The Army is updating its software directive and scrapping its existing policy on software funding that has routinely hindered software projects across the service. 

Michael Obadal, the service’s undersecretary, said the new software directive will be released “in the coming weeks.” The service plans to revise the document annually to keep pace with the rapidly changing environment. 

Meanwhile, canceling its existing policy governing how the service pays for software will allow the Army to “apply the appropriate type of money to the applicable use case.” 

“For many years, as many of you know, we’ve been trapped by the color of money. We try to buy modern, agile software with rigid funding authorities. Predictably, it doesn’t work,” Obadal said during the AFCEA NOVA Army IT Day event on Thursday.

This shift will give the Army greater flexibility in how it uses its operations and maintenance, procurement and research, development, testing and evaluation funds for software.

While flexible use of different colors of money will offer the service some relief, it is still not “the most effective method” for funding software. Obadal said the Army ultimately plans to pursue Budget Activity 8 (BA-8), which will allow program managers to move away from the hardware-centric budgeting model and instead draw funding from an appropriations category specific to software.

“We’re going to pursue Budget Activity 08 for our software, which would realign funding from various appropriations to new software and digital technology in its own budget activity,” Obadal said.

The Defense Department has long struggled with software acquisition for a number of reasons, but the rules that govern how the department pays for software have possibly been one of its major obstacles. The model Congress and the Pentagon have used to plan and execute the Pentagon’s spending was originally built for long-term hardware acquisition. But this structure doesn’t apply well to the agile software development model. 

The department has been experimenting with using a separate appropriations category for software. The idea started to gain traction in 2019, when the Defense Innovation Board found that “colors of money tend to doom” software programs. “We need to create pathways for “bleaching” funds to smooth this process for long-term programs,” the board wrote in its report. 

But lawmakers have been hesitant to authorize broader adoption of this pathway beyond a small number of pilot programs until the Defense Department is able to produce data comparing this approach to traditional appropriation practices.

“Agile funding … we have to have that in the right focus area to be able to apply it to modern software, and it’s a little more difficult than we think because it involves Congress … But these are the steps we’re taking,” Obadal said.

Obadal also urged industry to “build [systems] to scale, don’t build it to demo.”

“What we’re asking from industry as we tackle those things is the confidence in your solution to scale, not just demo … That means that you have to take extra steps, and you have to think about what happens in a year or two years for you. Open architectures, interoperable designs, secure by design software, not bolted-on cybersecurity. That’s another incredibly important one, is your design and a willingness to align with Army timelines and with our operational realities,” he said.

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