Event Recap: Tandem NSI Deal Day (Part 2)

This is the second part of a guest post by John Kaufhold. Dr. Kaufhold is a data scientist and managing partner of Deep Learning Analytics, a data science company based in Arlington, VA. He presented an introduction to Deep Learning at the March Data Science DC Meetup. Tandem NSI is a public-private partnership between Arlington Economic Development and Amplifier Ventures. According to the TNSI website, the partnership is intended to foster a vibrant technology ecosystem that combines entrepreneurs, university researchers and students, national security program managers and the supporting business community. I attended the Tandem NSI Deal Day on May 7; this post is a summary of a few discussions relevant to DC2.

In part one, I discussed the pros and cons of starting a tech business in the DC region; in this post, I'll discuss the specific barriers to entry of which entrepreneurs focusing on obtaining federal contractors should be aware when operating in our region, as well as ideas for how interested members of our community can get involved.

Barriers to innovation and entrepreneurship for federal contractors

One of the first talks of the day came from SpaceX's Deputy General Counsel, David Harris. It captured in one slide an issue all small technology companies operating in the federal space face, namely the FAR (Federal Acquisition Regulations). Specifically, David simply counted the number of clauses in different types of contracts, including standard Collaborative Research And Development Agreements, Contract Service Level Agreement Property Licenses, SpaceX's Form LSA, and a consumer-off-the-shelf procurement contract. The number of clauses is generally 12 to 27 in each of these contracts. As a bottom line, he compared these to the number of clauses in a Traditional FAR-fixed-price with one cost-plus Contract Line Item Number: more than 200 clauses. In discussion, there was even a suggestion that the federal government might want to reexamine how it does business with smaller technology companies to encourage innovators to spend time innovating rather than parsing legalese. The tacit message was the FAR may go too far. Add to the FAR the requirements of the Defense Contract Audit Agency and sometimes months-long contracting delays, and you have created a heavy legal and accounting burden on innovators.

Peggy Styer of Blackbird also told a story about how commitment to mission and successful execution for the government can sometimes narrow the potential market for a business. A paraphrase of Peggy's story: It's good to be focused on mission, but there can be strategic conflict between commercial and government success. As an example, when they came under fire in theatre, special ops forces were once expected to carry a heavy tracking device the size of a car battery and run for their lives into the desert where a rescue team could later find and retrieve them. Blackbird miniaturized a tracking device with the same functionality, which made soldiers on foot faster and more mobile, improving survivability. The US government loved the device. But they loved it so much they asked Blackbird to sell to the US government exclusively (and not to commercialize it for competitors). This can put innovators for the government in a difficult position with a smaller market than they might have expected in the broader commercial space.

Dan Doney, Chief Innovation Officer at the Defense Intelligence Agency described a precedent “culture" of the “man on the moon” success that was in many ways a blueprint for how research is still conducted in the federal government. Specifically, putting a man on the moon was a project of a scale and complexity only our coordinated US government could manage in the 1960s. To accomplish the mission, the US government collected requirements, matched requirements with contractors, and systematically filled them all. And that was a tremendous success. However, almost 50 years later, a slavish focus on requirements may be the problem, Dan argued. Dan described "so much hunger” to solve mission-critical problems by our local innovative entrepreneurs that in order to exploit it, the government needs to eliminate the “friction” from the system. Dan argued eliminating that “friction” has been shown to get enormous results faster and cheaper than traditional contracting models. He continued: "our innovation problems are communication problems," pointing out that Broad Area Announcements -- how the US govt often announces project needs--are terrible abstractions of problems to be solved. The overwhelming jumble of legalese that has nothing to do with technical work was also discussed as a barrier for technical minds—just finding the technical nugget the BAA is really asking for is an exhausting search across all the fedbizops announcements.

A brief discussion of how contracts can become inflexible handcuffs that focus contractors on “hitting their numbers” on the tasks a PM originally thought they should solve at the time of contracting, while in the course of a program it may even become clear a contractor should now be solving other, more relevant problems. In essence, contractors are asked to ask and answer relevant research questions, and research is executed with contracts, but those contracts often become counterproductively inflexible for asking and answering research questions.

What can DC2 do?

  1. I only recognized three DC2 participants at this event. With a bigger presence, we could be a more active and relevant part of the discussion on how to incentivize government to make better use of its innovative entrepreneurial resources here in the DMV.
  2. Deal Day provided a forum to hear from both successful entrepreneurs and the government side. These panels documented some strategies for how some performers successfully navigated those opportunities for their businesses. What Deal Day didn’t offer was a chance to hear from small innovative startups on what their particular needs are. Perhaps DC2 could conduct a survey of its members to inform future Tandem NSI discussions.