|01 Aug 17. Bringing Water to the Horse
“The system needs a major overhaul, not just continuing tweaks…and soon!”
The quote above, which was provided as a commentary to my recent article, “The Circular Firing Squad of Defense Acquisition Rhetoric,” underscores the intense frustration many experience in dealing with the Department of Defense (DoD) acquisition bureaucracy. Congress expressed its dissatisfaction by dismantling the bureaucracy from the top; the undersecretary of defense for acquisitions, logistics, and technology will soon be eliminated as a position in the Defense Department and its responsibilities split into two separate functions, with more responsibility delegated to the services. Time will tell if this reorganization leads to the type of “major overhaul” desired by critics.
Meanwhile, it is noteworthy that the Defense Department has had sufficient authority to fundamentally change its acquisition practices for decades. Yet, the most flexible authorities available to government personnel go largely ignored. As an example, this article briefly explores the use of Other Transaction Authority (OTA) as a means to improve national security and government accountability. The Defense Department’s minimal use of OTA is certainly related to the broad ignorance of the authority among acquisition professionals, as well as a reluctance to test new ideas. There is also a general fear of drawing the ire of senior defense officials, corporate interests, and ultimately the same Congress that granted the authority to begin with. Traditional defense firms also commonly lack the awareness and motivation to explore how these authorities can create new opportunities for growth, improve efficiency, and achieve better outcomes.
Major overhauls may indeed be necessary to optimize outcomes in our defense acquisition system. However, if we’re not using all of the authorities at our disposal now, what evidence do we have that such reorganizations will result in anything more than a reconstitution of our current bureaucratic processes? The crux of the Defense Department’s own acquisition policy (DoD Instruction 5000.02) is that programs are supposed to tailor their acquisition strategies, yet we most commonly see rote repetition of boilerplate practices. Without a concerted effort by government and industry personnel to apply the flexibilities already afforded to them by Congress, no amount of reform will result in demonstrably different outcomes than what we observe today.
OTA is sometimes trumpeted as a panacea for all defense acquisition woes. In reality, it’s merely a flexible contracting tool that allows the government to construct customized business practices for research, development, test, and evaluation (RDT&E) projects. Taken alone, it’s useful but does little to address endemic issues throughout the defense acquisition system. The Defense Department’s version of OTA is defined in two contexts: OTA for research (10 U.S.C. 2371) and OTA for prototypes (10 U.S.C. 2371b). The primary benefit of using OTA is that it enables agencies to design contracts notwithstanding the Federal Acquisition Regulation (FAR). So, the government has broad flexibility in the terms and conditions it may decide to include or not include in a business arrangement (e.g., intellectual property clauses required by the Bayh-Dole Act). However, OTA is not unregulated. Financial Management Regulation (FMR) and acquisition oversight structures within the Defense Department and Congress remain intact; in fact, the chain of approvals necessary to execute an acquisition strategy is often more onerous for an OTA versus a FAR-based acquisition. While the Government Accountability Office does not entertain protests of OTA awards, the U.S. Court of Federal Claims recently affirmed jurisdiction over the legal interpretation of the authority and over resolving disputes related to individual transactions.
Generally, OTA has been used in circumstances where contract flexibility enables competition from a broader segment of industry or where novel business models enable otherwise unattainable outcomes. For example, the Air Force used OTA to enable cost sharing with companies for the development of a domestic replacement to the Russian RD-180 rocket engine. The Defense Advanced Research Projects Agency (DARPA) regularly uses OTA to engage with emerging technology companies that wouldn’t otherwise have the wherewithal or inclination to pursue government business. The Army invented a business model, called an “OTA Consortium,” that allows companies of all backgrounds to compete for a variety of prototype projects through an accelerated process—typical durations from solicitation to award are in the range of two months.
These and other examples enable faster and more effective technological innovation for national security applications. More importantly, they represent an underappreciated form of business process innovation that is vital to all facets of our defense apparatus. OTA emphasizes participation by nontraditional defense contractors and small businesses, but it does so with deliberate intent to also create collaborative value propositions for traditional defense contractors. The rocket engine example above created opportunities for a diverse group of companies, including United Launch Alliance (partnered with Blue Origin), SpaceX, Orbital ATK, and Aerojet Rocketdyne. Some traditional defense firms recognize the benefits of OTA and are proponents of the authority. However, broad ignorance and skepticism persists. Firms that shun OTA overlook a universe of innovative business opportunities that can increase profitability while delivering otherwise unobtainable national security capabilities.
As with any form of innovation, business process innovations do not succeed in every instance. Yet, it is also evident that our traditional FAR-based business processes fail to succeed in every instance. By choosing to innovate, we at least build an intellectual foundation to strive toward a more rational and effective system.
Innovation and Accountability
It’s an uncomfortable reality that any acquisition program can fail to deliver planned capabilities on budget and schedule, despite our best efforts to regulate and oversee the process at every stage of execution. Our instinct is to add regulations and oversight after each failure, and our body of defense acquisition policies is, thus, ever-increasing. Under the banner of government accountability, these multitudes of reactionary restrictions combine to achieve the opposite result.
There is a subtle corruption intrinsic in perpetuating an opaque and exclusionary enterprise that few can understand let alone benefit from. Flexible acquisition authorities, like OTA, directly support the cause of ensuring government accountability by expanding the universe of individuals and entities that observe and participate in defense acquisition processes and outcomes. This broadened pool of participants has little incentive to sustain status quo practices that aren’t additive to national security. Innovating defense business practices is the best way to ensure that our acquisition programs support national security and government accountability.
This is not to say that applications of OTA shouldn’t be scrutinized by the public, government, and industry. It would also be disingenuous to suggest that OTA is appropriate in all circumstances. Yet, greater use of the authority is clearly justified given what we can observe from the closed nature of traditional acquisition processes. As use of OTA increases, the central point of scrutiny should be the government’s compliance with the provision that it maximize use of competitive procedures in the award of OTA contracts. A key objective of this authority is to increase competition, particularly from nontraditional defense contractors and small businesses. Rather than manufacturing a mountain of new regulations, we ought to monitor and hold the government accountable regarding whether competition is increasing and whether such competition results in better value toward national security objectives.
A Will Away
It’s easy to take a cynical view of defense acquisitions and fear anything that hints at a deviation from rote business practices. Yet, these same practices fail to consistently provide transparency or optimal outcomes and simultaneously exclude participation from most of U.S. industry.
All of the necessary statutes and policies are in place to affect meaningful change; the White House Office of Science and Technology Policy published an entire guidebook on innovative contracting authorities. The only thing holding us back is our collective unwillingness to act. It’s time to press forward and use all of the tools at our disposal to secure America today and into the future.
Camron Gorguinpour is a senior associate with the International Security Program at the Center for Strategic and International Studies in Washington, D.C., a principal at Wōden, LLC, and a former director of transformational innovation in the Office of the Assistant Secretary of the Air Force for Acquisitions.
Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).
© 2017 by the Center for Strategic and International Studies. All rights reserved.
The Center for Strategic and International Studies (CSIS) is a bipartisan, nonprofit organization founded in 1962 and headquartered in Washington, D.C. It seeks to advance global security and prosperity by providing strategic insights and policy solutions to decisionmakers.