Chris Ward (Commander, U.S. Navy (Retired)) has over 30 years of experience helping the Department of Defense (DoD) solve difficult technology requirements. She has a proven track record of building, maintaining, securing, and certifying technology solutions for use within DoD. She works with Industry to identify key opportunities and provides strategic guidance and support. She is a strategic analyst and cybersecurity professional who has deep expertise in improving enterprise cybersecurity.

Chris is a Senior Advisor at OODA LLC and an OODA Network Member. In this series of OODA interviews, we talk about how she came to be a part of OODA.  In subsequent conversations in this series, we will talk about Chris’ vast experience within the DoD, especially with procurement, operations, and specific programs like the Other Transaction Authority (OTA), amongst others.

“I’ve worked with a lot of companies that when you ask them ‘What do you do’? Their answer is ‘What do you need me to do‘?…which is not a good answer strategically…”

Daniel Pereira:  Let’s pick up where we left off in our introductory conversation.  Tell us about your experience with the Department of Defense?

Chris Ward:  Every once in a while, I will foray out of DoD if it is publicly accessible information I can get for a client.  But usually, I’m consulting specifically with a company that has some level of engagement with DoD.  But what I think is really interesting for this conversation is that at OODAcon, I was getting approached by so many of the attendees and companies at the event to talk about DoD.  Let’s face it:  companies, especially startups, care about DoD because there is money there.

Pereira:  Right. So let’s start with that because, by design, this conversation is an extension of the way you were getting cornered by attendees at OODAcon. I can promise you:  for everything we discuss here, there are staff members at startups and venture capital firms all over the country that are trying to puzzle out the government sector. So in this conversation, when OODA Loop readers engage with it, they will really appreciate the value add of your institutional knowledge and that of OODA.

So a startup executive team – or any business, really –  is always given the advice that one customer should only be X percentage of your total sales.  I think it’s like 20%. Ideally, you have to diversify your revenue streams.  And then there is the conventional wisdom about what percentage should be from government revenue.  And it should never be 100%.  You should never have the delusion that you’re a startup that is going to do 100% government work  – and that it will scale.

So now, a real quandary of this pivot that has been presented to us with the national security investment predominantly funded by VC is that OODA Loop is positioned to be a source for understanding the unique challenges of contracting to the USG and innovating within the USG.  Let’s face it:  a portion of these innovations simply will not have a commercial application, right?  So let’s start with that. What have you seen historically? Have you seen companies’ misstep trying to be 100% government vendors – and just not making it?

Ward:  Yes. It is a cyclical industry. If you look at the DoD budget – it goes up and down. You can look at 2005 as an example:  one of the peak periods when we were fighting two wars at the same time  – and there was a lot of money going out and a lot of companies had gone “all-in” on the Department of Defense side.

And I’ll just talk about the Department of Defense because that’s what I know. But it’s very cyclical and I know a ton of small businesses that are a hundred percent committed to the Department of Defense or even worse to the Navy or to the Army  – or even worse to Navy IT solely, you know?   So the more you neck that down  – the way that happens is there’s somebody that is in that industry that does really well at something – and they start a company and that is their focus. I’ve worked with a lot of companies that when you ask them “What do you do?” Their answer is “What do you need me to do?”…

Pereira: …which is not a good answer strategically.  Strategy is as much about what you are not doing as what you are doing.  So you should be closer to a “no” answer to that question than a blanket “yes.”

“When I was out in East Asia – we renovated the entire base infrastructure throughout all of our bases in Korea, Japan, Singapore, Diego Garcia the Philippines.”

Ward:  Right.  Because what will happen, especially within the Department of Defense, is DoD will groom a company to fill in for what they can’t get through regular government procurement.  So if you are a government person and you’re working in a laboratory and you have people on your team, and they’re all US government employees – civil servants – and you want to do more to get another eleventh person on your team – it is very difficult.  And if you do get them, you can never get rid of them.

But if you can get a little bit of money and give it over to a contractor and get them on board to do it, you can scale that really quickly.  You can turn your little 10-man team into a 50-man team and then you can just say at the drop of a hat “I don’t want to do it anymore” and let them go.  So it is an effective way for the government to be able to flex quickly.  Big or small. It is a tricky thing for a company to commit exclusively to that type of cyclical work.

Pereira:  So there’s an analogy in the film industry. I trained 3D animators for many years. Special effects shops ramp up for a big show  – like Jurassic Park back in the day and Avatar II most recently or any of the Marvel films – with what is called “seats” of animators.  And that is an all-gig economy, that is all subcontractor work. These big computer graphics films are two-year contracts with a $200 million budget:  so the money is there. But if there are two hundred seats to get the film out the door, those people are not permanent seats. They’re all contracts.  So that’s where I get my sensitivity to these issues.

So what’s the fate of that 40-person subcontractor that does flex contracting for DoD  – and they get “the call?”

Ward:  They are scrambling to be able to find something else to keep those people hired. But, you know: they wind up letting the people go.  So there are different types of small businesses, but that example you give is one where it is really a person “in a seat.”  So the government needs more cyber people, they bring more cyber people on.  They need more acquisition contract writers; they bring them on.  They need more electrical testers or spectrum analysts or something like that. They will scale for that.  It is good business when they’re doing it because it is low risk  – in that they know that they’re just going to get a percent of what that salary is and it’s going to be steady.

They can project out into the next year – but they can’t project over the next five years.  Companies are always scrambling for where to put these people if that contract goes away  – and the government – to its discredit or credit depending on how you look at it –is always looking for the best deal, of course.

So when another little company comes up that can pull together a team of let’s say spectrum analysts or whatever, right? And they can come in a little cheaper – then the government is just going to flex over to that company.

In fact, it is something that may be obvious but needs to be highlighted in this conversation: when the government uses an industry team to do what used to be a governmental function.

I’ll give you an example from my time in the Navy.  When I was out in East Asia – we renovated the entire base infrastructure throughout all of our bases in Korea, Japan, Singapore, Diego Garcia the Philippines.

Pereira:  O.K. Wow.

“…go somewhere else with the experience that a company has gained…use it in a different market area…and then come back to the USG or DoD later.”

Ward:  We were in teams to do this massive work. And then all this new work was put in  – and then we had to bring in people to design these systems.  Okay. So we brought in all contractors.

Pereira:  So, for clarity: were you a project manager on a team of PMs? Or were you the PM for the entire project?

Ward:  I was the operational manager for it.  I wasn’t ever on the acquisition side, but I was on the operational side. So I was the one there making sure that this thing happened.

Pereira:  Wow. Really impressive work.

Ward:  When you got the people in place, we had a company that we would use, and we liked that company. We tended to have two companies. So if one company ran a little short, we’d bring in more of the other company. But every five years that contract went out for a recompete – put out to the whole defense base for a competition.  And let’s say it’s a fifty-million contract. When it gets recompeted, there will be companies that will buy their way in by producing artificially low prices. There would be all kinds of different things that would happen to get those prices back down. So the net on the ground is you, you usually wind up changing the contractor out every five years because somebody else is coming in cheaper. It’s the same people doing that job. You have someone running the network in the Philippines for you, he’s going to stay there because he lives there and he’s going to be hired under the new company….

Pereira:  …I have experienced that…

Ward:  …it is a brutal life on that side of the contract.  It gives the government the ability to keep the cost down. Every year an employee gets an increase, right? Certainly every three years an employee gets a pay raise. And if you don’t do anything like that, then the price is just going to keep going up and up and up. It is not an advantageous industry. They have to be really sensitive to that.  You have to be willing to pull out of a particular contract completely and go somewhere else with the experience that a company has gained from it  – and use it in a different market area for a little while and then come back to the USG or DoD later.

“Our company is going to commit 100% of our resources to this contract…and we are not going to concern ourselves with commercialization.”  

Pereira:  So the current climate we are working in right now is different than even a year or two ago.  At that time, you heard a lot of talk about and everyone was trying to sort out or intuit or have a vision of a “New Marshall Plan” or a “New Manhattan Project,” to solve misinformation or climate change or domestic semiconductor manufacturing   I had a draft post in our research queue for months.  I was trying to answer the question:  what percentage of GDP was the Manhattan Project during WWII?

I thought we were looking for a major governmental internal effort. Then, the American Frontier Fund was announced in 2022 and we had a funding innovation panel at OODAcon.  That was a tipping point. Now, it doesn’t matter. Venture capital, which was invented as an instrument of post-World War II financial systems, is coming into the national security space because they want to impact mission-based projects at speed and scale.

Previously, VC would flinch at the $100M to 150M mark. They always flinched at the Capex, the capital expenditure of trying to do these big, big things.  Then Solyndra happened during the Obama Administration, which was the final nail in the coffin.

In this current business environment, where we now have a narrative about a new era of speed and scale, with private sector investment at the equivalent of a Manhattan Project and Marshall Fund scale to maintain American competitiveness through tough, advanced, and emerging technologies.

So, if a startup CEO has done enough research on or has experience with what we are talking about, what is the model for a technology startup sitting across from the USG in negotiations and saying “Listen, our company is going to commit 100% of our resources to this contract, but this is literally a one-off delivery and therefore here are the zeros at the end of it budget – because this contract award represents our entire play.” The company will be in and out of the contract – and we are not going to concern ourselves with commercialization.”  This is a “one-off” for this startup: delivering to the U.S. government at speed and scale. I know I am sounding a bit out there, but do you see what I’m saying?

“What I’ve seen so far are these OTAs – Other Transactional Authorities (OTA)…”

Ward:  I totally hear what you are saying.  and I have never, ever collaborated with a company that said to themselves “This is our net this year and this is what I want it to be next year.” Not that <laugh> or half that. I mean, companies are always going to represent growth, right? I’ve never collaborated with a company that’s been willing to accept anything except growth as their aim and their goal. So,  it is super dangerous.   And to your point about the big projects. What I have seen in the last 15 years is a  switch over to a more agile type of contracting with the Department of Defense.

Pereira:  Let’s talk about that.

Ward: OODA LLC is doing some work for a major international “big data” company.  The company is trying to figure out how to do agile acquisition for defense. And so we’re going to be writing some reports and doing some interviews for them to tell them how the U.S. is doing it. We are learning that all the countries are interested in it. Everybody thinks it’s pretty fascinating.

What I’ve seen so far are these OTAs – Other Transactional Authorities (OTA)…

Pereira:…my God, I am obsessed. On behalf of our readership and the OODA Network membership, I have become obsessed with contract vehicles like the OTA.  I ran a couple of TSA government contracts for an X-ray technology startup in a previous life, so I understand what the OTA process represents for a startup or SMB….

Ward:  Are you obsessed because you think they are good or bad?

“..tell us the pros and cons of the Other Transaction Authority.”

Pereira:  Good. When I ran those government contracts, I was at a point in my career where the more arcane the project or process, the better. So I really enjoyed managing government contracts. It is just so structural. And that TSA person would be waiting for my call for the right one-sheet document, properly formatted, to go into the USG system to be sent to the Coast Guard operation that manages the actual money. Some little shop within the Coast Guard, or something like that, was releasing the monies to my boss at the startup I was with, making me look like a superstar contract award project manager.

But I remember thinking the whole time:  what if I really needed to like “go private sector” on this project and really push things through at more of a private sector pace?   What are the mechanisms for doing this? I was enjoying learning how to deliver a government contract while following all the right protocols, but I was always looking for the “Bat Phone”  – what or who – what’s my red flashing bat phone to call someone to crunch this project, to really start killing on this thing and get this project done?

When the OTA finally crossed my desk, I thought “Ah, there it is, there is the mechanism I have been looking for all this time.”  A current OODA Network member, a CEO, recently mentioned on the OODA Network monthly call that his company is currently executing an OTA.

So, tell us the pros and cons of the Other Transaction Authority.

“…the government can write ‘I’ve got a problem, I need help’ on a piece of paper. It goes through the OTA Consortium…”

Ward:  So OTAs, so we first saw them, I guess, five or six years ago. The person who took over acquisitions at DoD came out of special operations command. So he was like the acquisition guy for SOCOM. And so he had these innovative ways to buy crazy stuff, really fast, and get it where he needed it – also really fast.  So that is why he got elevated into that position at least five or six years ago. And then he started putting in these other transactional authorities. Then,  most different organizations, the Air Force, you know, the Army, the Navy, produced their own OTAs. So the one I’m most familiar with is in the Navy – the one that the Naval Warfare Command uses, which is the Information Warfare Research Prototype (IWRP).

And they have been putting about $10 million a year through that for the last five years. Now they are small contracts, so that means there are a lot of contracts. You know, it doesn’t sound like a lot of money, but here’s the key to it. If you do get picked up for an OTA, and now I’ll just back up a bit.

I know you know how it works, but the government can write “I’ve got a problem, I need help” on a piece of paper. It goes through the OTA consortium, the consortium manager cleans it up, puts it in “speak” that everybody can understand, and gets it out to everybody. The consortium, a couple of hundred different industries that have joined the consortium, looks at it.

“You have a point here.  Why don’t you build us a prototype?”

And the five companies that can do anything about it will draft a white paper to back up how they would provide a solution.  The government will look at it and say, “I like your idea” and give a million dollars to three different companies to build a prototype. And then the three different companies will build a prototype, and if one of them works, the government can go full scale with no additional competition.

And that is the beauty of it.  There was the interaction back and forth between the customer and industry, the rapidity of how fast it went. And then if they succeed in getting a prototype that works, there’s no other competition for it. So they get it out there very, very quickly. And I’ve seen that to be helpful and effective.

The other side of it is the industries can say we have a solution you haven’t thought of  – which a lot of industries do. They can also tell the government decision-makers “We don’t know why you’re approaching X, Y, and Z this way. Why don’t you look at, you know, a, B, and C.”

And they can draft a white paper to go up and the government can look at that. The consortium will get it to the right government leaders, the government leaders will look at it and say “You have a point here.  Why don’t you build us a prototype?” So it can go back and forth many times with the same OTA company.

https://oodaloop.com/archive/2023/04/15/an-introductory-qa-with-ooda-senior-advisor-and-network-member-chris-ward/

https://oodaloop.com/archive/2023/04/28/usg-projects-at-speed-and-scale-the-disadvantages-of-ota-and-securing-the-emerging-technology-it-supply-chain/