J_A Capital Factory_Redacted.pdf

Contractor: Capital Factory Memberships

PROCUREMENT SENSITIVE

Department of Army FAR Part 13 Justification and

Approval for Other than Full and Open Competition

1. Contracting Activity: U.S. Army Contracting Command Aberdeen Proving Ground Research Triangle Park (ACC- APG RTP) Durham, NC 27709

2. Description of Action: The proposed action is to award a new follow-on contract with The Capital Factory, 701 Brazos St, Austin, TX 78701. The contract will be issued on a Firm Fixed Price (FFP) basis for a single twelve month award with a value of not to exceed . The Government projects an award of this contract in September 2021. An acquisition plan in accordance with Defense Federal Acquisition Supplement (DFARS) 207.103(d)(i)(B) is not required.

3. Description of Supplies/Services: The purpose of the Army Futures Command (AFC) is to improve future readiness by ensuring Soldiers have the weapons, equipment, technology and tools they need, when they need them, to deploy, fight and win future conflicts. After a very thorough evaluation, the Secretary of the Army selected Austin, TX as the location for the AFC Headquarters based on a necessary mix of Science, Technology, Engineering and Mathematics focus, research and development investment, a mature accelerator/incubator ecosystem (of which Capital Factory is intimately involved), a top-tier university system and welcoming culture that propels a vertical integration of concepts through solutions within a few city blocks. In order to meet the intent set by the former Secretary of the Army for AFC, AFC must build relationships and establish a footprint within Austin's entrepreneurs, accelerator/incubators, university system and private industry. The AFC's Army Applications Lab (AAL) is the entity primarily responsible for building these relationships. As the mission of AAL per HQDA EXORD 176-18 is to, “expand access to Academia, tech accelerators and high-tech industry,” it is critical to have access to start-up and entrepreneur ecosystem that exists from a technology accelerator/incubator, allowing AAL to collaborate with innovators across the United States in nearly every discipline and expertise. Specifically, AFC requires a corporate membership (65 personnel) from a technology accelerator/incubator, to foster the development of technologies offered by commercial start-up companies, with expertise in the six Modernization Priorities - Long Range Precision Fires, Next Generation Combat Vehicle, Future Vertical Lift, Network, Air and Missile Defense, Solider Lethality. This provides the opportunity for free flowing entrepreneur engagement as well as scheduled events and outreach in an ecosystem designed to host, foster, and grow these connections and relationships. Capital Factory also provides necessary infrastructure to facilitate in person and virtual engagements. Included in the corporate membership is Wi-Fi, printing capability, video-teleconferencing, event support (set-up, tear-down, audio visual, invitations, publicity and other support as required). Additionally, the Capital Factory provides access to events hosted by other entities within the Capital Factory, entrepreneurs, mentors, and accelerators. These stakeholder engagements are critical to the long term success of AFC and its ability to become part of the Austin center of gravity. Participation in stakeholder events either as an attendee or host is included in the cost of membership. The estimated price is less than for this award. AFC would like to purchase the membership for a period of twelve (12) months. The Capital Factory membership should not be confused with a lease as it is not a lease. The Government is not entering into a written agreement in which the owner of the property at 701 Brazos St, Austin, TX 78701, the Omni Hotel is allowing the use of the property to AFC for a specified period of time (term) for specific periodic payments (rent), and other terms and conditions. AFC is purchasing memberships from the Capital Factory a technology accelerator/incubator which is uniquely oriented with an emphasis on Defense/Army technology. Capital Factory is the business entity that has entered into a lease agreement with the Omni Hotel identified as real property described the premises (often by address/701 Brazos St, Austin, TX 78701), penalties for late payments, termination upon default of payment or breach of any significant conditions, increases in rent based on cost of living or some other standard, inclusion or exclusion of property taxes and insurance in rent, limitations on use, charges for staying on beyond the term (holding over), any right to renew the lease for another period, and/or a requirement for payment of attorney’s fees and costs in case of the need to enforce the lease (including eviction) is with Capital Factory not AFC.

Several Department of Defense entities have previously procured the same type of memberships to include the Air Force, AFWERX and the Defense Innovation Experimental Unit. AFC’s need to be present in the Capital Factory organization is to ensure we have access to the events, innovators, start-ups and the entrepreneur ecosystem that exists from Capital Factory’s technology accelerator/incubator, allowing AAL to collaborate with innovators across the United States in nearly every discipline and expertise.

4. Authority Cited: 41 U.S.C. § 1901 as implemented by FAR 13.5, only one reasonable source and no other supplies or services will satisfy agency requirements.

5. Reason for Authority Cited: As described at FAR 13.5, Contracting Officers may conduct sole source acquisitions only if the need to do so is justified in writing and, for those contracts exceeding the simplified acquisition threshold, but not exceeding $750,000, the contracting officer’s certification that the justification is accurate and complete to the best of the contracting officer’s knowledge and belief will serve as approval.

In order to build on the momentum and to take advantage of the reasons for locating AFC in Austin, AAL must continue engaging with the innovator ecosystem in Austin.

Capital Factory is the most mature, centrally located accelerator in Austin, TX with a unique combination of in resident technology related startup companies, a high volume of unique, widely attended entrepreneurial programming, and access to other Texas based innovative organizations, activities, and firms. Capital Factory is uniquely placed to evaluate thousands of startups per year, and accepts in excess of 100 of the most to evaluate thousands of startups per year, and accepts in excess of 100 of the most promising companies into their accelerator program annually. This enables Capital Factory to be the most active startup investor in Texas. These startups take advantage of programming in Capital Factory to include engagements with over 150 Austin based executive level subject matter experts, greater than 1,000 entrepreneurial and community related programs annually which reach over 100,000 participants, and a proven process which enables access to the venture capital community and their financial and analytical resources. Capital Factory also has unique relationships with the University of Texas, Austin, Saint Edwards University, and University of Texas, Dallas. These business education relationships enable access to Professors, students, and university resources.

Additionally, the Defense Innovation Unit and the US Air Force AFWERX have been residents at the Capital Factory with similar corporate membership agreements, and take advantage of access provided by Capital Factory to explore innovative approaches to solving their unique defense requirements. Other National Security related organizations have previously used the Capital Factory for periodic programming providing additional opportunities to collaborate. These Department of Defense elements also take advantage of the unique access to startups and years of data provided by Capital Factory to identify possible startups to collaborate with on projects. No other Texas based company offers the combination of technology startup access; unique, targeted, and relevant programming; access to the most mature entrepreneurial network throughout Texas; and central location which is also near the Army Futures Command Headquarters. This combination of Capital Factory capabilities and other defense related organizations are required to enable the mission of the Army Applications Laboratory, and to identify opportunities for disruptive innovation from high-tech partners in industry and academia which is central to senior US Army leaders' choice for selecting Austin, TX as home for the US Army Futures Command. During the past three years AFC has annually been invited to one-thousand plus (1000+) events from industry and academia organizations based solely on the membership with Capital Factory. Additionally through contacts established by this relationship, AAL has coordinated with hundreds of other private entities to address Army needs to include but not limited to AAL/AFC assistance in regards to the early stages of the COVID-19 pandemic. Working within the constraints of the COVID-19 environment, Capital Factory, with its organic infrastructure quickly adapted to a virtual environment to facilitate the continued event scheduling. Capital Factory offers weekly events connecting government, mature industry companies, startup companies, and universities with one another in one centralized location. At no additional cost and as part of the memberships Capital Factory has provided access to Austin industry networking events to include: South by Southwest, Austin Startup Week, Global Entrepreneurship Week, and Fed Supernova. These Austin based events bring together many of the Fortune 500 companies as well as small businesses but new and experienced to doing business with the Federal Government/Defense. Both AFC as well as AAL personnel have attended these event that would have otherwise cost AFC/AAL, six-thousand dollar ($6,000.00) annually. Additionally, Capital Factory has tailored its emphasis to Defense/Army specific topics. These include, monthly and some cases weekly events that include: Startup Assessment Day (general startup briefings/training); Federal/Defense Ask Me anything (a sort speed dating meet and brief for startups to sit down with an AAL representative and give a pitch); Federal/Defense Office Hours (a town hall type event where Federal/Defense personnel meet with larger audiences of startups); Community Showcase (another town hall type event for general startups and industry (Fortune 500 companies); Lunch and Learn events (coving general startup topics some customized for Federal/Defense topics); Diversity and Inclusion in technology (covers topics regarding hiring practices and general work topics for startups); Startups and Founders Academy (a twelve week program taking a new startup from conception, financing, output, and even eventual sale of the entity); Defense Academy (this is specialized training on “how to do business with the Federal Government” and include topics e.g., reading submitting proposals, reading a contract, invoicing, payments in Wide Area Workflow and past performance); SBIR/STTR Accelerators (training on how the Small Business Administration programs works in the Federal Government, financing structures, and the types of technology advancements through the different phases of the program); Professional or Industry Recruiting Events (to match up potential employers or mentors to protégés): as well as conducting generally short notice VIP tours which have included the Secretary of the Army, and numerous General Officers and Senior Executive Service personnel. With Capital Factory providing AFC/AAL access to their hosted events, AFC/AAL receives the benefits/access to the event all included in our membership price.

6. Efforts to Obtain Competition: The Contracting Officer will publish the notices required by FAR 5.201 and any bids or proposals received will be considered.

a. Effective Competition: During the past year market research has been conducted to find similar environments that match or exceed Capital Factory’s business model with no success. Although there are other entities in the Austin area that have a similar business model as an accelerator/incubator, none of those focus on the Defense/Army industry base. These entities are general business accelerators/incubators. Additionally a search was done for the previously used North American Industry Classification System (NAICS) code (as well as others closely aligned) and the only list business in either System for Award (SAM.gov) or the Small Business Administration Small Business Dynamic Search revealed the only currently listed company as Capital Factory. Capital Factory is a small business.

b. Subcontracting Competition: Not Applicable.

7. Actions to Increase Competition: AFC established full operating capability in July of

2019, and as of March 2021, AFC/AAL reviewed the benefit of this membership and determined continued presence at the Capital Factory continues to create the environment and opportunities necessary for AFC/AAL success with both modernization efforts as well as outreach to non-traditional potential providers. AFC/AAL continues to require colocation with a Federal/Defense start-up and entrepreneur community in order to posture for success. AFC/AAL will continue to monitor the Austin accelerator/incubator community and as well as other potential alternatives for this services in order to seek and obtain opportunity for competition of this service. During the course of this potential award market research will continue to try and identify a viable alternative to the Capital Factory.

8. Market Research: The Army Applications Laboratory (AAL) has reviewed public and private accelerator/incubator organizations in the Austin, TX area beginning in July 2018 and with follow-up in FYs 2020 and early 2021. AAL’s review began with looking at the market research for the FY2019 award. (See attached Word Document titled: W911NF19P0048. Capital Factory Market Research 19 Aug 2019.) The FY2019 award was a base plus one option year done under the same sole source criteria. The FY2019 information evaluated by the since experience of AAL’s utilization of the current Capital Factory services indicates that the market place has not changed in this two year time frame. Based on experience with using the current services the approach was updated to consider both past information as well as the factors associated with the actual facilities. First, AAL, with experience with the services received from Capital Factory, reevaluated all twenty-three (23) potential entities in the Austin, TX area. This reevaluation, based on how AAL uses the services, determined that of the 23 potentials, only Capital Factory provides the comprehensive services desired. The other 22 entities have either have restrictions and/or limits to their services that would exclude potential providers that AAL and Army wishes to approach under these companies approach to accelerator/incubator services. These limitation include: focus/outreach to limited demographics; restrictions on how an outside entity may become part of the accelerators/incubators network; no networking outreach/function; and/or no identified accelerator/incubator networking for Federal, Defense, or U.S. Army topics. Second, AAL, with assistance for the AFC Facility Services personnel, compared similar type facilities as to those provided under the current Capital Factory award. It reevaluation the entities reviewed in FY2019 research, it was determined that in regards to only the facilities services under consideration, most did not offer close to the same standards of facility as compared to Capital Factor. Under Facility Services evaluation criteria, Capital Factor is a Class “A” type facility. Of the entities in the downtown Austin, TX area, only five (5) others were found to offer the same Class of facility. As with the first evaluation criteria, of these entities, the other four besides Capital Factory have limitations. Again, in that regards, these 5 had limitations as in on services provided, limitation or capabilities associated purely with the facility, e.g., such as being able to house all of AAL in a single facility space. No other entity provides the unique combination of services accelerator/incubator and facility type/configuration ability as offered by the Capital Factory. The Capital Factory is situated as the center of gravity for Austin based entrepreneurial activity essential to the Army Applications Laboratory mission.

13. Fair and Reasonable Cost Determination: I hereby determine that the anticipated cost or price to the Government for this contract action will be fair and reasonable based on the price analysis of other Government Contracts awarded to the proposed vendor.

Procuring Contracting Officer

ACC-APG-RTP

14. Contracting Officer Certification: I certify that this justification is accurate and complete to the best of my knowledge and belief.

Procuring Contracting Officer

ACC-APG-RTP

APPROVAL

Based on the foregoing justification, I hereby approve the procurement of a sole source, firm fixed price contract for Workspace Membership License Subscriptions to the Capital Factory (a small business) on an other than full and open competition basis for up to $750,000.00 pursuant to the authority of 41 United States Code 1901 and Federal Acquisition Regulation 13.5, only one source is responsible to satisfy agency requirements, subject to the availability of funds, and provided the supplies and services herein described have otherwise been authorized for acquisition.

Lanelle T. Shands Branch Chief

ACC-APG-RTP