually in the room. And for any Hamilton fans out there, it was the room where it happened. There were roughly 250 folks in an auditorium on Fort McNair when Secretary of War Hegseth rolled out his ideas for transforming acquisition. And there was a lot to be said, Terry, he spoke for well over an hour, nonstop, no questions, just kept going. I would say it’s fair to characterize the audience as a rapt. We were waiting for everything he had to say. There were three main topics he wanted to talk about. One was reforming or transforming the requirements process. The second was transforming the acquisition process. And the third was reforming foreign sales processes, and that’s including both foreign military sales and direct commercial sales. So all of that were key topics for everyone in that room.

Terry Gerton Well, let’s take those one by one and the requirements topic, of course, came up first. He talked about the end of the JCIDS and a realignment of the JROC. What did you take away?

Stephanie Kostro So the requirements process has long been an issue of great concern to industry, as well as from my time as a congressional committee staffer on House Armed Services Committee, talking about by the time you go through the several years to validate a requirement, it may actually be obsolete by the end time you roll out of that process. And so the idea of transforming the requirements process has been long anticipated. And I really appreciate what the secretary said regarding being flexible. Going for combining the requirements process with the acquisitions process so that it’s modular, that it does leverage available commercial technologies and products, that it really looks forward to getting a faster delivery times and getting weapons both developed and then deployed and in the hands of the warfighters who need them. So that was very much appreciated. No one, I think, will cry over the demise of JCIDS, but the question becomes, what rises to replace it. And, of course, the under secretary of war for acquisition and sustainment owes guidance on this issue to be released 45 days from the date of that directive, and then the military services have to come up with plans of action within 60 days. So the next two months are going to be very, very busy.

Terry Gerton All right. Part two was a reform of the acquisition process itself. The headline here is the elimination of PEOs and the replacement of them with program acquisition executives, right?

Stephanie Kostro PAEs, that is correct. So I think the other piece of this that goes hand in hand with requirements transformation is the reform and the transformation of the war fighting acquisition system, as they call it now, not the defense acquisition system. And it really focuses on the war-fighting piece of it. I think what I took away, and he said this a few times, Secretary Hegseth, and I’m going to quote him here, they want to increase acquisition risk in order to reduce operational risk. And for me that means putting flexibility in the hands of contracting officers and those in the programs to pursue modular, multi-source solutions throughout the development of a requirement, or rather the development, of a capability. And then actually to get it into the hands of the warfighter. They want to reward and incentivize speed and performance over bureaucratic processes. And that is music to a lot of industry’s ears.

Terry Gerton So a big part of that speed increases buying commercial first. Secretary Hegseth said they are willing to settle for 85% functionality and work toward 100%.

Stephanie Kostro So that was, I think, an interesting turn of phrase for him, mostly because he did say a few times to increase acquisition risk to reduce operational risk. And of course, you’re going to have to have a balance there of what is that 85% and what 15% are you going to be missing? And so I think as they move forward with embracing modularity, fostering competition and pursuing multi-source procurement, that you do want to move fast to contract. He also did mention not over-relying on the testing element. And so we’ve seen that in previous memos, particularly back in May, where Secretary Hegseth signed some memos about operational test and evaluation and streamlining that process in those offices. And so what I also found interesting is talking about putting contracting officers within the program offices too, so they can sit alongside the requirements developers and the folks who are responsible for fielding the capability, so they get a better sense of what the requirements are and how to incorporate those into contracts, leveraging commercial technologies as much as they are available.

Terry Gerton I’m speaking with Stephanie Kostro. She’s the president of the Professional Services Council. Stephanie, let’s touch on topic number three quickly, the foreign military sales reform.

Stephanie Kostro Part of this reform, or they keep saying transformation, not reformation, so I’ll key into that, transforming what military sales looks like. We’ve had lots of conversations, and I was at the Pentagon, in particularly the European office, talking with our allies and partners about how they could access U.S. solutions, and it always was a multi-year process to go from all of that pre-work where we talk about requirements to a letter of offer and acceptance at the end of it, and actually delivering the materials. It’s multi-year and it is so frustrating, particularly when companies want to compete with non-U.S. companies who don’t have the layers of bureaucracy. And so I look at the reorganization that the secretary laid out, that is to move the Defense Security Corporation Agency and the Defense Technology Security Administration, so I’ll say DSCA and DITSA, which is how we call them, over to the acquisition undersecretary. I think those are smart moves if in fact you want to speed up the fielding of compatible and interoperable equipment with our friends and allies. That said, I think it’s important to note that we need to incentivize folks in order to speed those situations up. And one thing that works really well, and it’s something that PSC has talked about in the past, is if you’re going to have an assistant secretary in a military service responsible for acquisition, and each of the military services has that individual, you need to put into their performance metrics foreign sales. They need to be measured on how well they are doing on that front as well. And that is something that I will be talking to the Pentagon folks and our CEO at PSC, Jim Carroll, will be taking to his Pentagon friends as well regarding how to actually incentivize this behavior.

Terry Gerton So this speech on Friday was the tip of the iceberg, much remains to follow in terms of detail, right? What will you be watching for there?

Stephanie Kostro I will be watching for the number of times and the depth of availability of Department of War individuals to speak with industry. This needs to be a collaboration. When you’re talking about speeding up requirements and speeding up contracting and speeding up foreign sales, you really need to talk to the industry that will be responsible for that. One thing that I did take away from the speech on Friday was an openness for profit. And I say that because a lot of times industry gets demonized for making a profit. But what happens is when you have profits, you can actually turn them back into the company and then make investments in future opportunities. And so if companies are allowed to make a profit, then they can have more money to invest in their companies and their technologies and actually move the ball forward faster. And so as we go through this, I will be looking at opportunities not only to comment formally through written comments, whether that’s through the Federal Register or the System of Acquisition Management, or SAM.gov, but also having round tables. We’ve offered to Department of War individuals, we at PSC are happy to schedule and facilitate a round table to have industry speak candidly with their government partners about how to make this happen faster, better and more efficiently.

Terry Gerton So you’d say that the speech was pretty well received by the folks in the room, then.

Stephanie Kostro I would say it was very well received as a rhetorical device. The proof is always in the pudding. The devil is always in the details. I think as we move forward, there will be more enthusiasm. Enthusiasm will grow, but it really depends on what those reports look like, that guidance from the undersecretary in 45 days, the military service plans of actions in 60 days, and how much input it reflects from industry. I think there is generally a recognition across the board, industry, executive branch and Congress, that something needs to change here. And in fact, a lot of what was in the speech reflected things that are under negotiation in the National Defense Authorization Act conference right now. And I think we are all rowing in the same direction. And I hope we stay doing that.

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© Andrew Harnik/Pool via AP

Interview transcript:

Terry Gerton From printed circuit boards to drone assembly, the Army’s organic industrial base is evolving to meet future combat needs. Colonels Brett Ayvazian and James Crocker from Army Materiel Command say modernization is underway, but aging infrastructure and supply chain fragility remain key challenges. They joined me at AUSA’s annual conference to discuss the situation…starting with a general description of the Army’s industrial base.

Col. James Crocker I think the Army’s industrial base is our organic ability to repair or manufacture things that are necessary for our Army to fight and win our nation’s wars.

Terry Gerton And some of these are Army-owned/contractor-operated, some of them are contractor-owned/contractor-operated?

Col. Brett Ayvazian Yes, ma’am. Government-owned/government-operated, government-owned/contractor-operating, and then part of the further broad defense industrial base is the contractor-owned/contractor-operated.

Terry Gerton Both of you obviously have direct personal experience here and you’ve been in combat operations, you’ve served at all kinds of different levels. From your perspective now, at the headquarters of Army Materiel Command, would you say that the Army’s industrial base is adequate to meet the demands that we face both today and in future operations?

Col. James Crocker I would say that our organic industrial base is evolving.  I think it’s evolving from what we needed in the last 15 to 20 years to what we need in the future. For my experience at Tobyhanna Army Depot, we were very focused on communications electronic command systems that would come in and do repairs on those systems. Very rote system; so many trailer-mounted communication things that come through a year, you’d refurbish them, put them out of the field, and meet those requirements that are coming out of specifically Operation Iraqi Freedom and Operation Enduring Freedom. Today we don’t see that as much of a requirement inside Tobyhanna. So we see more of a move towards a technological requirement. In the last year, Tobyhanna has stood up its surface-mount technology printed circuit board manufacturing line to get after those things that are not necessarily easily available in the supply chain and try to enhance readiness that way. Focusing more on working with our PEOs and our PMs to work on the front side of the logistics cycle, like producing all of the mounting kits for all of our stuff going into next-generation C2. Things like that, I think, are where the future of our C5ISR depot are going. Because we may not be having to do overhauls that we did in the past, because of the cost are so cheap on those equipment, that there’s not really the benefit to do the overhauls.

Terry Gerton So tell me more about that in terms of how that’s changing the repair strategy for the kinds of equipment that Tobyhanna supports.

Col. James Crocker In your communication systems, you’re seeing — obviously, we’re still repairing shelters, right, there’s always going be a need for shelters that go in the back of Humvees and 5-Tons, and that’s a very vibrant repair line. But you may not be repairing all the components that go inside that shelter, right? You may just be refitting a rack, resetting up to a different configuration to meet the next requirement that the Army needs for the next evolution of what our communications architecture will look like.

Terry Gerton In the ammunition space, how are we doing there? We’re hearing a lot about ammunition inventories and supply. From your experience at Blue Grass, how are doing?

Col. Brett Ayvazian So ma’am, from the storage and distribution perspective and refurbishment at Blue Grass itself, I think we’re well-postured for where we are. However, our infrastructure definitely needs to be upgraded and updated. I mean, we’re still operating out of World War II-era facilities with just poor, old, degraded buildings. And so part of the whole OIB modernization effort is, over 15 years, to bring us up to date and up to speed to where we need to be as far as, you know, manufacture, refurbishment, storage, distribution, DMIL. So we’re on the path to get there. The last couple years that we’ve been in the OIB modernization space, the first portion of that is trying to upgrade our facilities so that we can modernize, we can get new lines, we can get robotics in there, we can expand our capacity. One of my subordinate units was Scranton Army Ammunition Plant, and they make the 155-millimeter metal parts.

Terry Gerton I’ve been to Scranton. It’s like a time travel experience.

Col. Brett Ayvazian It is. The building was built in like 1908 and it’s an old railroad car refurbishment place. When you walk and you still feel like you’re in the 1920s and 1930s. And one of the things that they’ve done there is they removed some of the older lines that they use to produce other munitions to put in additional lines to double their capacity for 155-millimeter production. So, you know, with the investments in that, and then as well as the investments where, at Blue Grass for example, they modernized one of their 105 millimeter-round refurbishment lines to additionally add on the capability to refurbish 155 millimeter as well. So we’re on the path. We’ve got a long way to go. It’s going to take a lot of time, a lot money, and we’re almost there, but we’re not close

Terry Gerton Our NATO allies really have modernized their ammunition manufacturing capacity significantly, really — 21st century capability. How does that mismatch in capacity and fabrication or manufacturing, how does that play out in operations?

Col. Brett Ayvazian Well, to be honest with you, I’m not so familiar with our allies and what their production capability and capacity is, but what I can tell you is that we have definitely played a big role in helping supply and double our production and with some of our government-owned/contractor-operated and contractor-owned/contractor-operated places, we’ve definitely expanded to be on point to double that production and make sure we meet up those needs to help not only ourselves, but our allies as well.

Terry Gerton One of the ways that we help close capability gaps in the industrial basis through partnerships, right? With OEMs, with other manufacturers, folks in various stages of the supply chain. Talk to me a little bit about how that’s playing out both in the depots and then in the ammunition plants.

Col. James Crocker Yes, I think at Tobyhanna, we had a very vibrant public-private partnership program. So I think we’re about 52 active P3s at Tobyhanna today, which is quite a bit. A lot of them for DMIL operations for communication security devices, but also some really good ones where we’re helping organic industrial manufacturers produce components of their systems to get in the hands of our soldiers. So like a P3 for being able to do weldments or do manufacturing. We’re trying to get into some space in some circuit cards up there today where we can help meet some reduced backlog for OEMs so that they can go into. So, places like that is where we really see a lot of benefit for our organic industrial base. Brett’s been working a lot with Dr. Hill on trying to revitalize P3s, or try to expand P3s inside the organic industrial base and really bring some of that greater defense industrial base cooperation together at our organic facilities.

Terry Gerton That’s got to help a lot with training the workforce as well on all the different kinds of technologies.

Col. James Crocker Absolutely, especially when we have — we’re in periods right now where we’re going through modernization. You don’t see as many refurbishments going through programs. And what that lets us do is really supplement our workforce so we can maintain that technological skill for human capital, so that when the Army does bring in the next sets of systems, those skills are still there and ready to move on to the next thing. So that’s really key for us.

Col. Brett Ayvazian Yes, ma’am, and to add onto that, one of the things that we’ve done at AMC headquarters in the last 60 days is conducting an assessment directed by the Secretary of the Army to understand where we are as far as our capability gaps, our capacity gaps, and then come up with recommendations on how to move forward. And part of that is we’ve decided that in certain places, where it makes sense, we’re going to explore partnering with industry to further grow public-private partnerships and augment our workforce. For example, one of the places, we’ve got a ton of underutilized storage capability. Ammunition bunkers, inside warehouses, outbound storage, container storage. So what we’re trying to do is partner with third-party logistics companies that have customers that are looking for short-term storage. We will partner with those companies and have them store and we will actually look to do the actual warehousing and distribution of that so it keeps our workforce fresh. And another example of something like that is we’re looking at potentially getting into partnerships with civilian companies that have heavy trucks and running them through our lines and doing some of the maintenance on it, so while it’s not doing military equipment, it’s still keeping those mechanics and those artisans still turning wrenches, still fresh in their craft, relevant and moving forward.

Terry Gerton Any other big observations from that assessment?

Col. Brett Ayvazian Well, at this point, the assessment’s not complete, ma’am, so what I can tell you is we owe an outbrief. We’ve done an interim. We owe an outbrief to the Army senior leadership, but we’re well on the way to producing this. We’ve got a backbrief here coming up to the end of the month to the Army Materiel Command commander, and then furthermore, the Army senior leadership.

Terry Gerton Got it, got it. We talked a little bit about technology coming into the depots. Technology, of course, is also coming into the end items that the Army is using, everything from unmanned systems, to satellites, to microelectronics. How are you adjusting — how is technology affecting both the work of the depots and arsenals, but also the kinds of equipment that you’re having to modernize and take care of?

Col. Brett Ayvazian I think you’ve got some great experience there with the SkyFoundry and that whole initiative.

Col. James Crocker Yeah, twofold for that. So the first point is from what we saw in the Tobyhanna workforce was actually a really large shift in what we consider floor laborers or our wage-grade employees moving towards more towards technical skills like engineers they require. Especially when you look at what Tobyhanna is doing for the future, more SATCOM-based work, managing everything from uplinks, doing testing and test environments before we deploy them on SATCOM systems. So a lot more complicated, a lot more software and digital requirements on our workforce than what we’d traditionally seen 15 or 20 years ago, for sure. And that seems to be a prevailing trend. Microelectronics, same thing. Getting into circuit card manufacturing, a lot of high-end electronics repair, and less reliance on what we would consider the old refurbishment labor in the past. Recently, AMC has taken on the initiative called SkyFoundry, and SkyFoundry is moving the organic industrial base into a SUAS manufacturing capability. The idea is over this next year to rapidly expand out five of our sites to do a distributed manufacturing model where we can produce at scale tradable UAS systems for our soldiers and support the department’s requirements. And so that’s a completely different kind of construct, different way of doing business. So instead of having a one-site set for one system, like at JMTC, we would use their advanced manufacturing capabilities to make the frames or the chassis. At Tobyhanna Army Depot we do the internal electronics and the brush motor manufacturing, and then we’d ship all those parts right over to Red River Army Depot, who would do the assembly of them, do the final test, they’ll make propellers and they’ll assemble batteries there for the final components and ship off to their soldiers. And then at Blue Grass Army Depot, where Brett commanded, we’re going to set up an innovation hub. And that’s a place where we do soldier-centered design, taking the feedback from the field, bring that in, and inform either a government design, or if it’s a public-private partnership where a company owns that design, we can give them that direct feedback. They can go to the innovator on it and say something that works great in CENTCOM, but it doesn’t work good in the Arctic. They can say, hey, we need to polarize this, get it ready for cold weather, and be able to up-degree that design for a one-off variant for what we’re going to ship up to that region, right? And we think that’s going to be very powerful for us. The folks at Blue Grass are doing a lot of great things on some AI, ML work on drones already, working with PEO-EIS. And so we’re just going to use that as a springboard to move forward. So really trying to use the strengths of our organic industrial base and not start from the ground up to move this a lot faster.

Terry Gerton That is fascinating. You mentioned AI, I’m just curious, how is AI changing the planning for Army logistics, especially at the depots? Are you doing more with predictive analytics?

Col. Brett Ayvazian So I think we’re just getting started on that. The Secretary of the Army and the under and the deputy just had recently an AI TTX, or tabletop exercise, and we’re looking and exploring options on how do we actually incorporate AI into our depots. Because again, we still operate in early this-century mode, at best, when it comes to data and data management and tracking and sorting everything that we do in our inventory and in our processing. So that’s one of the things that we’re exploring in looking at public-private partnerships to bring in companies that can help us take a look at how we might digitize the entire OIB, creating digital twins of the OIB so we can run simulations and we can factor in different data bits and data points so that we can better optimize our operations.

Col. James Crocker That’s a good point. And so for OIB modernization, one of the things we’re having to look at, it’s like SkyFoundry, and as we build in, we’ll digital twin that line before we install it, right? And so we may not be able to afford the automation in year one, but in year two, year three, we’ll have a cutout where we can go in and do automation at that point in time. You know, automate where it makes sense, keep manual where it doesn’t, right, but have those inflection points so that the line is designed to be able to do that, which is different than the past. And then once you have all that data, across the organization, based on the LOEs under Ms. Stephanie Hoagland’s OIB Modernization Task Force is to do automation of our network. So building the industrial control network necessary to control all those machines. Do all the fiber runs to make sure we have, you know, NIPRNET throughout the entire depot so that all your CNC machines, your lathes, your water jets, things like that. We can actually pull the data off there, look at it, use data-informed decisions when it comes to maintenance. Do predictive maintenance on those things and say, hey, when we saw this the last time, this is what went wrong, let’s go and order to that part now so we can fix it before it breaks, and we don’t have line stoppages. But also be able to look at capacity on those lines and say, “all right, we think we have capacity excess at Letterkenny, Tobyhanna, ship your excess workload down there,” and so Letter Kenny can execute that. Because it’s only a couple hours away, right, reducing shipping costs; they’re so close they should be mutually supportive. Those kind of decisions are what we’re looking at for that industrial control network and the ability to leverage that data. And then once we have that and we have good, clean data, then we’ll be able to use the artificial intelligence to help us make very, very risk-informed decisions.

Col. Brett Ayvazian And I can add on to that just one piece on the human workforce, human capital piece. As we digitize, as we start implementing more AI, we may not necessarily need workers on certain positions. But then that’s where we would actually retrain them and upscale them to focus on other areas so that they stay maintained, they stay operated, and we develop that workforce in that manner.

Terry Gerton I’m really glad to hear that. The AMC workforce is a national treasure, I think. I want to follow up here though, as we talked about the things that we’re doing to modernize the organic industrial base. Col. Crocker, I know you’re working with supply chain analysis right now. What are you finding in terms of the Army supply chain? Is it fragile? Does it have gaps?

Col. James Crocker There’s things we have to fix for sure, and so one of the initiatives I’ll talk about is our advanced manufacturing. So recently Lt. Gen. Mohan was granted authorities from the Secretary of the Army to qualify advanced manufactured parts, which is a game-changer for us. It lets us have another route to bring stuff in. So we’ve got, in fact at the Warrior’s Corner tomorrow, Brig. Gen. Behn from TACOM will talk about advanced manufacturing with our NIAR rep, who’s the partner we’re using on this, and so we’re trying to go fast. They qualified 60 parts in 60 days. And so the TACOM CG will talk about that, I won’t steal her thunder, but it’s a way for us to start getting parts faster, use our advanced manufacturing database so that when we get those parts, we can either get them out to a manufacturer or we produce them organically if we have the capacity to handle it, and that they’re already qualified parts that we know will work on our equipment, right? And so we’ll start with risk buckets, what’s low risk, what’s moderate risk, what’s high risk? Solve all the low risks and moderate risks and worry about the high risk later, right? And that way we can start solving readiness issues today as opposed to trying to figure out what the high risks will get us to. That’s a great initiative, one of the ways that we’re trying to help that supply chain.

Col. Brett Ayvazian And I agree in addition to that, again, our OIB workforce is so talented and they have such capability that they have been able to take a look at some of those long lead-time parts. They’ve been able reverse-engineer some things and have the capability to produce it themselves internally and like James just said, we’ve been granted the authority to go ahead and certify those parts, which gets us the parts that we need in the hands of the soldiers to fix the equipment a lot faster.

Col. James Crocker One last thing I’d bring on to that too, when you start talking about the more advanced supply chain — on the Q53 radar, one of the systems we maintained at Tobyhanna, there was a circuit card that was never intended to be repaired on it. It was made to be a disposable, supposed to be readily available, relatively low cost, and we found out because of post-COVID production lines, there’s like a two-year backlog on these things. So working with the OEM, no P3 involved, just working with Lockheed Martin, who was the OEM for that machine, they helped us figure out what it would take to do component repair on that, and so we can turn them around to five or six weeks as opposed to two years, right? And so not really a cost savings for the Army. But working with that strong defense industrial-base partner with the organic depot, it lets the manufacturer focus on manufacturing and getting the stuff they need out for the PM, but enabling the depot to be that source of support to make sure that we’re able to maintain our readiness. Things like that are important and what we’re going to have to continue to do inside our organic industrial base.

Terry Gerton Well, that seems to lead right into my last question, which is if the fight breaks out tomorrow, is the industrial base ready to scale at speed to support a major global conflict?

Col. Brett Ayvazian Absolutely. We’ve got the workforce, we’ve got the space and we’ve got the partnerships with industry to help us surge where we need to. Now again, as far as being in the modern facilities, we’re going to get there. It’s going to take us a little bit of time, but we’re ready to fight tonight.

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