[NON-CONSTITUTIONAL] Arbitrum DAO Procurement Committee: Phase II Proposal

Arbitrum DAO Procurement Committee: Phase II Proposal

Contents

I. Executive Summary

II. Background of the ADPC

III. Achievements & Progress

IV. Key Learnings & Improvements from Phase I

V. Phase II Mandate

VI. Budget & Methodology

VII. Methodology for Shortlisting Verticals for Phase II

VIII. Transparency & Community Engagement

IX. Checks & Balances

X. Multi-Sig

XI. ARB Conversion Strategy

I. Executive Summary

Background

The Arbitrum DAO Procurement Committee (”ADPC”), composed of Axis Advisory, Areta, and Daimon Legal, is coming to the end of its first phase on August 20, 2024. As such, this proposal aims to extend the ADPC’s tenure into Phase II for a 6-month period, which will commence on the date on which the Tally vote for this proposal is executed on-chain. 

Outcome

The ADPC’s pilot phase proceeded successfully, with significant outcomes to Arbitrum DAO and a range of key learnings for the committee. Creating a comprehensive procurement process from the ground up to ensure that Arbitrum is seen as a leader not only in the technical sphere but also within decentralized governance has been a great opportunity.

We laid the foundation for the ADPC to be an effective set-up bringing the benefits of well-structured procurement to Arbitrum DAO. Cost savings will result from the creation and use of procurement frameworks and marketplaces developed by the ADPC uniquely for Arbitrum DAO as well as the necessary legal and operational infrastructure and strategic sourcing methodology.

Way Ahead

The ADPC's initial phase was conducted as a proof of concept demonstrating the capability of the team and the benefits arising from the strategic use of advanced sourcing methodology. The ADPC proposes to build on these successes into Phase II of the ADPC's engagement. In this Phase II, the ADPC, after careful alignment with key stakeholders in the DAO, proposes to work on all of the following work packages:

1. Work Package 1: Procurement for 2 tactical verticals

• Vertical 1 will be focused on procuring RPC providers for projects building in the Arbitrum ecosystem. This decision is based on engagement with delegates and stakeholders as well as an understanding of the core services required by all projects looking to build in the Arbitrum ecosystem.
• Vertical 2 will be focused on providing the procurement services for events identified within the DAO Events Strategy for 2025. This event strategy is prepared by the ADPC, Entropy Advisors and Disruption Joe pursuant to a separate proposal. Please note that the ADPC will not request any funding for its events services procurement in that separate proposal.
• The scope within the 6-month term is to develop evaluation criteria, draft and publish the Approach to Market (RFP/tender), evaluate responses to Approach to Market and whitelist supplier/s. Contract negotiations with whitelisted suppliers are not in the scope as the counter-party may be the Arbitrum Foundation or third parties utilizing their own counsel, and the ADPC has no influence on those internal legal processes.
• Further details on our process for arriving at these shortlisted verticals can be found below in the section on Methodology for Shortlisting Verticals for Phase II.

2. Work Package 2: Continued management of the Subsidy Fund for Security Services and, based on the success of the first cohort, publishing the proposal for an extension of the fund.

3. Work Package 3

• Definition and creation of an Operational Expense (OpEx) budget for the Arbitrum DAO, to be custodied by the Multi-Signature Safe (MSS), and allocated towards the utilisation of service providers as whitelisted by the ADPC. This creates a utilisation rail for the DAO to be able to utilise the services of the whitelisted service providers procured by the ADPC. Without this in place, the DAO is unable to utilise these service providers without the full proposal process (Forum, Snapshot, On-Chain).
• The ADPC will draft and propose the OpEx proposal to the DAO;  further details, including the process and procedure for utilization of the OpEx budget by the DAO, will be outlined in this separate proposal to the DAO. This seperate proposal will contain multiple options for the size of the OpEx budget for the community to vote on.

4. Work Package 4

• Creating a Phase II Outcome Report, similar to the one we have [published](https://docsend.com/view/b25g3iu6feppm7as) for Phase I, and submitting it to the DAO.
• Continued alignment with key stakeholders in the DAO on the evolution of the Arbitrum DAO’s structure, and ensuring that the ADPC fits into any structure that is defined (e.g., OpCo).
• Ad-hoc tasks, e.g., aligning and connecting whitelisted service providers with existing and incoming projects on Arbitrum, existing and incoming DAO proposals, etc.

5. Optional Additional Verticals: On completion of Work Package 1 and subject to (i) DAO demand and (ii) capacity of the ADPC at that point, procurement for up to [2] additional verticals on request from the DAO after approval by the DAO governance process. Where the procurement for such additional verticals is likely to require an extension to the ADPC term, this Work Package will be contingent on that renewal being granted by the DAO to avoid partial completion of tasks.

The overall budget for the 6-month term will be USD 414,000 including OpEx, details on which can be found below in the Budget & Methodology section. The Funding Request from the on-chain vote will be 954,608 ARB based on the time weighted average ARB price of $0.5204/ARB as further outlined below. A buffer has been added so that, in the case of ARB depreciation, the ADPC multi-sig under the Multi-Sig Service (MSS) is still able to satisfy payments to the ADPC's members. Unutilized ARB will be returned to the Arbitrum DAO treasury.

The multi-sig requested to manage the funds is within the Multi-Sig Support Service (MSS) established by Entropy Advisors. The Multi-Sig that has been created by the MSS is the following address:

arb1:0x13d4Ff2A83fBCB8F5fc73cE66CF5928eD0943cB0

After receipt of the ARB, the ADPC will convert as much of the requested amount as is required to obtain 414,000 USDC and will return the unutilized ARB to the DAO treasury. This is intended to avoid fluctuations in ARB price and ensures that the ADPC avoids using the buffer as much as possible. 

The ADPC will utilize a Protocol-Owned Execution strategy on Gauntlet's Aera solution to convert the program’s ARB into USDC for operational purposes. The Protocol-Owned Execution strategy utilizes off-chain logic to monitor on-chain liquidity and model the price impact of trading. The ADPC will use an Aera Vault, with Gauntlet as the guardian, to execute the conversion. Trade execution is scheduled and sized according to impact modelling and executed on Odos, or Bebop. Based on current market conditions, it would take approximately one week to trade out of 414K USD worth of ARB with minimal impact. 

Once the ARB is converted into USDC, the Aera vault will utilize LlamaPay to stream the total payment due to the ADPC member wallet addresses over the course of the 6-month period (120k USDC per member, 360k USDC in total). The remainder of the converted funds (54k USDC) will remain in the MSS as the OpEx budget. This process will be coordinated with the MSS chairs and members.

Further details about the ARB conversion strategy and about Aera can be found below in the 'ARB Conversion Strategy' section below.

Note: The proposal includes the re-election of the current members of the ADPC. For any future extension terms of the ADPC, the process outlined in the original Tally vote will stand unless automatic renewal of the then-current members is proposed. Of course, this will be subject to the potential OpCo that gets formed and any implications that may have on the structure of the ADPC.

Acknowledgements

We would like to acknowledge the consistent participation and deep input from the Arbitrum community, delegates, and stakeholders, without whom our progress would not have been possible. We would especially like to thank the security service providers who deeply engaged with the program from the very beginning. We would also like to thank all respondents to the ADPC’s outreach in determining the procurement frameworks to tackle in Phase II, including @bobbay, @JoJo, @Frisson, @realdumbird, @IronBoots, and @krst, among others.

II. Background of the ADPC

The ADPC was established as a crucial component of the Arbitrum ecosystem's governance structure, following a successful proposal and subsequent community vote in early 2024. The formation of the ADPC was driven by the

... please visit link below to view full proposal

https://tally.xyz/gov/arbitrum/proposal/93496910583545921039254255671954964968329693484106479494661805749408858477569