3 - DRAFT CASR Incentive Plan.pdf

Commercial Augmentation Space Reserve (CASR) Incentive Strategy

This is a draft document to facilitate a more productive CASR Industry Day engagement. It is expected that feedback and discussion will facilitate refinement of this program.

Executive Summary – CASR Industry Incentives

Incentive Industry Benefit Page

1 RDT&E Funding

Provides industry the financial support needed to innovate, refine their technologies, participate in wargaming and exercises, and accelerate the integration of vendor solutions into USSF operations.

2 Participation in Wargaming

CASR's integration funding prioritizes participants for wargaming, offering vendors a vital feedback platform from end users to refine and guide their product development for broader DoD applications.

3 Participation in Exercises

CASR's integration funding grants participants access to military exercises, enabling vendors to receive real-world feedback and operational insights. This helps tailor their products to meet military requirements and enhances market exposure, building trust within the defense sector.

4 Information and Security Access

Provides industry with education and insights, such as threat sharing and warfighter requirements. This not only helps companies meet current CASR and USG requirements, but also strategically positions them for future opportunities within the defense sector.

5 Preference in Contract Award

The preference for CASR members in contract awards enhances vendor’s chances of securing defense contracts, giving them a competitive edge and more stable revenue opportunities.

6 Contract Specific Financial Risk Mitigations

Help vendors manage financial risks, enhancing cash flow and aligning USG and industry partner interests. As CASR is not a one-size fits all, specific considerations can be made at time of contract award to tailor the contract to the unique circumstances of each vendor.

Streamlined Cyber Accreditation and

Spectrum Licensing and Access

The USG will expedite the cybersecurity accreditation process for CASR members by prioritizing them in the ATT/ATO processes and grant them quicker access to licensing and access. 6

8 Financial Protection

Traditional commercial insurance, commercial war-risk insurance, U.S. Government-provided insurance, and indemnification as defined in statute are all financial protection tools.

9 Pre-Priced Options Predetermined prices streamline procurement by removing the need for lengthy negotiations, especially critical during conflicts.

This allows companies to optimize operations and resource allocation based on pre-negotiated terms.

What is CASR?

The Commercial Augmentation Space Reserve (CASR) is a governance framework to build relationships with industry during peacetime to increase capacity and resiliency during times of crisis and conflict. CASR is a voluntary initiative and will provide commercial industry transparency with a pre-negotiated, contractually managed framework that is executed today, and updated regularly to support future needs, ensuring the DoD has access to commercial capabilities through the full spectrum of conflict: peacetime, crisis/conflict and national war or emergency.

CASR provides a strategic advantage for the Combatant Commands (CCMD) by creating powerful partnerships with commercial companies for scenarios that require the DoD to surge commercial capabilities beyond what is covered by the DoD’s existing baseline under competition. These scenarios include, but are not limited to, requiring additional capacity above normal consumption for shorter periods not requiring baseline adjustments, filling capability gaps before existing programs become operational, providing redundancy and resilience in attrition scenarios, and providing solutions to unexpected events. CASR provides incentives for commercial market participation and provides the near-term funding for integration and testing, including wargaming, exercises, and the preparation necessary for these activities.

Operational consumption of CASR capabilities throughout the spectrum of conflict are primarily funded by appropriations that support the given contingency (i.e., emergency authorizations like OCO). By incentivizing participation and creating pre-negotiated options during peacetime, CASR builds a framework for guaranteeing access to critical and operational commercial space capabilities during times of crisis or conflict. The CASR framework is designed to ensure interoperability and seamless integration of commercial space solutions at pre-negotiated terms that are structurally aligned to strategic objectives DoD and CCMD requirements, through a tiered readiness and response structure.

The Core Tenets of CASR are:

• Voluntary participation

• Mutually beneficial relationships during peacetime to increase readiness

• Partnership with industry to share threat data, operational requirements, and potential investment opportunities

• Designing a contract structure that enhances scalable commercial capabilities throughout various levels of conflict - particularly during times of crisis

• Not a one-size model for every participant or mission capability

• Participation in wargames/exercises to inform industry investment and improve peacetime integration into warfighter operations, increasing readiness and responsiveness during times of crisis/conflict

• Security, resilience, reliability measures, and governance to ensure commercial capabilities will be available when called upon

• Combatant Command engagement in peacetime to predict capacity requirements during times of crisis/conflict

Why is CASR Important?

The Department of the Air Force’s priorities are shaped by Great Power Competition, which drive the Secretary’s Operational Imperatives (OIs), a set of seven “must do” tasks necessary to enable the Air Force and Space Force to maintain our competitive advantage against the nation’s pacing challenge in response to competition. OI-1 Defining Resilient and Effective Space Order of Battle and Architectures drove investments in resilient space systems, including pioneering work to start on future solutions for emerging challenges in the space domain. The threats the United States faces from its strategic competitors continue to grow substantially.

Concurrently, the space domain is shaped by a rapidly growing commercial space sector, which is cultivating a novel and innovative ecosystem that reduces barriers to entry and delivering new, operationally relevant capabilities. The USSF established CASR to leverage the growing commercial space industry (technology, capabilities, operating concepts) to support joint and combined operations across the full spectrum of conflict, specifically to offset the increasing adversary threats to our on-orbit systems and challenges to achieving our operational objectives.

Who should consider participating in CASR?

CASR is an initiative that encourages participation from all sectors of the U.S. industrial base, including start-ups and traditional defense contractors that offer commercial space domain solutions. Commercial solutions are products or services available for purchase through public market mechanisms. The primary focus for potential CASR members are companies that comprise the U.S. industrial base including Foreign Ownership, Control, or Influence (FOCI) mitigated subsidiaries of companies in allied countries. Foreign owned companies have not been ruled out, however, additional state-to-state agreements will need to be established.

Incentives for Commercial CASR Partners

To achieve strategic preparedness and effective partnership, the USG recognizes the critical importance of integrating commercial capabilities into the space domain architectures well before the onset of conflict. By offering compelling incentives to industry partners during peacetime, we not only foster a robust integration of commercial and defense capabilities but also ensure a seamless operational transition across the spectrum of conflict. This proactive engagement is designed to build a resilient partnership with the commercial sector, ensuring that when the need arises, both parties are well-prepared and aligned in their objectives and capabilities, thereby enhancing our national readiness and strategic response.

A robust incentive structure will encourage strong, effective industry participation in the

CASR program. This is particularly vital given CASRs focus on voluntary engagement during peacetime to develop rapid, impactful solutions when needed. Since CASR funding is currently limited to integration, testing and preparation of commercial options, it is essential to create compelling incentives to maximize voluntary participation.

1. Research, Development, Testing and Engineering (RDT&E) Funding

Background/Government Requirement: The CASR initiative secured funding to integrate and test CASR solutions. This financial support will help fund integration so that the desired military outcomes can be effectively achieved with these commercial capabilities when implemented at scale. Integration activities include, but are not limited to, conducting wargaming, exercises, testing and capability integration into the existing space architecture.

Industry Benefit: The allocation of RDT&E funding provides industry participants with financial support to innovate, refine their technologies, participate in wargaming and exercises, and accelerate the integration of vendor solutions into USSF operations while fostering valuable collaboration opportunities with the DoD.

2. Participation in Wargaming

Background/Government Requirement: A key component of CASR is development and refinement of commercial options to support desired warfighter outcomes. To better understand how commercial solutions will be integrated into existing space capabilities, the Government will schedule wargames periodically for CASR program participants. Wargaming primarily takes place in virtual environments to strategically simulate space-related conflicts and scenarios, enabling testing of tactics, strategies, and decision-making processes. Wargaming allows for assessing the effectiveness and potential outcomes of various military missions in a controlled environment. This will help inform how successful, and what potential commercial modifications or additional resources will be required to integrate commercial capability into space operations and enhance readiness.

Industry Benefit: CASR wargaming will be funded through RDT&E funds and CASR participants will be given preferrable consideration for wargaming. Vendors participating in wargaming provides a platform for the end users to give feedback on these commercial capabilities; helping vendors enhance their CASR offerings and providing them a guide to development of other products and services across the DoD. This educational exchange and collaboration benefits industry by aligning their innovations more closely with the specific warfighter needs and expectations. Access to the customer and obtaining clarity are essential for better positioning solutions to the end users.

3. Participation in Exercises

Background/Government Requirement: Exercises are similar to wargaming but are typically conducted in a physical environment, are much more labor intensive, and test the effectiveness of tactics, procedures and coordination between units and external players; and for CASR this would be industry partners. This direct engagement is vital to building operational cohesion and interoperability.

Industry Benefit: CASR exercises may be funded through RDT&E funds and CASR participants will be given preferrable consideration for exercises. Through military exercises vendors will benefit from receiving real-world feedback and operational insights to help tailor their products to better position them for meeting military requirements and boosts their market exposure, further building trust within the defense sector. Participation in these exercises allow for increased government customer awareness and will create visibility into what resources, personnel and other logistical support are needed to enhance readiness.

4. Information and Security Access

Background/Government Requirement: To enhance alignment between commercial capabilities and USG strategic needs there must be a deeper focus on transparency of information and warfighter requirements. CASR will provide recurring information exchanges including but not limited to, threat sharing, supply chain insights and classified and unclassified discussions.

When needed, CASR may sponsor facility clearances and DD254’s, network access, and/or vendor cleared spaces.

Industry Benefit: These exchanges and sponsorships for necessary security clearances benefit industry by providing increased education and crucial insights such as threat sharing, and details about warfighter requirements. This helps companies better prepare and position themselves to meet USG requirements effectively and efficiently for CASR but also positions them favorable for future non-CASR opportunities providing them a strategic advantage in the defense sector.

5. Preference in Contract Award

Background/Government Requirement: The USG is investigating options to establish award criteria preferences for CASR participants; like how there are procurement set asides for small businesses. To achieve this the USG will leverage a CASR participation certification (ref.

incentive #7) to verify a vendor has been pre-vetted to participate in CASR.

Industry Benefit: Such a preference for CASR members in contract awards enhances vendors’ ability to secure defense contracts, giving them a potential competitive edge when bidding on certain opportunities, resulting in additional revenue opportunities.

6. Contract Specific Financial Risk Mitigations

Background/Government Requirement: At time of contract negotiations the USG will work with each vendor to structure the contract appropriately addressing elements such as risk sharing, cash flow management, specific incentivization, alignment of interests and consideration of the economic environment. These considerations are vital to successful CASR solutions where scope, costs and timelines might be uncertain or subject to change.

Industry Benefit: The elements above are designed to facilitate effective project execution by helping vendors manage financial risks, enhancing cash flow and aligning USG and industry partner interests. As CASR is not a one-size fits all, specific considerations will be assessed at time of contract award to tailor the contract to the unique vendor situation.

7. Streamlined Cyber Accreditation and Spectrum Licensing and Access

Background/Government Requirement: To ensure system security, there are situations where systems provided by vendors might need to undergo the USG’s cyber accreditation process. This process is a fundamental part of the USG’s overall cybersecurity strategy, aimed at safeguarding essential systems, infrastructure, and sensitive data against increasingly sophisticated cyber threats. Additionally, the DoD manages the licensing and access to spectrum frequencies and is considering giving priority to vendors who participate in CASR. This effort will involve coordination with other federal agencies and commissions beyond the DoD to speed up processes and enhance rapid response capabilities.

Industry Benefit: To address the lengthy process required to achieve system accreditation, the USG will streamline the cybersecurity accreditation process for CASR members. By prioritizing CASR participants through preference in the Authority to Test (ATT) and Authority to Operate (ATO) processes, both parties ensure faster approval timelines. The combination of expedited cyber accreditation and priority for licensing and spectrum access will enable quicker deployment and reliability of capabilities and integration activities into space operations.

8. Financial Protection

Background/Government Requirement: In the context of the CASR surge capability needs, financial protections play a crucial role in managing risk. Commercial entities employing solutions in support of military operations accept risk. Traditional commercial insurance, commercial war-risk insurance, U.S. Government-provided insurance, and indemnification as defined in statute are all financial protection tools. A U.S. Government provided insurance is statutorily available for the air and maritime domains, but it is not yet available for the space domain. The Department of Defense is currently evaluating gaps in protection from commercial insurance providers, the conditions under which the U.S. Government-provided insurance would be needed for the space domain, and whether those conditions have been meet.

Industry Benefit: The financial protections listed above are crucial for vendors, offering essential risk and legal mitigations. These measures ensure that vendors can operate effectively and confidently, especially during periods of increased production and expedited delivery.

9. Pre-priced Contract Options

Background/Government Requirement: USG is considering pre-priced options for CASR solutions as they typically enable rapid deployment of capabilities, streamline the procurement process, and allow for quick and decisive action during a crisis. This approach also aligns both cost and capabilities closely with national security requirements. To reduce the risk burden on industry partners, the USG will collaborate closely with each vendor to ensure that the right contract clauses are included in the agreements (i.e., H-clauses, Economic price adjustment and escalation clauses).

Industry Benefit: Predetermined prices enable a streamlined procurement process, eliminating the need for lengthy negotiations which are crucial in times of conflict. Companies can also optimize their operations and resource allocation based on pre-negotiated pricing and scope of work.

Initial CASR Key Participation Criteria

Following the August 2024 feedback iteration, CASR will provide a voluntary participation agreement outlining the initial CASR key participation criteria. These initial CASR key participation criteria are:

● Companies willing to provide contracted capabilities throughout the full spectrum of conflict.

● Company provides a commercial product or capability that meets a requirement and/or need and can support a contingency surge in DoD activity.

● Company commits to managing and maintaining the capabilities selected during peacetime as well as conflict. The CASR program cannot guarantee that the integration funding and activities provided will cover all the necessary preparations by the company.

As a result, CASR will provide additional incentives to encourage participation, along with the inherent position to receive a rapid response contract award during a contingency.

● CASR will validate the posture and readiness of companies to ensure availability of included commercial options in accordance with the approved readiness plan.

Next Steps

● Participate in the upcoming CASR Reverse Industry Day, 27-28 August 2024

● Fill out the post Reverse Industry Day survey