Red Cell Partners announces a one-year agreement with the Department of War’s Chief Digital and Artificial Intelligence Office (CDAO) with a ceiling of up to $100 million. The agreement pilots shared savings, a contracting framework in which vendors are paid only for the costs they eliminate and the outcomes they deliver.

For nearly two years, Red Cell worked with CDAO and the Navy to define how the DoW could significantly reduce costs by improving efficiency through agentic AI. This agreement pilots a shared savings framework in which Red Cell covers all upfront costs and is paid a percentage of the savings it generates. If outcomes are not met and savings are not achieved, Red Cell receives nothing. Similar contracting models have already generated $19.3 billion in federal energy savings and returned $2.5 billion to Medicare in a single year.

Structured as an Other Transaction Authority, the agreement is designed to help the DoW to quickly partner with non-traditional firms. It allows any agency across the entire DoW to access shared savings contracting for AI services and agentic workflows. Pilot services will be provided by companies within the Red Cell portfolio.

What this means:

  • The department pays for performance, not promises. A contract model that pays only for verified results aligns vendor incentives directly with mission outcomes—vendors earn what they deliver, nothing more.

  • Results prevail over incumbency. Sole-source incumbents who have held the same contracts for a decade get replaced by competitors who deliver results, not by being too embedded to displace.

  • Funding is prioritized for the warfighter. Every dollar recovered through shared savings is a dollar available for munitions, platforms and readiness—without requiring a new appropriation or a budget fight.

The agreement is geared toward empowering the department to save on existing contracts and paying for outcomes rather than effort.

Read more about Red Cell’s perspective on fixing defense contracting and on shared savings and aligning incentives.

About Red Cell Partners

Red Cell Partners is a venture studio building rapidly scalable technology-led companies that are bringing revolutionary advancements to market in healthcare, cyber, and national security. United by a shared sense of duty and deep belief in the power of innovation, Red Cell is developing powerful tools and solutions to address our Nation’s most pressing problems. Visit us at redcellpartners.com and follow us on social media (LinkedIn, X, Instagram).

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