Building the Decision Edge for Defense Acquisition
Transcript
SUMMARY KEYWORDS
Government procurement, national security, commercial technology, defense budget, AI platform, data integration, acquisition challenges, government contracts, technology transition, procurement data, innovation programs, defense industry, software acquisition pathway, commercial solutions openings, other transaction authorities.
SPEAKERS
David, Brendan, Akhil, Maggie
Maggie 00:00
Welcome to the Mission Matters Podcast, a podcast from Shield Capital where we explore the technical opportunities and challenges of developing and deploying commercial technology to national security customers. I'm Maggie Gray
David 00:16
I'm David Rothzeid
Maggie 00:19
And we are your hosts from the investment team at Shield Capital. On this podcast, we discuss the technical challenges of developing and deploying commercial technology to national security customers, as told from the founder's perspective.
In this episode, we're joined by Brendan Karp, the CEO of Obviant, a government market intelligence platform. I had a lot of fun co hosting (and also a little bit interviewing) this podcast with my colleague David Rothzeid, who led this deal at Shield Capital. He really could have actually used this product back when he was an acquisitions officer in the Air Force, so he was the perfect person to have on this podcast talk about the exciting world of government, acquisitions, contracts, budgeting, data, etc.
David 01:16
Well, Maggie, I gotta say it was an absolute honor to finally come on to the esteemed Mission Matters Podcast, especially Yes, to talk about a company like Obviant that may appear mundane to the casual observer, but for those of us steeped in this national security government procurement system, this is truly critical, especially if we're going to achieve efficiencies in government and better outcomes for taxpayers and for startups that are trying to sell compelling technology into the government apparatus For those who don't know, but maybe you do, because you're listening to this podcast, the procurement government procurement system is made up of 1000s of different systems and information sources. Alarmingly, some of it still runs on paper and spreadsheets and is siloed off in hundreds of different databases. And you know, just for an example, the upcoming $1 trillion defense budget, yeah, it's going to be delivered in 1000s of pages of PDFs. And you know, for Obviant, they're tackling this problem by building the data source of truth for programs, acquisition, organizations and budget data for all of the Department of Defense, they've built an AI platform that creates a common data operating picture with incredible workflows on top of that data foundation. And I'm just really excited for that conversation we had with Brendan.
Maggie 02:38
David, Brendan, so great to have you guys both on the show today. We have Brendan Karp here from Obviant, the CEO of Obviant, and then David Rothzeid from the Shield Capital team is joining us today for this special episode on the world of DoD budgeting and contracting and acquisitions. Thank you so much for coming on the show. I want to just start laying the groundwork. You know, can you tell us a little bit about what is Obviant and, you know, how did you get into the world of government contracting in the first place? It's not exactly the sexiest topic that you can end up in.
Brendan 03:15
No, definitely not. There's not, typically not how I describe it, you know, I think it's a it's a really niche but, but somewhat important thing is, especially as you think about the budget and the acquisition side of it. So I'll give a little bit of background as to why I chose to focus on this problem space.
So I grew up in the DC area, in around the beltway, but actually had no exposure to government whatsoever, right? I grew up in a family with no government involvement, and you know, the last company I was building, last startup, most of that business was in the private sector, funding early stage technology companies. However, we scaled a $20 million Homeland Security innovation program where we would take those same non traditional companies and fund them around mission needs. And that was my first exposure to public sector problem sets. And I was hooked, because for me, it was this amazing intersection of getting to build but for a problem that actually mattered, right, like the public sector mission sets, we got to focus on for that program, first responders, homeland security use cases, was incredible.
And the flip side of that story, though, is that although is a ton of fun working on those problems, it felt like punching a pillow at times, trying to make progress. And I think anyone, and especially I know David, will resonate with this. Anyone that's been part of the government acquisition or innovation ecosystem feels that right. So, flash forward. We scaled that program great. The impact, honestly, was somewhat limited by that acquisition process, and I knew I wanted to build a company from zero again. And the thing that was missing for me in every other space that I explored, whether it was enterprise SaaS or otherwise, was that mission piece like that was really real for me, of like, why am I going to wake up every morning and want to work? On this problem set, and it was the impact. And so for me, it was kind of a no brainer at that point to focus on the government space and take all those learnings in that experience that I had building that last company and do this specifically in defense and national security, because I truly felt that this was the highest order problem of our time to work on, and that's what drove me to start avian and work on this, this challenge.
Maggie 05:23
And David, you led this investment at Shield Capital, along with Mike Brown. What got you so excited about this space? You're obviously an expert in the acquisition space. What about Obviant really stood out to you?
David 05:36
Well, thank you, Maggie. I think expert is definitely in the eye of the beholder, but I have had the privilege of being in this defense acquisition system for quite a long time, and I will say very rarely in my you know, I guess 15/16+ years of being around defense acquisition rarely have ever come across somebody who was like a complete independent party, didn't grow up in the system, wasn't an acquisition or a contracting officer, and really understood the subject material and not just that, like the high levels of, oh, the defense industry base, it's shrinking. Oh, the defense industrial complex, it's challenging to work with. Oh, I've, you know, tried to work with it, won a contract or didn't win a contract, and it's terrible. Like no Brendan truly understood some of the insides and outsides. Like, I think, the first time we met, we got very wonky on the what's called a DoDAAC, a DoD activity, address, code, and I would be hard pressed to find 5% of acquisition officers in the military who know what a DoDAAC is, right. So like some of this nuance stuff that I knew that what Brendan was building would be very compelling. And I will say at first, when I started exploring this space of what are all the tools out there that can help a company understand the marketplace, right, the federal marketplace, at first, it was, who can I partner with on behalf of Shield Capital for all of our portfolio companies and try to get them a discount? And when I met Brendan, it turned into, okay, how can I be a partner and collaborator with Brendan on a full time basis, ideally, through an investment to help accelerate the opportunity that's in front of us to really build out the source of truth around government procurement data.
Brendan 07:37
What one thing I gotta call out is, I think that that is I think that that is the one and only time that having knowledge of what a DoDAAC is has actually gotten me points, because it is a terrible party trick otherwise.
David 07:49
So, yeah, I wouldn't bring it up too often otherwise,
Maggie 07:53
So Brendan, can you tell us a little bit about what is actually the state of tooling to track DoD contracts and budgets and acquisitions today, both within the US government and in the private sector, and how is Obviant really pushing forward the state of that tech? And David, I don't know if you have any horror stories here from your time In government, if you want to chime in with anything like that.
Brendan 08:26
Yeah, I think just, real quickly, and then I'll let David speak to some of those horror stories, or whatever you want to call it, you know, truly appreciate, you know, all the belief and conviction that David and you and the team at SHIELD have had in us. But you know, that was always our goal, right? Was like to that point where he was able to look and look and say, this person or this company gets it right, was always like, how do we build this for the people that know this system and have a deep level of empathy for them, of like, are working it inside and out every day, and represent the data in the way that they wish they had it right.
And so to your point on, what is the landscape of tools that is a lot of the challenge is that the way that folks like David and others who have been in those chairs, right, the tools they wish they had don't often exist. It's often PDFs or spreadsheets, phone calls to other people who have information that they don't, right, and then separated different enclaves and systems that don't talk to one another. So, not only is there a base level access to the data problem, right? So we don't even have access to that, and that takes weeks, months to coordinate that for much of the information, which is open source, by the way. The second level is then, even if we had access to it, the tooling that we're used to in the commercial sector, right? You think of like something like air table in terms of how you can manipulate simple data sets or build your own database, you know, analytical dashboards. None of that really exists in the form that we have in the commercial sector, side, in the government.
David 09:47
Yeah. I mean, I'll just go back to my time at the Pentagon. We used a system called ABIDES, which stands for automated budget, interactive data, enterprise system. It recently got replaced in 2022 with its with a new thing called program and budget enterprise system. But ABIDES was built in the 1970s It was DOS based, and you had to, like hit F2 and F7 to move through it. And this is how the budget was built, program element by program element and then rolled up into some other system at OSD, and then sent off to the office of management and budgeting OMB. And it was just sort of like, like you had defense contractors in the Pentagon solely for the purposes of being able to, like, maneuver with that type of a system. So, you know, it's really not a surprise that the Department doesn't necessarily understand everything that's going on when you're still constrained to systems and large parts that were built, you know, in the 1970s on these mainframes that really should have gone away a long time ago.
Maggie 11:05
So Brendan, tell me why is Obviant need to exist in the first place, and who are really the different kinds of users that you guys are targeting?
Brendan 11:16
Yeah, so go back to what I was talking about a little bit ago, right? Which is like, how does this process actually play out right now? So if we talk about the acquisition process, where is the funding? What budget is available? What are the different programs that that funds? What who are the organizations and the people that actually own those programs? What is, what does Congress think about that? And how are they changing that money, adding to it, subtracting from it, and then the company's capturing it. All these questions are surprisingly difficult to answer, right? And most people can't get the answers, not that they don't know how to but it takes a long, long time to do it.
Just answering one of those questions could you take you weeks of if you're on the outside of the building, diving through 15 different PDF documents, three different websites, Googling on, you know, on searching on Google, or looking through LinkedIn to kind of connect those dots and all that information exists out there in this weird mix of structured and unstructured format, right? So there is no actual source of truth to actually follow the money, and so that first archetype that I'm speaking to is on the private sector side. And when we started Obviant, that's who we thought we were solving for.
But what we quickly realized is that same problem is equally as acute within the building right like to make critical decisions, and if you're in David's shoes to actually execute acquisition or innovation programs, you don't have that data at your fingertips, and so what do you do? You have to do that same research process, dig into different systems or make phone calls and try to get that data from other people right. So what we do is, we ingest all that information, so we pull from 1000s of different sources, like an open source intelligence company, right? And fuse that all together into an actual source of truth, right? We use AI and machine learning to actually structure and connect that data up.
And so who that benefits is that we've realized is on the private sector side of things. We can help a company understand what is their execution roadmap, where is their capability relevant? Where can they solve problems, and where's their funding for it, from an investor standpoint too, where are the largest markets and where are the trends going? Where should we deploy capital? And then within the government, it's actually how to execute efficiently, manage their portfolios, collaborate, understand where there might be duplicate efforts and could be, could be, you know, working together. And lastly, one of the biggest things is technology transition. So we're funding all these different capability areas, but where is their long term sustainment funding and partners that we can work with? And so kind of tying all that together, right, if you listen to that, that all those parties are asking similar questions from different angles, and it all kind of boils back to this fact that there is no common operating picture, from a data standpoint, for them to ask those questions and get an answer in a structured, organized way.
David 14:12
Yeah, that was masterfully said Brendan, and couldn't agree with you more. You know, the way that the DoD on the inside, it is organized around different functional areas. And so if you were to say, what is the budget for this grouping of programs around this technology area, and who are the organizations that are executing, it would be a very manual process to put it together. In fact, it would come from some sort of a request for information on one of those terrible systems that, you know, does taskers, and then, you know, would kind of filter out to a bunch of people like me, you know, like a former O-4 or O-5, that are, you know. Providing oversight for a myriad of different programs. And then we would reach out to the outstations you know, and say, hey, does this thing you know, is it? Do you think your program subscribes to it?
And maybe I'll just give like a specific example, when I was still in the building, the Undersecretary for Research and Engineering highlighted 14 critical technology areas, you know, things like biotech and hypersonics and artificial intelligence and cybersecurity. And the way that the Department kind of rolled up how much funding was going into these different technology areas was by asking all the different like program elements. You know, how much of your budget is AI, how much of your budget is hypersonics? Of course, like the program I was on, we had $0 in hypersonics, but my program was the advanced battle management system, right? Which was the Air Force's major investment into Joint All Domain Command and Control, which was another amorphous topic. I sort of, I don't know, I don't know how much of my $5 billion budget over the future year defense plan is associated with artificial intelligence, but I gave a number.
And so it's like these types of things that where what Brendan is doing is taking the actual data that is being executed against these contracts and lining it up to the organizational structure and the people that are executing them and the programs that Congress cares about. And I guess what, creating this, this taxonomy whereby you can understand what these similar but not necessarily functionally aligned elements are telling you and at a high enough level, you can really derive some valuable insights. And so whether you are a program manager doing market research around a solicitation topic area, and you want to know who are all of the performers that have executed against these types of capabilities in the past. Or you just want to get better insight into how much funding is going into these types of capabilities, you know, based on actual data that is being executed against, whether it's in, I forget what the Federal Procurement Data of FPDS, right? You know, you can start to get real meaningful understanding of what's happening in the Department, and that can greatly inform where you choose to apply your resources or how you do your evaluations.
And then on the VC side, like, totally agree. You know, if we're seeing, you know, how many counter UAS companies do we see Maggie, like, so many, and how much actual budget is going towards this area? Like, not that much. Or if they are, who are they going to it tends to be the large defense primes. You know, it becomes a bit of a challenge to make an investment here, because one the total addressable market isn't that big for who you would expect to be the largest buyer, national security. And it seems like it's got pretty well locked down with the defense prime. So, you know, these are just ways that we can help inform our startups, you know, or inform our investments, and then help our startups think about how they can penetrate the defense industry, the defense procurement system.
Maggie 18:32
I'm curious Brendan, how does Obviant actually maintain its database for these insights? You know, I'm thinking about the President's budget request just came out, and they're devoting a lot of resources to programs like Golden Dome. And I know this is a new term, but it's probably going to actually incorporate a lot of existing and future programs. Like, how do you guys think about organizing that data for something like that?
Brendan 18:56
That is one of the key questions we get all the time is one, A) how do we organize it? And B) how do we keep it up to date and make sure it's accurate? And so one thing that I think is really important, so obviously, startup urgency is critical, right? And moving fast and with incredible speed. But I also felt that building this space, you have to build something that really works, right? Like vaporware in the government market does not work, right? And that there are real mission use cases that has to be dependent on and so for us, we actually went heads down and did nothing but data engineering for a year to figure out how these data sources were structured, how we could accurately represent them, and build the pipelines and structuring mechanism to actually keep that up to date, right?
So, to your point, you've called out a few of the larger sources that we pull from, but there's also 1000s of other sources that we have to ingest to populate that, that core data structure and the schema, right, that underlies everything that we do here at audience. So to your point on, how do we keep it up? Keep it up to date? Well. We're constantly going out there and collecting more information, right, but making sure that when we do structure it, that it is at parity and we can trace it back to a source of truth, that this exact piece of a PDF or this point in a video hearing, right? And then now, because we've done that, we can consistently add to it, right? So how do we keep it up to date for existing sources, that just happens in the background. But now, when we work with folks on the government side or within industry that say, Hey, we also have all of our own data that we want to understand. What that means against the information that you collect, we want to rationalize that out against the acquisition landscape. It's easy for us to bolt that onto that data structure, kind of in a secure environment for them to unlock their own insights from it.
So the data engineering challenges is where we started, actually, before we launched a product, to make sure that we had that. And along the way, we've had to really solve some of these more complex natural language processing problems to take these amorphous concepts, right? And my favorite is contested logistics. What is contested logistics, right? It is the big buzzword. It is the it is one of the top priorities right now. But knowing that contested logistics means these 10 things which have these other seven components which relate to one another in that taxonomy tree, those are some of the hard things that we've had to do to not only A) ingest and structure the information, but then B) can, you know, continuously translate against it to unlock what people are looking for.
David 21:27
Maybe Maggie, if you don't mind, I'd love to ask Brendan a question. So, say the DoD came to you and they were willing to give you some of the inputs that would go into their systems of record. Because right now, you're only seeing the stuff that's publicly available, which in a lot of cases can be very rich, because these are contracts, right? And contracts, it's a double ledger. So like, you know, there's real money going in, and people are signing their names. So like, trust me, like it's very real. But what about getting the inside some of the messiness as the programs are being developed, or, you know, with in the services themselves, they're doing gives and takes, and then the budget rolls up to OSD, and they're doing more gives and takes, and then it goes up to OMB, and they're doing more give and takes, like, with that sort of insight, you know, what do you think something like Obviant could do for the Department?
Brendan 22:32
To that exact point, that's where I get really excited, right? Is that really, it's, a data challenge, and then how do we actually build the workflows and the product outcomes that that meet the day to day challenges that we face in the Department, right? And so to your point, you know, fusing government data, whether that is the programmatic side of things, or, you know, solicitation, CSOs, to what we were talking about, that that they might issue, and understanding what is the full pathway with that. You know, some of the things that we can unlock that we get excited do, get excited one, one piece right now is just following the money audit. Right?
We talk about audit a lot right now in terms of ensuring that the DoD finally passes an audit. That's one area. Can we trace the dollars all the way from budget through to contract execution and understand where that money went? You know, another big one that I think is super top of mind is that, when we're talking about developing non traditional capabilities, that oftentimes starts out in the R&D side of things, but what is the transition pathway for that? Right? So you fund these non traditional companies, it is fundamentally an equal parts collaboration. So like, how do you work within the building, but also to in order to collaborate effectively, you need access to the data to do that. So if you're able, at the outset, to understand, I'm funding the CSO as company, right, and I'm within one of the R&D organizations, there's realistically one of two, three transition pathways that that's going to follow to PEO missiles in space, right? Or, you know, IWS on the Navy side of things.
So really like solving these data problems and getting access to some of the other information, which, which we're working on right now with the government, can unlock a broad range of use cases, everything from the financial management side of the house and just portfolio, but all the way through which, which I'm personally most passionate about is that capability development side. How do we make sure that we actually take these capabilities that exist in the private sector and make sure they don't just die on the vine, but they actually get into the hands of the end users, and critically at scale?
David 24:32
So if I heard you correctly, you know, go back to April 2023 when Jon Stewart interviewed then SECDEF Kath Hicks on fraud, waste and abuse and the inability of the DoD to pass an audit, you think, with the power of Obviant, you know, at its disposal, and granted, would take some time, but you think the DoD could maybe actually pass a financial audit?
Brendan 24:58
What I would say to that is: what gets me really, really excited is the opportunity to partner with folks like that, right, and hopefully reach that outcome together. So I think that you know so much this is back to, you know, the product and capability and culture side of things is that taking a great, phenomenal, high performing team, which, which we think we're building here at Obviant, and pairing that with folks on the inside that feel the exact same way from the mission side of it and reaching that outcome. I think anything is possible. I really, really, really do.
David 25:28
So you know, all audits aside, Brendan, maybe you can highlight how your current customers are leveraging you today and extracting a lot of value. And if there's any anecdotes that you want to share, we'd love to hear it.
Brendan 25:44
Yeah, for sure. I think that is the most rewarding part. Is like when you're able to be part of building a product and you actually see it make a difference, right? Like it's producing the outcomes that that you, that you hope it would free user. And so I'll talk about a similar thing across all three sides of our customer base and on the company side, right?
We had a fast growing defense technology startup, right? Think Series B onward, that has a capability, and they weren't quite sure how they could actually make that hop over to the program of record side and into the program office, right? And as we know, that's a multi year battle. It takes a lot of different pieces that you have to connect and stakeholders. And so what we were able to help them understand is that for their capability, where do they actually mesh, right? And in this particular instance, that they fit in a couple of intelligence oriented program offices across the DoD and in particular, they were able to understand that this one program office had some very early RDT&E funding, and that RDT&E funding was actually being allocated for an emerging program, right? And it hadn't turned into a program of record yet. And so really early on in its life cycle were they not only able to understand A) where their capability maps, but B) understand something that is capturable, see all the atmospherics around it, and the current players in that program office, where the strategic thinking was going there, and how they're speaking about this, and then even down to the exact stakeholder to engage with. And what we found is that that actually put them in the running to get a contract with that organization right.
And so that exact thread of basically taking something from capability all the way down to execution is playing out with investors and funds that we work with, where they say we want to make an investment in offensive cyber, right? What is all the money out there? And then who does that drill down to from an execution standpoint, and can we get to conviction there, right? And even on the government side, if you're developing that capability from the other side of the coin, right? You possess that early stage funding, and I'm the one that's prototyping these intelligence capabilities. You know, how do I take that all the way through to actually identifying my transition partner, right? Who is the organization that can actually fund this through sustainment, being able to power those kinds of workflows are the success are the success stories that have just been unreal to be part of.
David 28:04
Yeah, that's awesome. I've definitely used the tool a few times to sort of really understand how much success a given company has had in a given area, and then been able to then also see other organizations that they're not working with, and be able to point them in that direction, and it's only with a few, you know, semantic queries pretty, pretty simple, I guess. What would you say to companies that are interested in using something like Obviant, but maybe a little bit reluctant from from the spend standpoint, and maybe you could also highlight, like, what's the earliest stage company? What's the latest stage company currently using your platform today?
Brendan 28:48
Yeah, yeah. So we've worked across that entire spectrum, right from early early stage companies that have just gotten their first SBIR awards and are already thinking strategically about, well, what is my transition plan? What is my transition pathway, and what can I capture along the way to get there right, and then all the way up to the top 10 primes right that we work with? So what we found is, for us, it's always been, I said this at the outset, how do we take the workflow and the knowledge that the experts like you David, have in this space, right? People that know this market like the back of their hand, and how do we democratize that and just make it dead simple and easily understandable and a beautiful product that that that folks can leverage and make it intuitive so working across that spectrum, right? Obviously, budget and spend tolerance is vastly different, and one of the things that's always been really important to us is making sure that we build a business model that can accommodate all sides of that spectrum. However, what I will say is, at the end of the day, it's you're making a long term investment.
And one of the things that we hear, oftentimes, that companies in the defense market have to do is engage on the Hill, and engage on the Hill, and engage early and. Oftentimes that entails hiring a lobbyist, and that is not cheap. But the thing you oftentimes hear is, if you don't do that, though, your upside is inherently gonna be capped, right? And where you need to get to without that congressional engagement is gonna be super hard. And we think that that program office problem, right, and the funding, identifying that and running a strategic business development process is the same way that, if you're not investing in it early and continuously and running that effort in parallel with the immediate things, whether it's SBIRs or OTAs or otherwise, at the end of the day, you know you're gonna have to be playing catch up over the long run, and it's a critical competency that you have to build early on.
Maggie 30:38
So I want to take some time to really talk through some of the big changes that have been happening in the acquisitions and contracting space over the last five or six months or so. Right here we have two of the experts in DoD acquisitions and contracting. So I want to take the time to really break down some of these big changes. So Brendan, can you talk through what are you seeing as some of the most important or impactful initiatives coming from the administration thus far? And can you break down what do they actually mean for both, I guess, traditional defense primes, for the DoD and for this new generation of startup?
Brendan 31:23
So I like to think about it in a couple of different realms, right? So one is really the how we buy side of things, right? And the how we buy has to do with more of the regulations and the processes around that. The other side of things, I think it's important to touch on, which is the what we buy, right? And that's this discussion that we're having right now is shift from these large platforms to commercially available items, products, and what we actually need for the future from a national security standpoint, and the two are deeply related, right? So that first part of things is how we buy, right? And you saw this with the executive order around rewriting the FAR, right, something that has been around for decades and decades and decades, which I'm sure David can tell us lots of frustration stories about, can you define, define the far what does that mean? I will, I will defer to David on the actual definition on that.
David 32:15
Sure it stands for the Federal Acquisition Regulation. It is about 3000 pages around all the things you can and cannot do when acquiring goods and services for the government. So extends beyond just the Department of Defense, it's for all federal agencies in the executive branch. And then, of course, beyond just the Federal Acquisition Regulation, the DoD has the DFARS, which is another set of tombs, further refining things that are more bespoke and specific to the DoD. Not to be outdone, the services tend to have their own, you know, variations and variants on this document. And then, of course, you get down to the individual programs. And they have their cultures, their guides, their instructions. Lo and behold. You know, it's easy to see why the culture of compliance sort of permeates across the entire acquisition workforce.
Maggie 33:09
And I assume, David, you've read the full FAR, cover to cover.
David 33:13
I have not read the entire thing, but I am pretty good at most of the various parts of it, right? It's broken up into all these different parts. And so at times, I have dug in and really tried to hone in where, you know, I can find exceptions for things.
Brendan 33:29
And that's one of the reasons so, the last thing he just said there, and why, I think it's wanted to defer to him to define that right, like exceptions for things, right? In order to be able to navigate that effectively and actually drive change. You have to know, within this 1000s and 1000s of 1000s of pages framework, know what part of it you can actually use to get done. What do you want to get done right and find the exceptions within it. So back to kind of your original question, Maggie. One is this rewrite of the FAR and then two, one of the other big things is, is, is, is promoting things like the software acquisition pathway, right, or commercial solutions openings, right, which David and the team at DIU years back pioneered and actually started right. So this idea of we can leverage these other authorities, different than the far right, other transaction authorities, etc, to actually accelerate the acquisition landscape. This is a huge shift in terms of the way that acquisition is done. And the big area that that's being pointed at back to that, that other category here, of what we buy, the big area that's being pointed at, commercial solutions, openings, again, is commercial technologies, things that can be adapted towards mission needs, or non traditional startups that we can bring into the fold on prototyping agreements that are these more lower cost or adapted solutions that actually meet the capabilities that we need today, not three years out, or 40 years ago, from a major platform standpoint.
Maggie 34:59
So Brendan. And you mentioned the commercial solutions offering a couple times now, but I want to take a step back from some of the acquisitions contracting jargon. What does it actually mean to buy commercial and why is that even important in the first place?
Brendan 35:15
What this is essentially saying is that if there is commercial, if there's a commercial alternative, right, and technology exists in the commercial sector that we can either leverage or adapt, right? We should be doing that which, which makes sense, I think, like one of the, one of my, one of my favorite, uh, unfortunately, anecdotes is, like a number of folks that I've talked to who are still active duty, they talk about how difficult the payroll process is, right, like how awful the experience around payroll is, of like, missed paychecks or having to go back and request pay that's been missed or time off. And that, what does that tie back to? That oftentimes ties back to these massively complex, custom built systems, right, where the private sector, again, has built some of the best in breed, right?
You think about companies like ADP and on the on the startup side of things, what we know is like a Rippling or Gusto, right? The the sector has been building these systems and, and so this, this whole shift, is to say, Well, can we leverage things like that, right? And, and, if not, off the shelf, adapt it right again, from a prototyping standpoint, to meet the mission needs, right? So when a commercial alternative exists, can we leverage that? Because what I think it's a shift to say is that there are certain things, absolutely, from a basic research or a custom, you know, needs standpoint, that should not, cannot and will not ever exist solely in the commercial sector. But there's a whole lot of things that the government does right, and the government needs, excuse me, that exist in the commercial sector right now that the incentive is out there for the commercial sector to develop that is the best in breed that leverages, you know, top engineering talent across the board and capital incentives from investors that the government can benefit from, right? And get that at not only a lower cost than it would be to build these systems over time, but a far superior capability, because the private sector is going to maintain that and upgrade it.
David 37:09
Maybe my favorite anecdote that Brendan you were just highlighting around payroll, which, yes, is an absolute nightmare, and I had to call on the phone more than a few times to figure out my MilPay back in the day, especially when you move from organization to organization. Well, you know the defense travel system DTS is probably the bane of a lot of military and civil servants’ existence that was designed, developed by Northrop Grumman. I don't know if you knew that they were, you know, known for their travel website, ferocity. I mean, I thought they were more about building weapon systems, but yeah, Northrop Grumman won the contract to build defense travel system in 1998 so this is pre dot-com bubble now, and they've gone on to win task orders, you know. And it still remains to be the same system that is quite cumbersome. So much so that if the, you know, I'm still in the Reserves at the Pentagon, and if the Reserve said, David, you can no longer drill locally to where you are, because I live in Washington, DC, you now need to go to, I don't know, say, Wright Patterson, Air Force Base. So now for my reserve duty, I'd have to engage with something like DTS to get over there. I would definitely at year 18, almost to 20, I would say, sorry. You know, it's not worth it, because that system is just so brutal to work with.
Brendan 38:42
And I think it's back to your question, Maggie, right on, you know, the experience on this and what does this buy, commercial meet all mean, all this ties together, because what we're talking about is, how do we bring these non traditional commercial companies into the fold, right or accelerated pathways? Well, are those like, how do we actually get them on contract? Then, if they have to go through a multi year contracting process, or the acquisitions officer doesn't actually have the tools in their toolbox to work with them quickly on prototyping for that solution, so these things really all kind of converge.
And back to, you know, a lot of what we focus on is, well, how do we identify those capabilities. How do we identify the acquisition pathways? Well, what funding is available, right? So on the government side, how do we actually tap funding to leverage this? Like, where is there money in either my budget or elsewhere that I can partner with to do this? And it's equally as challenging on the private sector side, not only is it a Pathways problem, but it's also a demand signal problem, right? So from the private sector, how do they know that this is a problem worth solving, right and worth focusing on, meaning that if I have an expense management platform or a travel systems platform, how do I understand what, what millions or billions of dollars there is for me to capture in the DoD to go after? That and adapt my solution and justify that to my investors, right? There is no source of truth for that is one of the hardest parts. So I think, like all of these things again, really tie together is everything from the approaches to, if we're aligned on the approaches and we and we fix a lot of the authorities and regulations around that, conveying that demand signal is equally as important so that people can execute on both sides of the equation.
Maggie 40:24
So how can we actually measure the effectiveness of the administration's new initiatives around streamlining defense acquisition? How do we know if rewriting the far or pushing the commercial solutions offering software acquisitions pathways actually makes a tangible difference in the state of acquisition efficiency, and
Brendan 40:48
That's one of the challenges that that we're hitting head on right, which is there is an easy way to understand when we leverage the software acquisition pathway or we leverage CSOs, what does that actually translate into down the road, right? So let's just pick an example here. Let's say a lot of the C-UAS efforts that we hear about, right? That’s counter small unmanned aerial systems. So think a lot of the things that we hear about in terms of small, commercially available drones that folks are using, that we have to defend against. Currently, a lot of the times we're using missile systems that cost, you know, upwards of 1,000,002 million bucks a pop, to take those out, right? And, and so, how do we bring into the fold more affordable alternatives to that that, again, might be commercially available and, but there is no way to track that great we leverage the CSO right now.
What did that translate into a year, two years, three years down the road, right? What percentage of the overall capability that was fielded can we attribute back to that original OTA? Or if an OTA started off in prototyping, right, which means more that R&D stage, did that OTA transition to production? Was it fielded at scale? And one of the core problems, and this is what we're hitting head on, is that data is not either a structured that way, or structured to begin with, because, again, A) it might only be in a PDF or a contracting document and B) there's no traceability between those handoffs, right? So the R&D organization that might issue that prototyping agreement. There is no data source of truth between that and the production organization, whether it's a program executive office or otherwise that fields it.
So to your question on “Well, what is the effectiveness of these things?” That's a lot of what the Department is trying to figure out on its own end right now is, well, what is the pull through and the follow through of when, when we use these new methodologies, what is the overall success rate in terms of companies that are transitioning to programs of record? And it starts with the data right? And because the data is not set up to answer those questions, and then we're not manipulating it, we're not able to get a clear picture of that.
Maggie 42:55
Brendan, where are we today in terms of using some of these more innovative contracting mechanisms, like OTAs and CSOs. And where do you expect us to be within the next few years?
Brendan 43:11
I’ll start with the end state. And I think exponentially different, right? I think that we are at the beginning of really you look at kind of things like the CSO and you can go back from there. You know, consortia is the first models of leveraging this right at some level of scale, but we've really only scratched the surface. If you look at OT, other transaction awards, in the last year or so, in both years, it's less than 5% of all awards issued by the government in terms of dollars, right? Less than 5% of money is going to these innovative mechanisms. So if we look at all the discussion and the talk about defense tech and leveraging the software acquisition pathway and CSOs and OTs, it is still such a very, very small piece of how we actually contract today.
However, with the momentum that we're seeing and the discussion around it, and the actual policies that we're putting in place, I think that that looks exponentially different if we look three to five years down the road in terms of how, not only the percentage at which that we leverage these authorities, but also the outcome that it can drive. You know, if you look at the number of venture backed companies, non traditionals, that have transitioned to a program of record. And I think that this is and I think that this is correlated, there's less than a dozen right that have actually gotten Program Office contracts like we are still so so much in the top of the first inning in this transformation.
Maggie 44:35
What will it actually require within the DoD to take these top down directives and actually make them a reality and a part of the culture across the organization?
David 44:48
I think it requires a lot of training, and then I think it also does require more publicizing of the anecdotes that are going well. Other transactions have been in the Department as an authority since the mid 90s. One of the biggest programs to leverage it was called Future Combat Systems, FCS, and it was like this massive, multi billion dollar program that the army was going to sort of digitally revolutionize all of their capabilities. So it was a hardware, software, data like, I mean, it was kind of this crazy program, and it failed spectacularly. Now, if you go back to Rick Dunn, who's the greatest historian of other transaction authority, because he did bring it to DARPA in 1989 and then helped shepherd it into the DoD after that. You know, he will tell you that program was only an OT in name. But if you look at the terms and conditions of the contract, if you look at the milestones and how it was executed, and Boeing, I believe, was the primary contractor, it was only, it was only OT and name it really had nothing. It did not leverage the value proposition of that authority. And so, you know, these things go, they ebb and they flow based on how successful or not successful things are. I think we need to just sort of mandate it, as we are seemingly doing. But then really take you know, to the craft and teach and and celebrate the successes and showcase. You know what is, what is good look like, and I think that's kind of how you move the Department over time.
Maggie 46:34
Brendan, what would you say is your most controversial hot take about DoD, acquisitions, budgeting, contracting,
Brendan 46:43
Yeah, to be honest, not really a hot take guy, yeah. Prefer to just focus on the execution side of it. But I'll probably kick this question to him, because I'm sure he might have one.
David 46:54
You know, in spirit of Maggie, your question, one thing that has me a little bit concerned, and I haven't heard a lot of people talking about it, is with the people taking the return to the office and then being offered the fork in the road. A lot of great contracting officers, acquisition professionals have taken it, and I am concerned that the most innovative ones who should be awarding the contracts in this new, like mandated way, leveraging, you know, underutilized contracting vehicles, like other transactions, etc. I'm afraid that we're going to have a bit of a glut in awarding contracts and getting non traditional companies into the industry base. So a little bit of, you know, cutting our nose to spite our face with what we're trying to do in the Department, I think it'll get worked out. But maybe something Brendan, if you wouldn't mind, highlighting, like, you know, is there a way to sort of see a trend analysis around some of these policies being enacted, and whether or not they're having the necessary effect or the velocity of contracts being awarded, is that maybe gonna shrink or not meet the same pace as previous years?
Brendan 48:17
Yeah, and I think that what you're speaking to, there's tracking what the downstream effect and outcome is, right? And this is one of the things that we find that in order to do that. So the platform that we've built right, allows decisions to be made more effectively at every level, right? And so whether that's downstream from the end user or technology transition, right, if you're a program manager, all the way up to the headquarters level to understand, well, whether it's at the services or DoD right, what are the implications of the changes that we make. And so to that same anecdote that I like to speak to is that OTAs are currently much less than 5% of all award values right annually. The same thing, we can look at the data here to understand, when we make a policy decision or an HR decision over here, what is the impact in terms of contract velocity, right? And we can look at that information understand, has that dipped, has that gone up? Did we see an impact on these more innovative mechanisms that we wanted to use? And I think what I would say is that all ties back to the thing that we're so focused on. Is, how do we not only make this data accessible, but then do analytics right and manipulate it in a way that gives us the answers that are timely and critical to the actual decisions that need to be made that are gonna that are gonna transform this how we do business at the Pentagon.
Maggie 49:36
What advice do you have for other startups building in the national security space, other than “buy Obviant,” which is obviously a given.
Brendan 49:46
No, I appreciate that, you know. And then I love to hear David's take from the other side of the investor angle and government side. You know that? I think that the biggest thing is like be strategic, and play the long game, right with what you're doing. Know that signing up to build a company is a 5 to 10 year journey, right? And in this case, it is that and then some meaning that you might not see the payoff until three to four years into that journey, right, in terms of exponential returns. And so the biggest thing, I would say is really like, you know, focus on something that you're truly passionate about, and that, you know, you feel that you have a connection to from the mission side of it, and know that you're playing the long game, both in terms of building, not only building the company, but also in terms of how you think about how you're building that product and executing the sales motion that everything that you need to do in this space, I think, needs to optimize for what that long run is.
David 50:47
That's awesome. Brandon, I guess, yeah, for me, advice for other startups: have a co founder and choose them very carefully, because it is a really hard, long journey, building something from scratch, trying to convince customers to try you out, trying to convince investors to take to collaborate with you, and then trying to hire employees right to go on that journey. And I think a lot of times companies where the co founders just aren't totally in lockstep, it can be really, really challenging for the future success of the startup.
Maggie 51:24
Brendan David, thank you guys so much for coming on the show.
Brendan 51:27
Really appreciate. Maggie,
David 51:30
Yeah, awesome.
Brendan 51:30
Thanks so much for having us.
Akhil 51:35
Hey everyone. Thanks for listening to the Mission Matters Podcast from Shield Capital. Tune in again next month for another conversation with founders building for a mission that matters. And if you yourself are looking to build in the national security space, please reach out to us.