The U.S. Army has released detailed information about its plans for a significantly larger software development support contract competition (up to $10 billion compared to the previous figure of $1 billion), according to an updated Request for Information (RFI) published in August 2024.
Despite the significant changes in figures, the notice’s scope remains largely unchanged. The Army plans to award a new Indefinite Delivery/Indefinite Quantity (IDIQ) contract to multiple contractors, creating a flexible mechanism for quickly issuing task orders for modern software development.
The initial RFI, published in May 2024, estimated a ceiling of more than $1 billion for the IDIQ program over the next 10 years for new modern software development. The updated announcement indicates an increase in the ceiling to $10 billion.
According to the RFI, the contract aims to facilitate a range of activities related to “modern software implementation.” This includes developing custom software solutions, customization, integration, or modification of existing software, providing Software as a Service, and modernizing software security and hosting.
Customization remains a key area of focus, with the Army emphasizing development practices such as DevSecOps, Agile, cost-effective, and continuous integration/continuous delivery.
The Army is also expanding the number of potential awardees to 20, compared to the initial limit of 10. The Army will reserve up to five contracts for small businesses.
The RFI describes a “three-step advisory down-select process” to evaluate proposals and inform bidders of their chances of moving forward. However, the agency assures that companies can continue to participate regardless of their advisory reports.
The U.S. Army also lays out a procedure for adding more firms, establishing a category known as “Awardable but Not Selected” for those who almost made it through the first selection and will receive preference in subsequent ones. Conferences are also planned. To avoid a probationary period, contractors must bid on at least 25% of orders and win 25% of them. If firms fail to improve within 180 days of notification, we may remove them from the list.
The deadline for submitting proposals for the draft notice is 10:00 AM Eastern Time on September 6, 2024.
U.S. Army Modernizes Software Acquisition Process
The details are crucial as the U.S. Army strives to modernize its software procurement process. Recently, two senior officials stated that the service is working on streamlining the process and promises closer cooperation with industry, especially with non-traditional defense firms—but critics argue that the rhetoric of reform has yet to match the Army’s actual actions.
Industry Objections Regarding Custom Software Development for the Army
The industry’s objections focus on the development of custom software for the Army, which is paid for using a unique cost accounting system prescribed by the Pentagon, instead of simply purchasing off-the-shelf commercial software at list price. These cost accounting methods are an established practice for traditional defense contractors. However, industry experts argue that these methods are so unfamiliar, complex, and difficult for commercial software development companies to implement that they could effectively discourage the most innovative tech companies from competing.
Feedback from the industry is crucial, said Jennifer Swenson, the Army’s head of software procurement, at AFCEA. The Army is working very closely with all types of companies, and it wants to ensure that non-traditional small, large, and other companies have the opportunity to compete for the work. he added.
Army leaders are saying the right things, experts noted, but the actual procurement language is quite different at the moment. This pertains to recent documents from the Army that are focused on implementing procurement reform, such as
The Army’s March 2024 directive, “On the Implementation of Modern Software Development and Acquisition Practices”;
The Request for Information (RFI), published in May 2024 and updated in August 2024, solicits industry input on a new multi-vendor megacontract for software procurement, officially known as the MSD MA IDIQ (Indefinite Delivery/Indefinite Quantity Contract for Modern Software Development).
The “Cost-Plus” Issue
A specific point of contention is the Pentagon’s practice known as “cost-plus” contracts, which industry critics say is vastly different from the fixed-price model preferred by commercial software development companies.
The “cost-plus” model is not entirely foreign to the private sector: many types of businesses, from home repair specialists to law firms, operate on a model where the client pays for the contractor’s time and materials, plus a percentage to cover overhead and profit. Military development programs—whether for stealth aircraft or software—are particularly difficult to estimate in advance because they are so prone to unforeseen technical challenges that drive them over budget.
The difficult part is determining what constitutes a legitimate “cost” that is eligible for reimbursement. To do this, the Department of Defense imposes a strict, complex, and unique cost accounting system that requires companies to track, among other things, the hours worked by employees across various government-defined categories.
This system somewhat works for companies building traditional weapons systems, such as tanks, warships, and aircraft; these are physical objects built by workers in officially classified trades—welders, fitters, electricians, and many others—who are generally paid by the hour.
However, as industry sources explained, systems for tracking labor costs in “cost plus” contracts do not align with the chaos of modern software development in this way.
Army commanders have acknowledged the criticism and are canceling at least some of the cost accounting requirements.
However, this doesn’t mean that the Army should completely abandon cost-plus contracts and rely solely on fixed-price contracts for all software needs.
They contend that the government can purchase software for almost any purpose in the commercial market at a fixed sticker price, without incurring additional costs for custom solutions, especially under cost-plus contracts.
The $5 trillion software industry includes more than 30,000 SaaS (Software as a Service) companies, around 500,000 IT and software service providers, and approximately 2.8 trillion lines of code written to date.
Existing commercial products can likely meet most of the Army’s needs.