ImmixGroup publishes Government Sales Insider. In a recent edition they provided a Q&A with DOD’s DIUX on the use of Commercial Solutions Openings (CSOs). I found it interesting that GSA now also has this authority.

Read the full article here.

As previously reported,  DOD released clarifying guidance on Other Transactions. You can find that guidance here. You can also read what ND Magazine thinks of this guidance.

DOD is expected to issue this handbook by Thanksgiving according to Executive Government. 

Inside Defense also reported on the handbook and simultaneously announced that a Rapid Prototyping policy for mid-tier acquisitions is also due out in early 2019.

Personally, I am hopeful that this handbook does NOT contain sample documents. Remember the purpose of OTAs is to allow the parties to an agreement to negotiate the terms and conditions that mitigate the risks to both parties – not a one-size fits all approach that the government typically implements.Stand by to see exactly what the handbook contains.

 

Today I found the below study from Nextgov. It would seem that the concerns so many were expressing about abuse, misuse and rapid growth of OTAs may be premature. Over the last ten years, ten billion dollars were spent using this authority. The study shows that TSA is the biggest user of OTA, not DOD. Of course there is no guarantee that this won’t change in the future, but looking back, it seems that its use is relatively minimal considering overall government spending during the same time period.

Read the Report Here…

 

Scary New Contracting Method That is Not

The Gatekeepers of OTAs

I’ve written before that OTAs are growing in use. And with their growth there are more people who seems to be skeptical of their value. And there will be many lessons learned, no matter whether OTAs continue to multiply or if they recede.

OTAs aren’t constrained by all the rules and regulations of the FAR. And unlike a procurement contract covered by the FAR, GAO review of OTA actions are rare because GAO review authority is limited to only complaints that the government agency acted outside of its authority.
The world moves at a rapid pace. Threats to domestic security are real and evolving. Can the speed of OTAs help combat these challenges?
Perhaps – but more understanding of what OTA instruments are and are not is needed.

Here are our thoughts on a few articles – all posted in a relatively short period of time – debating what to do about the changing face of warfare and where OTAs can be leveraged to help protect us.

Interesting OTA Questions

The author of an article posted on Federal News Radio dated February 26, 2018 poses an interesting question.  If OTAs are supposed to be limited to innovative solutions then why do the membership rosters of all the consortia organizations, which function as a conduit facilitating information exchanges between the government and the consortia members, read like a Who’s Who of the top 500 in government contracting?

Here’s our answer to that question.

OTAs are for innovative solutions, many of which come from small companies, either unwilling or unable to comply with all of the traditional contracting rules and regulations. These same small companies are also on the membership rosters with the proverbial “Who’s Who of the top 500 in government contracting”. Both types of consortia members are an integral part of the OTA process.

OTAs were created to give the government a mechanism to negotiate relatively simple, commercial-type contracts with these reluctant companies. Gaining access to the new technologies (from these reluctant companies who wouldn’t agree to a contract subject to the FAR) is only the first step. Once the government acquired the new technology or capability, it must then integrate these innovations into the products, services, and systems that benefit and protect our nation.

Who does this integration?

The “top 500”. They are the producers of vehicles, satellites, communication systems, medical cures, protective garment, and detection sensors that the government buys. They must receive OTA agreements when they partner with these innovative companies to complete the integration process. Therefore, their participation in consortia and OTA transactions is vital.
The author goes on to question if the OTA process is preferable to making the hard but necessary changes to the Federal Acquisition Regulations System. Again, we don’t think this question applies to the OTA process or the resultant agreements. The FAR includes commercial contracting processes already. Even this process, which is comparatively much simpler than the noncommercial contracting process, imposes many restrictive requirements and unwanted compliance risk on these innovators. For the innovators and the traditional contractors to work together to integrate new technologies into existing technologies, Congress saw that it was essential and proper for both to be free of the FAR for the public good. FAR contracts obviously have a place, but even changes to the existing FAR system will not deliver the benefits that OTAs can.

OTA Agreements an Ideal “Toe in the Water”?

In the next article posted on the same site just a few days later:

“All these attributes make OTA agreements an ideal “toe in the water” for government market engagement for cloud and startup companies from Silicon Valley (or elsewhere). It’s simply a fact that many innovative start-ups will not remotely consider contracting with the government given the compliance risk, oversight burdens and loss of control over key assets, especially their intellectual property.”

The author goes on to say, that although the flexibility of OTAs is their broad appeal, he is not a champion who believes the FAR should be lightly disregarded. He cites the thoughtful work of the Section 809 panel whose members have undertaken the task of looking at how the government buys as well as in attempting to streamlining the FAR. Until this day comes, though OTAs might be a solution when combined with other iterative agile procurement processes.

A Revision and a Protest?

Finally, last weekend another article was posted, this time at Federal Computer Week. DOD announced that it had scaled back the initial $950M award to REAN to $65M so that the award is more narrowly tailored to support only TRANSCOM for whom the original prototype work was completed. No additional details were provided. However, from our perspective there are two things of interest here.

First is the issue of follow on production work under the OT authority. It is perfectly appropriate for a sole source OTA to be issued to the organization that successfully completes an initial prototype under a previous OTA. Scaling back the OTA to TRANSCOM appears to be related to the fact that there is a$2B FAR acquisition for cloud services running in parallel. No sense in duplicating efforts.

Second, Oracle has protested the initial award. GAO only has no jurisdiction to hear a protest on an OTA award. However, as mentioned above, GAO does have jurisdiction to determine whether an agency has properly used their Other Transactions Authority. It appears that the government may have scaled back the scope of the OTA as a corrective action in response to the GAO complaint. This is not uncommon. Unlike a FAR contract, OTA instruments often have very flexible values with potential estimated costs covering 5, 10, or even 20 years. Values are often adjusted over time as determined by use.

OTAs Continue to Fascinate

The contracting community at large is experiencing a bit of cognitive dissonance as the use of OTA instruments seems to be increasing. A culture change must occur both in industry and in government if we are to get the most out of the OTA process. Can we create a culture where both processes thrive? What are contracting offices doing to groom Agreements Officers (AOs) and Agreement Officer’s Representatives (AORs)?

I for one am fascinated to see this all play out.

The article is the collaboration of Karla and Joanne. For more information, email Karla at karla@othertransactionsauthority.com.

NIH is joining the list of government agencies who are making the most of the OTA authority granted to it by Congress. Expect these success stories to continue while studies continue to improve, streamline and modernize the FAR to keep up with the pace of the modern world.

Read more here

Yesterday morning I read in Defense News that the use of Other Transactions Authority (OTA) has grown nearly 500% in the past 5 years in DOD alone. And DOD is not the only agency that has the authority to use OTAs as a procurement method. DOE, ARPA-E, NIH, TSA, and DHS are a few of the agencies that also have authority to issue contracts not subject to the traditional FAR contracting process. (A full listing of agencies with this authority along with links to the legislation can be found here.)

What is driving this increased use of OTAs?

According to Stan Soloway in Defense News, this increase is in part due to growing unhappiness of government customers and their frustrations with the traditional acquisition process. And I agree. Contracting professionals and their internal government customers who have critical missions to carry out on behalf of citizenry are on the same acquisition team. However, the teams appear to have problems agreeing on an approach that will satisfy both the need for speed and innovation and the demands of a rigorous set of rules and regulations that have not yet been adapted to account for the changes caused by advances in information technology.

In 2016 Congress directed the DOD to convene a panel to recommend what needed to be changed or eliminated form DOD’s contracting process in order to streamline and improve the efficiency and effectiveness of the acquisition process and maintain DOD’s technology advantage. This panel, known as the Section 809 panel has just issued their first report. Not surprisingly, they too touch on the increased use and award of OTAs. In their general comments they note that consortiums that pool companies with special technical capabilities and service offerings CAN help DOD collaborate and compete with one another to purchase innovative products and services. NSTXL is one such consortia as they help small businesses pursue and receive OTA awards within about 3 months. There are many consortia that focus on different needs.

However, consortia managers are not incentivized to recruit new members with newer and better technology. Nor do they generally perform technology-scouting to help DOD locate new technologies. While the speed and form of OTA awards deliver benefits to DOD, OTAs do not solve all of the problems the government experiences in locating and accessing new and innovative products and services. Nor do they solve the organizational and cultural issues that currently appear to be hyper focused on rules and the elimination of all risks, which of course results in unacceptable mission delays.

Still it is worth noting that OTAs did not escape their notice. This same report defines four “lanes” of procurement from which a DOD procurement may choose when determining the acquisition plan.

1. Readily available products and services
2. Products and services requiring minor customization
3. Products and services requiring major customization
4. Products and services uniquely developed for DOD

The report seems to indicate that the panel is leaning towards separate rules and processes for each of these lanes. For me, it’s not hard to imagine that OTA awards can, and should, play a major role in making it easier, faster and cheaper for the government to buy the products and services it needs to do the business of the people.

Will DOD Leadership Embrace OTAs Going Forward?

When you factor in the desire of DOD Undersecretary Ellen Lord to reduce acquisition time by half, it seems that the time to leverage Other Transactions Authority may have arrived.

Stay tuned.

The current definition of a NTDC is an entity that has not performed (for at least one year) on a DoD contract or subcontract that requires full CAS coverage. The NTDC must also participate significantly on the OTA project.

Therefore, an NTDC must:

• be an entity
• without DOD contracts requiring full CAS coverage, and
• participate significantly on the OTA project

1. An entity’s status is determined based on a number of factors, including its tax ID and DUNS number, how expenses are allocated and overhead rates calculated, responsibility for profit/loss, location of principal place of business, the articles of incorporation, authority to enter into contracts, government policy, regulations, and other business and legal considerations. A parent company can have subsidiary companies, with these being a corporation, partnership, limited liability company or other type of business structure which makes them separate entities.

In addition, the DoD identifies each commercial, nonprofit, or Government entity awarded a government contract with a unique entity identifier (UEI). For DoD, an entity’s UEI is its D-U-N-S number. More than one D-U-N-S number can be issued to a company “provided that they are separate legal entities, or companies that have the same legal business name but have different DBA’s or a different line of business.”  Therefore, one company could comprise different entities.

2. What is full CAS coverage?

Full CAS coverage requires that the business unit comply with all of the CAS in effect on the contract award date. Full coverage applies to contractor business units that received a single CAS-covered contract award…of $50 million or more or received $50 million or more in CAS-covered contract awards during the immediately preceding cost accounting period. DCAA Audit Manual.  Note that in defining the applicability of CAS the DCAA does not use the term “contractor” or “company” but instead, uses “business unit,” thus recognizing that one company may have different CAS compliance requirements.

Therefore, to have NTDC status for an OTA Agreement, an entity must not have a business unit with a  full CAS covered DOD contract (currently or for one year preceding the solicitation for the OTA agreement).

Note: This requirement applies to only procurement contracts and not to grants, cooperative agreements or other transactions. CAS regulations are inapplicable to small businesses.

3. The NTDC must participate to a significant extent. In addition to 1 and 2, an entity must demonstrate that it will be a key participant having significant involvement in the OTA project.

In conclusion, if a company meets these requirements they likely qualify as a NTDC; however, other requirements will need to be met before being awarded an OTA agreement.

This information is provided by Joanne Abbott, Esquire, and is not a substitute for independent legal advice based on your unique situation.