The Defense Department spent nearly $21 billion on OTAs in the past three years, but who is bringing home the bacon? Read the Federal News Radio’s exclusive report: Danger at High Speed: OTAs in Action.
As President of Consortium Management Group, Inc., which manages two large Other Transaction (OT) Authority consortia, I read with great interest Federal News Radio’s two-part series addressing the growing use of OT Authority by program offices in the Department of Defense (DoD).
I commend Federal News Radio for undertaking an examination of an acquisition tool which, despite its long history, has only recently been actively embraced and utilized by the DoD as a path to more rapid acquisition and as a way to make it easier for non-traditional contractors to do business with the government.
Our two consortia — Consortium for Energy, Environment and Demilitarization (CEED); and Consortium for Command, Control and Communications in Cyberspace (C5) — have been operating under agreements with the government for several years, during which we have grown our total enrollment to more than 1,300 companies, nonprofits and academic institutions. By the end of this calendar year, we will have facilitated nearly $1.5 billion in prototype project awards to meet urgent mission needs of government program offices. We are proud of our process and our record, but we know that this tool could be put at great risk through careless or imprudent application — by a member, by another consortium or by the government.
Indeed, that concern has grown. As the use of OT Authority widens for both prototype development and follow-on production, it is essential that the scope, application, safeguards, costs and benefits associated with other transaction agreements (OTAs) be effectively communicated to government acquisition professionals, industry and the public. Failure to do so could lead to crippling restrictions by the Congress, the Office of the Secretary of Defense or the military services. The ultimate loser in such a scenario would be the warfighter.
Although the Federal News Radio story is detailed and heavily sourced, I must call your attention to several errors and misrepresentations, many of which could have been avoided had your reporter reached out to CMG and other organizations with broad experience in OTA consortium management.
Our two consortia are mentioned, but despite our role in creating and managing the largest single DoD OTA consortium, we never were contacted for these articles.
Instead, the series relies upon a group of sources who have little understanding of the current safeguards of a consortium-based model, the DoD’s most widely used mechanism for OTA acquisition. Consequently, it leaves a distorted picture of OTA acquisition in general and does a particular disservice to the competitive practices inherent in the consortium model of OTA contracting.
One article asserts that “there are no rules” governing OT Authority. That simply is false. Statutory authority enshrines many of the rules and procedures for its use, including dollar ceilings and levels of acquisition authority. Moreover, CMG and other consortium-management firms impose a strict set of written rules and guidelines, all of which are cited in membership agreements and are embedded in the binding OTAs with the Government. In addition, the DoD published an “Other Transactions Guide for Prototype Projects” in 200l and released an updated version last year. OTA acquisition is not subject to the Competition in Contracting Act, but our consortia and others adhere to the DoD Guide instructions to enforce “competition to the maximum extent practicable.” Any funding opportunity released by CEED or C5 is competed among the entire membership of the appropriate consortium.
The first article states that the two CMG consortia received $4 billion in project awards from DoD between 2015 and 2017. In fact, CEED and C5 members received several hundred million dollars in awards during that period, far short of the number cited.
One article raises questions about the handling of intellectual property under an OTA, but the closest thing to an answer provided is hearsay from congressional testimony from 13 years ago that companies are using OTAs as a way to “fully protect their intellectual property rights.” In fact, those rights are negotiated between the government and the performing member on a project-by-project basis and are specified in each fully executed OTA award package.
The author states that the consortium-management firm only rarely provides “details on who did the most or who received the most funds.” In reality, it is the government, not the consortium-management firm, that determines which member companies receive an award. Furthermore, the allocation of workshare under that awardee is explicitly proposed to, and evaluated and approved by, the government.
In both articles, sources contend that OTAs are abused by large, traditional contractors as a way around the Federal Acquisition Regulation, citing as proof a report by the DoD Inspector General from more than 20 years ago — four years before formation of the first DoD OTA consortium and more than a decade before CMG’s first consortium was created. I cannot comment on such an outdated statistic, but I can say this: while large traditional contractors are allowed under our open-membership rules, more than 80 percent of our members are classified as non-traditional — under a definition set out by statute. And over the life of both CMG consortia, 88 percent of the total dollar value of awards has gone to non-traditional prime contractors, with significant non-traditional participation in the remaining 12 percent.
Contrary to the article’s claim that no definition of “significant participation” exists, a specific set of criteria to define “significant participation” can be found on Page 4 of the 2017 DoD Guide.
The article makes the claim that, “The law … doesn’t define what constitutes a prototype.” Page 4 of the 2017 OTA guide lays out in precise detail what constitutes a prototype.
The story advises the reader that, “OTA [projects] can be awarded to just about anyone.” That is true only if that “anyone” has the capabilities required for consortium membership, has demonstrated the technical qualifications to meet the government’s specified requirement, is an active System for Award Management (SAM) registrant and is not on the government’s list of debarred contractors.
Statutory OTA language has been put in place to ensure that small businesses, nonprofit research institutions and other non-traditional contractors have preferential access to OTAs. CMG and other consortia have worked closely with the Congress to this end, and the pending fiscal 2019 Defense Authorization bill strengthens reporting requirements to ensure compliance. We likely will see further clarification in the rules governing follow-on production and other features of OTA. Even though this tool is 60 years old in its generic form, OT Authority nevertheless is new in its broader DoD application.
I am pleased to have an opportunity to correct the record on the use of OTA and how Consortium Management Group’s practices provide transparency, robust competition and a broad range of technology solutions to the government.