Defense acquisition, translated for investors
The vocabulary that decides defense-tech diligence — obligations, OTAs, Phase III, ceilings, recompetes — in plain English. These are the same definitions Roxi’s signals are computed from.
- Obligation
- Money the government has legally committed on a contract — recorded on USAspending. Obligations are payments-in-motion, not company revenue, and are the core traction signal in defense diligence.
- TTM obligations
- Trailing-12-month federal obligations. Comparing TTM to the prior 12-month window gives federal momentum — whether a company’s government pull is growing or shrinking.
- Prime contract
- A contract awarded directly by the government to a company (the "prime"). Distinct from subawards (work under another company’s prime) and assistance (grants/cooperative agreements) — the three should never be summed as one number.
- Subaward
- Work a company performs as a subcontractor under another firm’s prime contract. Real traction, but mediated by the prime — kept separate from prime obligations in diligence.
- OTA / Other Transaction
- A flexible agreement (10 U.S.C. 4022) outside standard procurement law, heavily used by DIU and consortia for prototypes. OTs do not appear in USAspending’s award data, so OT visibility requires DoD announcements and agency publications.
- SBIR / STTR
- Small-business innovation grants in phases: Phase I (feasibility, ~$100–300K), Phase II (prototype, ~$1–2M), Phase III (sole-source production contracts from any agency, uncapped).
- SBIR Phase III
- The transition signal: a sole-source contract derived from SBIR work, awardable by any agency at any size. Crossing from Phase II to Phase III is the clearest evidence a company escaped the valley of death.
- Valley of death
- The gap between R&D funding (SBIR, OTA prototypes) and a program of record. Most defense startups die here; investors underwrite the crossing.
- Program of Record (PoR)
- A program with a budget line in the President’s Budget / service POM — durable, multi-year funding. The destination every defense startup pitches toward.
- IDIQ
- Indefinite Delivery / Indefinite Quantity contract vehicle. Winning an IDIQ grants the right to compete for task orders up to a ceiling — the ceiling is not money in hand.
- Ceiling vs. obligated
- A vehicle’s ceiling is the maximum potential value; obligated dollars are what has actually been committed. Press releases quote ceilings; diligence ranks companies by obligations.
- Recompete
- When a contract’s period of performance ends and the work is competed again. Revenue concentrated in awards ending within 12 months is recompete risk — a cliff to underwrite.
- Option year
- Pre-negotiated contract extensions the government may exercise. An expiring option year is routine; a true recompete is competitive — conflating them overstates risk.
- PIID
- Procurement Instrument Identifier — the contract number. DoD PIIDs encode the awarding office, fiscal year, and instrument type.
- UEI
- Unique Entity Identifier — the SAM.gov ID that links a company to its federal awards. No UEI match means a company’s federal record is unresolved, which is not the same as having no traction.
- PSC / NAICS
- Product & Service Codes and industry codes attached to awards. PSC describes what was bought (e.g. 1410 = guided missiles) and is the better mission signal; NAICS describes the industry category.
- SEC Form D
- The filing companies (and VC funds) make when raising exempt private capital. The regulatory record of a raise — it lags announcements and omits valuation, but it never depends on a press release.
- DIU
- Defense Innovation Unit — DoD’s commercial-technology gateway, transacting mostly through OTAs and CSOs. A common first federal customer for dual-use startups.
- AFWERX / STRATFI / TACFI
- Air Force innovation arm and its bridge-funding programs. STRATFI/TACFI match SBIR dollars with program funds — a deliberate valley-of-death bridge and a strong transition signal.
- PEO
- Program Executive Office — the acquisition organization that owns programs of record. A named PEO sponsor is evidence demand is institutional, not experimental.
- COCOM
- Combatant Command (INDOPACOM, CENTCOM, ...). COCOM demand signals operational pull; budget authority still lives with the services.
- ITAR
- International Traffic in Arms Regulations — export controls on defense articles. Shapes hiring (US persons), foreign investment, and exit options.
- FOCI
- Foreign Ownership, Control, or Influence — a security-clearance gating issue. Foreign capital on the cap table can block facility clearances unless mitigated.
- CFIUS
- Committee on Foreign Investment in the U.S. — reviews foreign investment in sensitive companies. A diligence gate for any round with non-US LPs or co-investors.
- CMMC
- Cybersecurity Maturity Model Certification — the compliance bar for handling controlled unclassified information in DoD contracts.
- Concentration risk
- The share of a company’s federal dollars from one agency or sub-agency. Near-100% single-customer concentration plus a near-term recompete is the classic defense-startup failure mode.
- Dual-use
- Technology with commercial and defense applications. In diligence the label needs proof in both directions: real commercial revenue and real federal obligations.