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GovDiscovery AI Podcast with Mike Shanley
Ep 78 Col. John Oliver - U.S. Army Strategic Capital Initiative
00:23:17
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- [00:00]
A
Welcome to the Gov Discovery AI podcast. I'm your host, Mike Shanley. Our guest today is Colonel John Oliver. Colonel Oliver currently serves as the imitative group's chief for the Deputy Undersecretary of the Army. He was commissioned as infantry officer from the United States military academy in 2006 and graduated from Infantry Officer Basic Course, the Maneuver Captain's Career Course, Airborne School, Air Assault School, Ranger School, Jumpmaster School, the Command and General Staff College, and Army War College. Colonel Oliver, great to have you on
- [00:32]
B
the podcast today, Mike. Thanks for having me. Glad to be here.
- [00:36]
A
So let's jump right into it. We're here to talk about the Strategic Capital Initiative. Colonel, could you share with us what that is and what you're really hoping to achieve with it? Yeah.
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B
So the army has a historic problem where we never have enough appropriated funds to do everything we need to do. You might think, hey, $200 billion, that's a lot per year, we should be able to do everything. But when you start to think about it, after pay people, you know, after you do healthcare, after you kind of, you know, pay into our big modernization efforts, there's not a lot of left for other activities. And the army has on average, you know, $140 to $150 billion worth of infrastructure projects that we need to get after think, you know, aging industrial base, organic industrial base, aging infrastructure on post, et cetera. So the secretary came up with a unique initiative and where we're going to look to leverage private capital outside of the army to help both us and them benefit from using some of the non traditional assets that the army has, whether it's land, whether it's, you know, OIB infrastructure, et cetera. So what we are doing is we are putting a request for information out to industry partners and the enterprise as a whole to say, hey, you know, what are your ideas that you have that you could bring to us that as it has a commercial model that the army can benefit from and that you can benefit from so that we can keep some of our powder dry on our appropriated funds and use those for things that we need to like, you know, magazine depth on our missiles, et cetera, and then go into partnerships with industry to help modernize other aspects in which we have a mutual beneficial relationship. So that's the general concept, the rfi. And we want industry to bring us the good ideas.
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A
So building on that, why was the old way not good enough or maybe not the only model that you wanted to pursue for this? What is that specific problem that you're trying to solve with this RFI with these new requirements?
- [02:53]
B
Yeah, and that's a great question. Right. And I think as a lot of that has to do with technology changes, which I know is the answer everybody says. But I'm going to use the example of the Army's new infantry squad vehicle. So that is a personnel carrier. It is essentially a Chevy Colorado, about 80% parts of a Chevy Colorado. Right. You know, GM is building it for us. The army is going to need replacement parts for that isv. Right. So our organic industrial base can build the replacement parts. We can build a line that will do that and build those parts. However, you know, we're not going to need that line running all the time. Right. So is there a partnership that we can do with GM that says, hey, listen, you help us modernize this line, we use it for 20% of the time, build some army specific parts plus some other parts, and then GM uses the line to build replacement parts for their Chevy Colorado's that are out in the, in the, you know, the civilian world for the remainder part. So we don't have to worry about, you know, workflow and workload of that line. It's those people are always being employed and we're both us and GM are reaping the benefits of something like that. I think that's what's changing. Right. So if you look at our organic industrial base now, a lot of it is still the infrastructure we had from World War II. Right. And so there is, there is not the capability there to do flexible manufacturing and all that kind of good stuff that modern modernization efforts require, which are also including a whole lot more commercial product components in them. So that kind of joint venture will, is what we need to do to change our industrial base.
- [04:35]
A
So we're talking about army partnership here. First thing that'll come to mind for most people is going to be the large defense contractors. Is that who you're really looking to engage with this? Is it their subcontractors? Is it the private capital? Who are you really looking to target with this rfi?
- [04:52]
B
Yeah. So the way we are looking at this RFI is if the major defense primes are building us our modernization efforts. Right. Think M1E3s Flora our new aircraft. Right. If they're building those, we want to give them the infrastructure to do that. Right. And so from our perspective, we think the infrastructure is either the industrial base or repair facilities on post. Right. So it's not necessarily defense primes we're looking at to engage with this. It is that private capital and those other components that go into the Army's modernization enterprise that are required to facilitate the Defense Prime's delivery of that equipment. But it's all those other aspects. So yes, if a Defense prime wants to come with an ingenuitive way to develop a flexible manufacturing line at an organic industrial base, that we are happy to consider that. But we are looking at more of kind of our private capital partners who can develop kind of conglomeration of organizations that come together to provide strategies that the army has never seen before as more of what we're looking for.
- [06:04]
A
And I'll just pause here to share that. This RFI we're talking about is the US Army Enterprise Strategic Capital Partnership. You can find it on SAM.gov and the submission date is April 2, 2026. We'll also have the link in the show notes so you can get right to the RFI and see how to submit and respond to this. Colonel, that sounds like a bit of a shift. What is the urgency? Why is it the army is making this move at this stage?
- [06:33]
B
Yeah, so I think a lot of it has to do. If you look at what's going on in the news right now, and if you look historically right, the army has a desire we need to apply our appropriated funds, things that Congress gives the money to us towards, towards things that can only be done by that only the army needs. Right. Think missiles, think major weapons systems. Right. That's where we need to apply as much of our dollars as we can. So as we shift more into concerns about magazine dep and depths of our weapon systems, we need to look for other ways to lever up our dollars so that we can focus our capital on that. But we still need to have these other efforts going as well. So that's really the impetus of this right now. Right. So also we are an aging industrial base and technology has changed dramatically. So those two kind of factors merging lead to the right environment to kind of look at new ideas for first 2G capital engagement.
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A
I hear the phrase value. Value for value for partnerships like this. From your perspective, what does that mean? Is there an example that you can share of what a successful project might be that is a value for value project. And you touched on this a little bit already.
- [07:53]
B
That's a great question. Right. So value for value means that both we in the army and our civilian commercial partners are getting equal value from it. Right. And I'm going to use an example here. The army is going towards campus style dining facilities across our post. Right. We want to give our soldiers the option, like any college student to go on campus get food when they want it, you know, high quality, high nutritious food. Something we just haven't been able to do in the past, right? And so we are bringing in, you know, private partners to, to deliver that food. One of the things we're running into is the actual buildings on post that we want to, the old defects aren't necessarily modernized to do that, right? So if we in the army go and modernize that building, it's going to take three to four years and cost 70% more if we do it ourselves than it would if we just did it. You know, a civilian partner did it outside of our army post. So how do we generate value for value, right? What if we bring a partner on post and hey, hey, you guys re outfit this building quickly, you put the capital in yourself, you upfront the cost and you get it up and running for this, the campus style dining very quickly. And then we lease that from you over the next 30 years, right? So we get an immediate value of a building that can serve our soldiers high quality food very quickly. And then our civilian commercial counterparts get a long term lease that they can generate revenue over a long time for and we get stability in that way. So that's a great example of a value for value, right? So rather than waiting two or three years for, you know, us to do that, you know, upgrade to that building, our partners do it faster and we both get value from it.
- [09:44]
A
Colonel so we also work a lot with the new defense tech companies in Austin, in Boulder, in Silicon Valley. What role, potentially, if any, would you see for them in responding to this rfi? You mentioned the role, of course, of the private capital, but what about some of the new innovative defense tech companies? How should they be thinking about potentially engaging or responding to this rfi?
- [10:10]
B
Yeah, so that's a great question. So one of the things that we were very clear in the RFI is we are laying out our problems, right? And inside the RFI we lay out our problems of energy resilience, critical minerals and resource development, supply chain strengthening, advanced manufacturing and facilities utilization. Those are kind of our six pillars that we're looking to solve with srfi, right? So we wanted to be broad with the problem set and let industry come back with us and say, hey, we looked at your problem. This is how we can think we can solve some issues across maybe all the pillars or one of the pillars, right? So, you know, a tech industry could look at maybe our supply chain management issue and said, okay, here's a way in which we can solve your supply chain chain issue through AI or something else that we can upfront, you know, the capital on and then we can develop a kind of a unique commercial business model in which we can both develop that value for value perspective that you're looking at. So I think the thing that we would want to say to these tech companies is bring us ideas that you've thought about that you said were like ah, this, the, the army will never go for this. It's not, you know, it's not something they normally do. Make it bold, make it an idea, put it in the RFI and we may come to you and say we want to do that. We are willing to take down normal barriers right now to go after the ideas that generate the quickest value for value for us and for you.
- [11:39]
A
First question that comes to mind or thought that comes to mind right there, thinking two decades in government procurement is, is risk? How are you all conceptualizing, framing, approaching the risk? Of course, what if you make an investment and something fails? How has your risk calculation changed? Has your perspective, has anything changed in that respect related to this rfi?
- [12:05]
B
Yeah, so that's something we thought a lot about. Right. So we know there's always risk from both sides. Risk with dealing with, you know, the army and as a federal government entity and then you know, us dealing with our commercial partners. Partners. However, as we think through this, we want to lower the risk for both sides. Right. So we know we have been bad partners in the past as we, you know, demand one thing and then appropriations or a CR changes and therefore we can't fund a requirement going forward. You know, that, that classic seesaw that we sometimes have. And so we want, as we go into this, the RFI specifically talks about we don't want the army to be the primary anchor cut. We can be an anchor customer, not the only source of re for a lot of these operations. So we are relying on our commercial partners to be rational actors and be profit seeking in a lot of ways to say, hey, we're going to develop a concept that maybe has the army as a portion or an anchor customer. But if there is risk from a government appropriation side, the model has other customers and or other offtakes that can keep the operation profitable going forward.
- [13:19]
A
That touches a little bit on the, on the next question. But as you approach the private capital, private companies, how do you want, how do you convince them? How would you convince them that this is not a famously large, slow government procurement or the requirements aren't going to change after they make a large upfront investment. What do you. Yeah, what's your, what's your message to. To, to industry on that question?
- [13:45]
B
Yeah, so I think we're taking a lot of our cues from OSW SEC war. So the 30 for 30 deal teams that you maybe see in the news recently. So officers chief of Capital of Osw is doing, hey, we're doing 30 deals in 30 days. They're developing deliberate deal teams to kind of quickly negotiate and go through a lot of what we would consider typical bureaucratic tape of negotiations and strip those down. We inside the armory are doing the exact same thing. So we are developing army deal teams with subject matter experts across everything that we may need to do for negotiations, environmental issues. So we can bring everybody into a same. In the same room. We're calling them kind of a deal team war room where we can answer questions very quickly and get everybody on the same page to kind of knock down that bureaucratic layer that you're talking about and take something that would, that normally goes like six to eight months and create a negotiated deal in, in a month or two. Right. The secretary has been messaging, the Secretary of the army is messaging that he want shovels in the ground for a lot of these projects by the summer. And that is incredibly fast comparatively. But we are posturing ourselves to do that in every way, shape and form.
- [15:02]
A
And I would say when we see that getting done, the one way it does get done is with that strong, clear demand signal from senior leadership. So I think that will be music to the partner's ears. Moving on to the money. It might be a little bit obvious, but I'd love your take on it. So how does bringing in this private capital help benefit the American taxpayer?
- [15:26]
B
Yeah, so that's a great question. Right. So let me use the barracks or on the slides, the OIB monetization effort. Right. So you know, we have some outdated capabilities there. We have outdated technologies. Right. If we bring on a private capital partner that is, is able to develop a flexible manufacturing line that can retool very quickly, can, can be used for other aspects of it. Right. So the army, the cost for that piece of equipment for the army is going to go down. Right. So rather than kind of then carrying a bunch of overhead and having a line be active that maybe is not running all the time for an army specific piece of equipment, we can develop a line that's running constantly. It's just the economies of scale. Right. So the, the army gets a ch part for the part that comes off the line for the army and then, you know, the industry gets to use it for as well. So we, so we get cheaper parts, we get cheaper capabilities that we can then use to, to, to invest in other modernization efforts. You know, more missile, magazine depth, et cetera. So the benefit is, you know, more quality, cheaper for a lot of the stuff we can do.
- [16:42]
A
And I think that idea of the US Budget, it's not, that's not your final number. It's a way to, I mean, it's capital, it's a tool, it's resources that you can leverage to increase that. What would your, what do you think's going to be the single biggest misconception about this initiative and something that you could have the opportunity now to clear up for potential financial and or industry partners?
- [17:09]
B
Yeah, so I think a lot of, there's going to be, there's gonna be a lot of hesitancy on this, right? Like we are, we have been bad partners in this and we can had. We have done kind of these large scale RFIs before where you know, I think industry responds and they feel like they're screaming into the void to this on us, like, hey, we want to solve these problems and nothing happens. Right. You know, I can say it's different now, but it is different because we are actively organizing around solving these problems. Right. The Army's never had a Strategic Capital initiatives group before. We've never had a negotiations deal team before. Right. We've never had the alignment between OSW and the hqda, Department of the army with doing these deals at a very fast and iterative nature. So I think there's a lot of things that are aligning right now with kind of congressional thoughts on this. What we're seeing inside the building and the Pentagon that we can guarantee the industry that you're not gonna be screaming into the void. You know, we are actively going to hear you, listen, take those good ideas, ask questions back to you and go right back to you and say, okay, let's do this together now and let's do it next week. Which I hope is refreshing to industry that we're gonna actually hear them to that point. Right inside the link that I think Mike's gonna post here to the rfi, there's an email address attached to that link. Every week we're going to be holding what we're calling open ranges, kind of Q and A sessions with industry to say, hey, let me, you guys ask some questions to us and let us get them back to you quickly. You know, on the Spot with answers. Right. If you want to be involved in that question and answer session, email that link or email the email address in the RFI and we can get you the link to that teams chat. And we want to have a conversation with industry on a weekly basis about this RFI and answer your questions so that you don't feel like you're screaming into the void.
- [19:14]
A
And Colonel, I would think from the perspective industry, from the clients we work with, that, that does sound different. And I think there would be some reassurance in that. As we're getting close to wrapping up here. Just a couple more questions. Want to get your take on. Okay, great. Someone's responding to this rfi. What would you say is the single most important thing that army is looking for in their proposal?
- [19:38]
B
Yeah, I would argue the most important aspect, that we're looking for something that is commercially and governmental viable. Right. We continually get RFI submissions that are very much reliant on the US army to be the sole customer. And that's not really what we're looking for here. I'm not saying it's not an option. And if it's a great, bold idea that we haven't thought about before and that ends up bringing more value to the army, we will absolutely look at those. But I think we're looking for that kind of good Venn diagram crossover of something that can be both commercially viable and applicable to the army so that we can both be value for value partners and we can continue to be a good anchor customer, but we won't be the one who brings down the deal on the back end.
- [20:31]
A
All right, Colonel, let's fast forward five years. You're back on the podcast. This was a tremendous success. What, what happened? What did that look like? How was this successful? What does the army industrial base look like at that point?
- [20:43]
B
Yeah, I think in five years we're seeing, you know, complete overhauls on the industrial base. We are seeing technology companies inside our OIB developing joint rapid modernization lines or flexible manufacturing lines together. And we have a, you know, partnership in which maybe a, a line is building brushless motors for UAVs for some of the time, and then that's building brushless motors for an automotive company for the. Making the, the thing that makes the windows go up and down in your car. Right. Same brushless motor. We need it for some things and then. And then, you know, autos, entities needed for other things. Right. And then what that also does for us is we now have capacity that if, if the balloon goes up and we need to scale. We have capacity of those lines that we can go full on, you know, creation of an everything we need for the army for. At. At 100 capacity during those times of war. So we've got, you know, depth in terms of our industrial base, it's modernized and companies both inside our normal partners, outside our normal partners and the army are reaping value on a daily basis. Great.
- [21:55]
A
Last question. This will be stepping outside the RFI a little bit to what's that demand signal for the overall market? But I always like to end with so what, what's the so what for industry again, maybe going beyond this RFI of what is that signal that they should be. They should be noticing, they should be following.
- [22:14]
B
Yeah, I think the signal is we are in a space in which we can go bold right now. Right. So there is no idea that is too off the wall. There's no idea that is too crazy right now. We are looking for bold and unique ideas that we can leverage quickly. And I get the feeling, talking industry, that a lot of these ideas are probably on the shelf somewhere and maybe they've tried to broach them with the army or OSW in the past and maybe got like a now we're not interested or, you know, we can't do that. Dust those off, resubmit them, get them back into us. And we're in an environment right now in which, you know, we want to take those bold ideas and turn them into reality.
- [22:59]
A
Great. Colonel John Oliver, currently serving as the imitative groups chief for the Deputy Under Secretary of the Army. Colonel Oliver, thank you for your service. Thank you for being on the podcast today and for the important work you and your team do every day day.
- [23:14]
B
Thanks, Mike. Happy to be here and have a great day.