Hi @pedrob, first of all thank you very much for taking the time to go through the entire Outcome Report and our proposal in such detail - we hugely appreciate the level of engagement and feedback.
To answer your questions below:
First, I would like to ask about your work in general as a committee. Do you believe it was efficient? Did you face organizational challenges? Do you think you effectively balanced the decentralization and oversight that a DAO requires with the efficiency needed to execute your tasks? Was it worth implementing the work as a three-member committee? Why continue with that composition? Why not -for instance- concentrate the work on a single member or increase the number to five?
We think that the committee structure worked very well. We had the right mix of teams and skill-sets, with Daimon Legal and Axis Advisory focused on legals and Areta bringing operational and strategy expertise to drive the ADPC forward. Since what we have been attempting is so novel, and no tender process has ever been conducted publicly in the crypto space, we had to build a lot of infrastructure and processes from the ground up. This, of course, presented some challenges, that we outlined in the report, but nothing unusual and think we can proudly say managed and learned from them well.
A second bigger topic is that we also focused quite heavily on transparency and oversight - this can be seen in our comprehensive Notion dashboard and the Outcome Report which you have referred to. While this focus on oversight did require a significant time commitment from the ADPC, we believe it was time well spent as it is the hallmark of a decentralized, public, DAO-native process. A key organizational challenge we faced was ensuring the alignment of each ADPC member on every major decision. We took some time at the beginning of our tenure to identify the best working model and have managed to streamline our communication and touchpoints over the last 7 months.
We also believe that the current 3-parties structure serves the procurement function very well. We have managed to obtain the right mix of skill-sets, as mentioned above, which has allowed us to lay the groundwork to set up further procurement frameworks. A 5-party committee at this point would add further complexity to our operations, and may, to a certain extent, slow down our decision-making and speed of execution, while not being necessary due to the existing mix of skill-sets. On the other hand, boiling the work down to one party would not be feasible since each party does not have the mix of all the skill-sets required to successfully deliver (legal, operational, business strategy, procurement, etc.). We think that a 3-party committee offers sufficient checks and balances while enabling operational efficiency, i.e., it is the correct trade-off between decentralization and efficiency.
My first question is: What are the reasons you identify for not being able to complete the entire work in 6 months?
By the time of the 6 months getting over, we did complete the whitelisting process and have announced 9 whitelisted providers pending KYB and signing of the agreement with the Arbitrum Foundation.
To dive a little deeper into the RFP process, due to the necessity of a robust legal framework for the application processes, the operation of the marketplace and the subsidy grant, we had to create legal documents, including a first-of-its-kind Security Service Panel Head Agreement, the Application Documents, and the Terms and Conditions for the Means Test. These documents took time to create: they had to be drafted from scratch since we had to be very intentional about the type of marketplace structure we wanted to create. We also had to liaise closely and align with the Arbitrum Foundation, who would be the ultimate counterparties to these agreements, since the ADPC does not have a legal entity set up. Due to this dependency, we went through several rounds of iteration and significant time was initially spent developing legal terms in alignment with the Arbitrum Foundation who has its own preferred model terms. This is a key learning we have taken to Phase II, where we will ensure complete alignment with the Foundation before we begin drafting any legal documents.
As an example, I understand that the STEP, without being called a procurement framework committee, did similar work (RFP, applications, selection of service providers, and fund distribution). They completed all the steps in less than 3 months, from the on-chain proposal approval executed in April to the communication of the chosen service providers in June, ultimately approved during the first days of July.
What differences do you identify between your work and the delay compared to theirs?
With regards to the STEP, some of the key differences are that there was no standard legal agreement or legal documentation that STEP had to create. The RFP for STEP was not linked to a legal agreement that had to be signed by each of the providers. With the ADPC, our primary work was to establish this broader, overarching framework that could potentially cover multiple verticals and create a marketplace structure. This was not the same with STEP.
With the ADPC, we had to dedicate a significant amount of time to create the legal frameworks underlying the RFP, which is what led to the process taking more time than that of STEP.
An obvious one is that the Subsidy Fund had to be discussed and voted on separately from the ADPC proposal. I ask, wouldn’t it be better if this temp check included signaling that the DAO intends to allocate “x” amount of resources to those service providers, justifying the procurement framework? That would also give more weight to the budget you’re requesting to carry out that work.
Good point! To clarify, we are not allocating a set budget to each service provider via the Subsidy Fund. The entire size of the Fund is up to $2.5M worth of ARB, and projects looking to build on Arbitrum will apply to the fund to obtain a subsidy up to 70% of the fees charged by the security service providers. Once a project is initially shortlisted on the basis of the Means Test, we will request quotes from each of the whitelisted security service providers, and upon receipt of the quotes, each project will select their preferred provider. The ADPC will then make the final subsidy decisions on the basis of each initially shortlisted project’s preferred provider and their scoring on the Means Test. The initial size of the Subsidy Fund was a decision that we left to the DAO and one that invariably required a lot of discussion amongst contributors and delegates.
We are also not proposing at this stage that separate Subsidy Funds be created for the verticals we tackle in Work Package 1 (RPC Services and Events Providers). By pre-vetting and whitelisting RPC and security service providers in this instance, we want to create standardized pricing and a streamlined model of engagement with these providers for projects in the ecosystem. To illustrate this more clearly, our ideal system would be the following:
Projects looking to obtain a security audit can input a work order outlining their requirements into a quotation system. This work order is forwarded to all whitelisted providers, each of whom respond with their quotes. The projects can then select the quote with the best price, ensuring they obtain better pricing, SLAs, and improved service. Moreover, the contract they will sign with the provider will be under the legal terms created by the ADPC, ensuring a streamlined engagement model.
Would that be the OpEx budget you mention? Another alternative could be that if this temp check is approved, the budget is included before the proposal goes to Tally.
The OpEx budget has a different intention. To give you some context: currently, the DAO cannot utilize the services of the providers whitelisted by the ADPC, be it security service providers from Phase I or RPC providers from Phase II. In case the DAO wants to procure such services, it would be necessary to undergo a fully-fledged governance process, which can be a blocker in certain situations. With the OpEx budget (we definitely have to change the name!), we aim to create a Utilization Rail for the DAO to procure services from the whitelisted providers.
For example, let’s assume a budget of $100K is allocated to utilize the services of security service providers as part of this OpEx budget. Let’s further assume that there is a proposal which requires a security analysis similar to that performed by OpenZeppelin for the ARDC. With the OpEx budget, the proposal author can apply to (partially) utilize this $100K budget to conduct that security analysis. Following the application, an entity (similar to the DAO Advocate for the ARDC) will need to approve that request. Once the request is approved, a scope is sent to each of the whitelisted security service providers, and each interested provider responds with a quote to perform that service. The DAO Advocate can then choose the best-priced quote for that scope of work.
In Work Package 3, we will draft a proposal for the DAO to assess the creation of individual Utilization Rails for each of the verticals where the ADPC is whitelisting providers - security services, RPCs, and Events. Hopefully this better clarifies the work around the OpEx budget.
On the other hand, if the first procurement framework — the Subsidy Fund — took more than 6 months to complete, why are you requesting a renewal for 6 months to develop double the work — RPC and events providers — instead of, for example, one year?
As outlined above, we can streamline the work to deliver greater output within the same timeframe and a similarly scaled budget by using our learnings from the initial phase and building on top of the groundwork that was laid earlier.
What have you learned from this? What concrete measures will you take to manage your time more efficiently without compromising the culture of transparency and collaboration?
Good question. Our weekly internal calls are necessary for alignment and progression on work tasks. From a community perspective, we think that our bi-weekly ADPC calls are valuable for attendees to update them on our progress. In addition, we constantly updated the Notion hub and ADPC update thread, providing transparency into our operations and progress.
Re. community discussions on proposals, this is an inevitable part of DAO governance and one we believe to be incredibly valuable. As such, we have decided to allocate greater capacity and budget in Phase II to account for the time spent on ensuring a high level of community input and discussion.
I’d like to hear more about that cost-benefit analysis, especially since you’re now requesting $500K USD versus the $144K USD (+ msig funds). The increase is considerable.
Please note that the budget for this proposal is not $500k but $414K, of which $54K is allocated for operational expenses. If this budget for operational expenses is not used, it will be returned to the DAO. That leaves a budget for our work in the amount of $360K. As outlined above, $144K was requested in Phase I to kick-start the pilot phase with one vertical. As further described in the proposal and the Outcome Report, the workload in the ADPC was significantly more time and capacity intensive than priced-in, but taken on by the committee as goodwill to make the engagement work. Since we have now left the initial phase and will provide procurement services for two more verticals in Work Package 1, paired with dedicated value in the additional work packages, while continuing to work on the Security Subsidy Fund, the budget merely reflects the capacity and time spent by the teams.
In terms of cost-benefit, we could negotiate additional discounts and value-adds, better SLAs and improved service scopes from security providers. Bundling the buying and negotiation power of a whole ecosystem compared to individual reach-outs of projects, the approach of utilizing a marketplace to inquire services from a panel of whitelisted providers has allowed us to generate leverage through strategic sourcing methodology. While we cannot quantify this impact yet, given that the Subsidy Fund has not begun yet, we will aim to provide as specific cost-benefit information as soon as possible in our reporting to precisely quantify the cost-benefit.
Hopefully the above responses have been able to answer your questions - please let us know if you require any further clarification!