Silicon Valley Meets Washington, D.C.: DOD's CSO Authority Is Here to Stay
The U.S. Department of Defense (DOD) has finalized a proposed rule authorizing the acquisition of commercial products and services using general solicitation competitive procedures known as a "commercial solutions opening" (CSO). The rule amends Defense Federal Acquisition Regulation Supplement (DFARS) Part 12 to implement Section 803 of the National Defense Authorization Act (NDAA) for fiscal year (FY) 2022, which made permanent a CSO pilot program initially authorized by Section 879 of the NDAA for FY 2017.
What Is a CSO?
A CSO is a publication, similar to a broad agency announcement,1 seeking innovative commercial items, technologies or services that directly fulfill requirements, close capability gaps or provide potential technological advances. It is an alternative acquisition method designed to lower barriers to entry in the DOD space and attract companies that traditionally have not worked with the federal government.
As compared to traditional government solicitations, CSOs present broad problem statements in order to attract and maximize participation from commercial companies that may not be familiar with standard government procurement processes (i.e., "nontraditional defense contractors").
For instance, in response to COVID-19, DOD issued a CSO in order to expand and enhance domestic manufacturing capacity to reduce dependency on foreign sources of supply for key medical personnel protective equipment (PPE) items, screening and diagnostics instruments and supplies, finished drugs, and active pharmaceutical ingredients.
In another example, DOD's Defense Innovation Unit (DIU), an organization "focused exclusively on fielding and scaling commercial technology across the U.S. military at commercial speeds," published the following broad problem statement seeking an "endpoint querying solution":
Endpoint Querying Solution: An endpoint security and management solution that executes queries and actions over millions of endpoints in near real-time. It should take a platform approach that is scalable and flexible to accommodate changing and/or expanding network infrastructures. Accurate endpoint data should provide visibility across IT and security operations to facilitate threat detection, incident response, patch management, asset inventory, etc. Solution should be commercially available and tested in customer production networks.2
Proposals submitted in response to CSOs are evaluated individually on the merits, as opposed to on a comparative basis, because such proposals are not submitted in response to a common performance work statement.
The CSO solicitation method can result in either an other transaction agreement (OTA) or a traditional Federal Acquisition Regulation (FAR) based fixed-price contract (but not a cost-reimbursable contract). DIU summarizes the benefits of the CSO strategy as including:
- a streamlined application process requiring only minimal corporate and technical information
- fast-track evaluation timelines for solution briefs, with notifications typically made within 30 calendar days of topic closure
- negotiable payment terms
- capital is non-dilutive
- negotiable intellectual property rights and no plans for the government to own any intellectual property
- direct feedback to product development teams to hone produce design and functionality
- potential follow-on funding for promising technologies and sponsorship of user test cases for prototypes and possible follow-on production3
DFARS Subpart 212.70
DFARS subpart 212.70, Defense Commercial Solutions Opening, defines "innovation" to mean:
- any technology, process or method, including research and development, that is new as of the date of submission of a proposal, or
- any application that is new as of the date of submission of a proposal of a technology, process or method existing as of such date
Contracting officers are permitted to use a CSO only:
- to obtain innovative solutions or potential capabilities that fulfill requirements
- to close capability gaps or provide potential innovative technological advancements
- when meaningful proposals with varying technical or scientific approaches can be reasonably anticipated
When awarding a FAR-based contract pursuant to a CSO, contracting officers must use fixed-price contract types, including fixed-price incentive contracts. DFARS 212.7002(b). Cost-reimbursable contracts may not be used. Products and services acquired using a CSO are to be treated as commercial products and services. DFARS 212.7002(c). Research and development requirements acquired using a CSO are subject to FAR Part 35 and DFARS Part 235. DFARS 212.7002(d).
For contracts awarded in excess of $100 million resulting from a CSO, contracting officers must obtain senior procurement executive approval. DFARS 212.7003.
The permanence of the CSO program is exciting and part of a larger shift in the way the government does business – spurred, in part, by the reality that U.S. national security and technological innovation are inexorably intertwined. Lowering the traditional barriers to entry and streamlining the acquisition process for new, disruptive, innovative commercial products and services seems to be the ideal solution to ensuring the government maintains its technological edge.
1 A broad agency announcement is a general announcement of an agency's research interest including criteria for selecting proposals and soliciting participation of all offerors capable of satisfying the government's needs. FAR 2.101. Unlike broad agency announcements, however, CSOs may be used to acquire technology directly relevant to a specific program.