For the past several years, US Government agencies have shown an increased interest in open source software, and with the advent of the Obama administration's call for transparency and openness several organizations believe open source software is part of the answer.  So what is the allure of open source to the government? Is it the promise of reduced cost? Is it access to the source code and the knowledge that it can be modify at any time if desired? Is it hope that the government will no longer by locked into a specific vendor?  Most people will be surprised that the reason for so much interest by the government in open source software is really based on the government acquisition process and how the open source business model relates to this process.

In order to understand the government's interest in open source software, one must understand the government acquisition process.  While government acquisition is a science unto itself, the key is to understand how two of the five the major appropriation categories work and relate to the acquisition of IT systems.

The first category is the Research Development Test & Evaluation (RDT&E) Funds. "RDT&E appropriations finance research, development, test and evaluation efforts performed by contractors and government installations to develop equipment, material, or computer application software; its Development Test and Evaluation (DT&E); and its Initial Operational Test and Evaluation (IOT&E). These efforts may include purchases of end items, weapons, equipment, components, and materials as well as performance of services - whatever is necessary to develop and test the system. This applies to automated information systems as well as weapon systems. RDT&E funds are also used to pay the operating costs of dedicated activities engaged in the conduct of Research and Development programs. RDT&E funds are used for both investment-type costs (e.g., sophisticated laboratory test equipment) and expense-type costs (e.g., salaries of employees at R&D-dedicated facilities). There is an RDT&E appropriation for each service (Army, Navy, and Air Force) as well as one to cover other Defense agencies, operational test and developmental test. RDT&E appropriations are normally available for obligations for two years. RDT&E funds are budgeted using the incremental funding policy."¹

The second category is Operations and Maintenance (O&M).  "The Operation and Maintenance (O&M) category of appropriations is composed of many appropriation titles, e.g., Operation and Maintenance Army, Operation and Maintenance Marine Corps Reserve, Operation and Maintenance Air National Guard, etc. O&M appropriations traditionally finance those things whose benefits are derived for a limited period of time, i.e., expenses, rather than investments. Examples of costs financed by O&M funds are headquarters operations, civilian salaries and awards, travel, fuel, minor construction projects of $750K or less, expenses of operational military forces, training and education, recruiting, depot maintenance, purchases from Defense Working Capital Funds (e.g., spare parts), base operations support, and assets with a system unit cost less than the current procurement threshold ($250K). O&M appropriations are normally available for obligation for one fiscal year. O&M appropriations are budgeted using the annual funding policy."²

It can be generically stated that costs associated with acquiring any software package for a program would come from RDT&E funding, and any associated maintenance and support costs would come from O&M funding.  So any cost associated with the acquisition of software licenses are funded out of RDT&E funds, which are the same funds that are used to fund the labor to create the solution or capability that is being developed. This creates immediate competition between organizations providing software and the organizations providing the labor, with each group fighting for the same dollars.  Also, organizations that acquire systems are usually not the same organization that maintains the system once it is deployed. Typically, acquisition organizations are looking to acquire something for the lowest possible cost, and in some cases best value. They are looking to spend the least amount of RDT&E dollars to get the capability required.

This is where the open source model, or at least a subscription based model, becomes attractive to the government.  Government programs are able to use software that has a low cost of entry to develop the required functionality. Instead of having to use RDT&E funds to acquire a software package, they are able to leverage those funds to facilitate the development and deployment of the program.  The programs would receive support from the software vendor through the support subscription that is funded out of the O&M funds. It is that feature of a subscription-based model, funded from O&M funds that make the idea of using open source software so appealing to the government.

Software companies who are looking to provide products to the government need to understand these key differences between appropriation categories and the acquisition process.  To be successful, software companies must provide a low cost of entry that minimizes the initial outlay of RDT&E funds up front, and look to provide an O&M funded subscription model.  Companies who provide open source software already understand this model and this is a major reason why the government continues to look to open source as a solution.

Footnotes:

1)  DoD Financial Management Regulation 7000.14-R, Volume 2B, Chapter 5, paragraph 050201.

2) Financial Management Regulation 7000.14-R, Volume 2A, Chapter 3 – Operation and Maintenance.

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