Hercules Completes DoD SBIR Phase I

Here's what we learned about the financial processes in the public sector and how we help. 

Six months ago, Hercules was selected for Small Business Innovation Research (SBIR) contract with the Department of Defense (DOD).  Last week, we completed Phase I. As we transition toward Phase II, it's worth looking at why this mission matters.      

The problem we’re solving for the DoD is the same one we've tackled in the private sector for years. It just looks different at the scale of the world’s largest enterprise.  

The scale of the problem 

The fiscal scale of the DoD is substantial. According to FY2026 data published on USAspending.gov, the department manages approximately $995B in total obligations against roughly $2.03T in total budgetary resources, representing a financial portfolio exceeding $2 trillion in value. 

And yet, despite that volume — or maybe because of it — the department has a persistent, documented, years-long problem with invoice reconciliation. 

The DoD Inspector General has issued 140 audit recommendations related to contract compliance and invoice matching since 2021. Nearly half of those remain open. This is one of the reasons why the FY 2026 budget specifically requests $1.8 billion for audit-related activities and $200 million for automation to accelerate financial statement integrity. 

The bottleneck isn't lack of effort; it's fragmented data architecture. Contracts live in one system. Invoices live in another. Modifications and amendments are scattered across shared drives and email threads. When a finance analyst needs to verify whether an invoice matches a contract, they reconstruct the relevant terms manually - from scratch, every time, for every invoice. At this scale, errors are structural, not human.  

What we built  

Hercules delivers enterprise-grade intelligent automation that verifies, reconciles, and executes complex document-driven workflows to reduce risk, lower cost, and protect revenue. 

Our platform does three things:  

• Ingests Source Truth: It reads contracts, task orders, invoices, and modifications, regardless of format. 

• Codifies the Logic: It extracts the complex rules embedded in those documents and makes them computationally enforceable.  

• Prevents Improper Payments: It validates every line item against those rules before disbursement is made. 

The results from our Phase I pilot mirrored what we see in our commercial deployments in staffing and insurance: a near-zero billing error rate, a 94% improvement in data accuracy, and a 25% reduction in payment cycle time. For the DoD, this translates to a projected 4.6x ROI in Year 1 by capturing leakage before it leaves the Treasury. 

Why Phase II matters 

Phase I proved the logic. Phase II takes it to the next level - integrated with the DoD's existing financial infrastructure, running entirely on-premises, with Impact Level (IL) compatibility in mind. 

The goals are simple: Catch invoice errors before they become improper payments. Give contracting officers and finance teams a complete audit trail for every transaction. Turn audit recommendations into closed findings. 

The bigger picture 

The DoD is the most extreme version of a universal truth:  

Contracts define the rules but systems don't always enforce them. Money leaks through the gap in every large organization. 

We built Hercules to close that gap. The DoD SBIR process has validated our approach, not just for commercial markets, but for the world’s most demanding, most scrutinized procurement environment. 

On to Phase II. 

Learn More

To learn more about how Hercules removes manual bottlenecks in data-heavy federal processes and Order-to-Cash workflows through a human-in-the-loop (HITL) framework, visit https://www.hercules.ai/public-sector.

*We use AI to accelerate ideas and outcomes. Insights here have been vetted and shaped by our team’s expertise.