We’ve recently reported testimony regarding the status and health of the defense industrial base. Readers may recall that Jacques Gansler told the Commission on Wartime Contracting that—

We are now 17 years beyond the 1994 passage of the Federal Acquisition Streamlining Act, and faced with the reality that application of FAR Part 12 principles has been problematic for services: only 18 percent of DoD’s services are sourced using commercial practices. The entry barriers remain the same: concerns over intellectual property and data rights, cost-accounting requirements, profit and overhead policies—to name just a few.

In a similar vein, Mr. Gansler subsequently testified before the Senate Armed Services Committee (Emerging Threats and Capabilities Subcommittee) that—

To meet the 21st Century National Security environment, the industrial base must be flexible, adaptable, agile, responsive, and innovative; and it must provide high-quality goods and services at affordable prices, in the quantities required. To achieve this, requires the government to change the way it does its business, i.e. reform its laws, regulations, policies and acquisition/procurement practices. It must remove the current barriers—created through overregulation and detailed “input” specifications—and shift to an emphasis on creating incentives for industry to achieve the desired output results. [Emphasis in original.]

Perhaps the DOD has given up the fight to transform its acquisition practices along the lines Mr. Gansler has advocated. Perhaps it has given up efforts to emphasize flexibility, adaptability, agility, responsiveness and innovation when there are so many barriers—internal, external, cultural, and legal—to such an evolved state. Perhaps not. History may be the final judge.

But National Defense magazine reported in its May 2011 edition that DOD has begun to look outside the Pentagon walls to search for nontraditional defense suppliers to fill niche needs for green energy, wireless communications, cybersecurity and data mining products. As the magazine article reported, “Some of the technologies on the Pentagon’s wish list exist in the larger [non-defense] marketplace, but are supplied by companies that shy away from government contracting or may not be aware that the Defense Department is in need of their products.”

To that list of supplier concerns we would add—

• Don’t have an approved accounting system

• Don’t have an approved timekeeping system

• Are afraid of hostile DCAA auditors writing adverse audit reports condemning perfectly acceptable commercial practices

• Are afraid of Truth-in-Negotiation Act requirements

• Are afraid of being accuse of False Claims Act violations because of inadvertent mistakes

In other words, all the barriers that Mr. Gansler told his Governmental listeners keep companies from entering the DOD marketspace.

Anyway, the DOD thinks it has found a way to identify and encourage/incubate its next generation of suppliers, to assist them in developing innovative products, to create opportunities for future competitions. It calls its efforts the Defense Venture Catalyst Initiative—or DeVenci, for short.

DeVenci “focuses on increasing Department of Defense (DoD) awareness of emerging commercial technologies developed by non-traditional DoD procurement sources, and on increasing the awareness of DoD needs and requirements within these sources.”

DeVenci accomplishes its objectives by having potential suppliers pitch their products to a government panel that includes 26 outside venture capitalists, who provide their services to DOD on a pro bono basis. Suppliers may self-nominate (via FedBizOpps) or may be nominated by the venture capitalists (VCs). Suppliers who make successful pitches must then survive a DOD review and (DOD-funded) test of their products—a process that can last “from six to 18 months.” Survivors of that vetting process are then evaluated by DOD personnel via a process that excludes the VCs. The survivors are connected with DOD users/buyers and (presumably) receive contract awards.

In the words of the DOD—

Interactive participation of the venture capital community, small innovative companies, and potential DoD customers is a proven way to accelerate the identification of emerging commercial technologies relevant to DoD needs. The DeVenCI model is to broker interactions that transfer knowledge and understanding between DoD participants with specific capability needs and small innovative companies. The goal is to find emerging technologies aimed at commercial market driven needs that also could be applied to DoD needs.

How’s the program doing?

The magazine article reported that—

Over the past year and a half, 376 companies were nominated. Defense Department subject matter experts reviewed their submissions, and 99 of them were invited to give a 25-minute presentation to an audience of government officials and VCs. Out of the 99 firms, 25 received government funds to have their products tested. Of those, 10 companies reached the ‘operational capability’ holy grail.

If the odds seem daunting, consider that a 10/376 chance of a contract award is not that much different than the odds faced by the average DOD bidder; in fact, the odds may be better than those experienced by bidders in many competitions.

If you are a small business, offering a cutting-edge product, and have been looking for a way to break into the DOD marketplace, then DeVenci may be your ticket to success. Moreover, if you are a large prime with a mentor-protégé agreement, you may want to consider pointing your protégé firm towards this program.

After all, nothing ventured, nothing gained.