DoD Increases Use of Commercial Solutions Opening Procedures

The National Defense Authorization Act for Fiscal Year 2024 (“NDAA”), signed into law on December 26, 2023, contains a number of important changes to federal procurement law and policy.¹

Section 813 of the NDAA directs the Secretary of Defense to—at least four times per Fiscal Year (“FY”)—exercise the authority under 10 USC 3458 to acquire innovative commercial products and services using general solicitation competitive procedures, known as a commercial solutions opening (“CSO”). Not wasting any time, a quick review of SAM.gov shows that the Department of Defense (“DoD”) has already issued CSOs under this authority six times in 2024.² The specific procuring agencies using CSOs include the Departments of the Army, Air Force, and Navy, as well as US Special Operations Command and the Defense Intelligence Agency.

This Legal Update provides an overview of CSOs as an innovative competitive process, and highlights important considerations for companies that compete under these procedures.

Background

Over the years, the use of CSOs has evolved from experimental use under a pilot program to a codified method of obtaining commercial solutions.

The CSO pilot program was initially authorized by section 880 of the NDAA for FY 2017.³ The pilot program was created to provide DoD with a streamlined way to address specific needs for innovative commercial items. To this end, the program sought to reduce barriers to entry, with the goal of bringing new entrants into the DoD marketplace. According to data from the Federal Procurement Data System, DoD awarded a total of 120 contracts as a result of CSOs during the pilot program (i.e., FY 2018 to FY 2022). Of those contracts, 82 (68%) were awarded to a total of 72 unique small businesses.⁴

This pilot program was made permanent by section 803 of the NDAA for FY 2022. On August 17, 2023, the statutory changes were implemented by the Defense Federal Acquisition Regulation Supplement (“DFARS”) subpart 212.70.

Overview of CSOs

• Authorized Use: A contracting officer may only use a CSO:
  • • to obtain innovative solutions or potential capabilities that fulfill requirements;
    • to close capability gaps, or provide potential innovative technological advancements; and
    • when meaningful proposals with carrying technical or scientific approaches can be reasonably anticipated.⁵
• “Innovation” Defined: The DFARS defines innovation broadly as:
  • • “[a]ny technology, process, or method, including research and development, that is new as of the date of submission of a proposal;” or
    • “[a]ny application that is new as of the date of submission of a proposal of a technology, process, or method existing as of such date”
• Limited Contract Types: For awards resulting from CSOs, the contracting officer may only use fixed-price contract types, including fixed-price incentive contracts.
• Approval Authorities: Contracting officers must obtain senior procurement executive approval to award a contract from a CSO in excess of $100 million.

CSO Procedures

Enabling rapid selection of innovative commercial solutions, CSO procedures include:

• a description of the agency’s interest for an individual program requirement or for broadly defined areas of interest – i.e., no requirement for performance work statement or statement of work;
• a list of proposal instructions; and
• a description of the evaluation factors to be used by the agency.

Notably, while the agency evaluates each proposal submitted in response to a CSO, proposals need not be evaluated against each other. In other words, submissions are evaluated on their own merit, as opposed to comparative evaluation.

Important Considerations for Contractors

Whether a company is an experienced DoD contractor or a nontraditional contractor looking to enter the defense sector, CSOs present several noteworthy issues that must be considered.

• CSOs Afford Agencies More Flexibility and Discretion: Under the above procedures, CSOs allow procuring agencies to quickly select the vendor which best provides the innovative commercial solution being sought. Streamlining the process, CSOs remove the burdensome requirement that agencies develop time-consuming and detailed statements of work or performance work statements. Importantly, CSOs give agencies the freedom to craft more flexible evaluation criteria than those required for a traditional negotiated procurement under Federal Acquisition Regulation (“FAR”) part 15. For instance, agencies need not establish a formal competitive range in order to engage in negotiations with vendors.
• CSOs Should Not be Confused with Broad Agency Announcements: It is true that both CSOs and Broad Agency Announcements (“BAAs”) establish simplified and flexible acquisition procedures. But whereas CSOs may be used to acquire existing commercial solutions, BAAs are limited to basic and applied research, and must be funded with research, development, test, and evaluation appropriations.
• Not Limited to FAR Contracts: The CSO process may solicit proposals that result in a traditional FAR-based contract. Notably, agencies may also use the CSO process to award a non-FAR based agreement, such as an Other Transaction Agreement.
• CSOs May Be Protestable: Even though CSOs represent an innovative solicitation method, it is important for vendors to recognize that CSO acquisitions may be subject to a bid protest at the Government Accountability Office (“GAO”) or the Court of Federal Claims (“COFC”). That is, the mere fact that the procuring agency is using CSO procedures, does not remove the risk of bid protest review. Such a protest would still need to satisfy jurisdictional, timeliness, and standing requirements applicable to the protest forum, whether it be GAO or the COFC. Thus, while CSOs provide increased flexibility, an agency’s evaluation and award decision may be subject to review.

Conclusion

CSOs are an innovative procurement method created to reduce barriers to entry for nontraditional defense contractors. Recognizing the benefits of a streamlined and flexible process, DoD agencies have been issuing CSOs at an increased rate. While CSOs are similar to conventional solicitations in some ways, important differences exist. Accordingly, both traditional and nontraditional defense contractors should familiarize themselves with CSOs procedures so that they can effectively compete to provide DoD with innovative commercial solutions.

¹ In a previous Legal Update, we discussed these statutory developments in detail.

² The SAM.gov website is the current governmentwide point of entry, which serves as “the single point where Government business opportunities greater than $25,000, including synopses of proposed contract actions, solicitations, and associated information, can be accessed electronically by the public.” Federal Acquisition Regulation 2.101.

³ Pub. L. 114-328.

⁴ See Defense Federal Acquisition Regulation Supplement: Defense Commercial Solutions Opening (DFARS Case 2022-D0006), published at 88 Federal Register 158 (Aug. 17, 2023) at 55938.

⁵ DFARS 212.7002.

⁶ See, e.g., Kinemetrics, Inc. v. U.S., 155 Fed. Cl. 177 (Fed. Cl. 2021); Oracle America, Inc., B-416061, May 31, 2018, 2018 CPD ¶ 180; PredictiveIQ LLC, B-421436.2, July 7, 2023, 2023 CPD ¶ 186.