‘Rapid Contracting’: A Quick Review of OTAs and Other Methods to Acquire Innovation

Published: May 30, 2019

Acquisition ReformUSAFARMYBusiness DevelopmentContracting TrendsDEFENSEDefense & AerospaceInformation TechnologyInformation TechnologyInnovationUSMCNAVYResearch & DevelopmentResearch and Development

OTAs are getting a good deal of attention, but are not the only game in town. The government is using a variety of acquisition strategies to acquire and get access to innovative technology, or to rapidly get capabilities fielded. What some of these other methods are, in addition to OTAs, will be covered below, with an emphasis on those that are becoming noticeably prevalent in their use.

What are these ‘rapid contracting’ methodologies?

Partnership Intermediary Agreements: DoD’s Innovation hubs, technology accelerators, and prize competitions

Partnership Intermediary Agreements (PIAs) consist of contracts, agreements, or MOUs with “non-profit partnership intermediaries to engage academia and industry on behalf of government to accelerate tech transfer and licensing.” In short, 501(c)(3) organizations partner with an agency to create  ‘innovation hubs’ tasked with facilitating through a number of means collaborating between the government, industry, and academia.

DEFENSWERX is one such organization. The innovation centers under its purview created through PIAs include the Doolittle Institute out of Niceville FL, SOFWERX (based out of Tampa, FL), AFWERX (based out of Las Vegas), MGMWERX (based out of Montgomery AL), and ERDCWERX (based out of Vicksburg, MS). AFWERX itself has additional innovations hubs in DC, Las Vegas, and Austin.

Another example is DreamPort, a collaboration between Maryland Innovation and Security Institute and USCYBERCOM. 

So how does this factor in with respect to acquiring innovation and rapid contracting? At the acquisition level both FAR and non-FAR-based contracts can be utilized, as deemed appropriate. Commonly used are publicized ‘Challenges’ that seek to address specific capability gaps. Some of the topics that have come up for these challenges include pilot training, new helmet systems, mixed reality platforms, and geospatial data processing, to name only a few.

The opportunity for industry is to be able to get in early on what are potentially high priority initiatives within a given agency. To take as one example, the “Multi-Domain operations (MDO) Challenge” posted by AFWERX is noted as being part of a larger $2B investment the Air Force plans to make over the next several years for this capability.

Pitch Days: Acquisitions modeled after ‘Shark Tank’ and Investment Pitch competitions

The Pitch Day concept builds upon the already well-stablished SBIR process, but introduces a layer of streamlining by awarding one-page contracts within a single day via credit card payments (following an evaluation period leading up to the actual ‘pitch day’). In terms of making awards quickly, the idea has been a success thus far. At the inaugural Pitch Day back in March 2019, 51 contracts of up to $158K each were awarded. The topics were C3I and networks, Battlefield Air Operations Family of Systems, and Digital Technology. Based upon the success of the initial Pitch Day, the Air Force will now be hosting several more:

  • UAS Pitch Day on July 24, 2019
  • Kessel Run Pitch Day on July 26, 2019
  • Space Pitch Day in September 2019

Rapid Prototyping / Fielding (aka Middle-Tier Acquisitions): Acquisitions not subject to JCIDS or DoD Directive 5000.01

The Middle-Tier Acquisitions process takes its authority from Section 804 of the FY 2016 NDAA. This is the same NDAA that permanently codified the OT authority, allowed for an easier transition to production, and ushered in the recent boom in OTA spending. In short, the rationale and motivation behind Section 804 is to deliver capabilities in a period of 2-5 years, either through prototypes that will provide ‘residual operational capability’ within 5 years, or through proven technologies that can complete fielding within 5 years.

Most notably, Section 804 designated programs will not be subject to the lengthy JCIDS process or to DoD Directive 5000.01. In addition, once a program is ready to proceed to the acquisition phase, contracting officials are to use wherever possible expedited means for the procurement. This includes but is not be limited to IDIQs, OTAs, and PAR Part 12 procedures.

It should be noted that unless extended, the authority expires in September 2019.

Examples of some of the programs that have been designated as Section 804 efforts include: Air Force’s AOC Pathfinder, the Unified Platform program, Nuclear Planning and Execution System recapitalization, AWACS-related modernization efforts, and Army’s Mobile Protected Firepower program (to name a few). 

Commercial Solutions Openings (CSO): “BAAs”…but for specific programs…and result in OTAs

CSO procedures, authorized in Section 879 of the FY17 NDAA, represent a modification to the Broad Agency Announcements (BAA) process in that they are geared towards acquiring technology that is ‘directly relevant’ to a specific program. BAAs by contrast are generally restricted to basic and applied R&D. In addition, CSOs are designed to result in OTs, through which follow-on production contracts can awarded. The end result is a formalization of one additional avenue (among others) by which OT prototype authority can be put to work.

The organization to be especially aware of with respect to CSO use is the Defense Innovation Unit (DIU). It was stood up in 2015, and uses CSO procedures to award Other Transaction agreements. DIUs director, in congressional testimony from March 2019, noted that 103 companies have been awarded contracts through DIU to date. 

Outside of DIU, CSO utilization is becoming increasingly used by other organizations, among them USSOCOM, Army’s PM DCO, Air Education and Training Command, Air Mobility Command, Air Force Technical Applications Center, and U.S. Air Forces Europe.

Other Transaction Agreements

Prospects for future use of OTAs

Additional oversight of the OTA space is coming. The FY 2019 NDAA explicitly requires that Congress be briefed on DIU and DoD OTA activity. In addition, the growth of OTAs on a year-over-year basis can reasonably be expected to stabilize in the not-too-distant future after the initial period of education and adoption fades.

That said, even if growth in use stabilizes, can we expect funding levels to potentially remain at or near current levels? There are a few factors that suggest the answer to this question is, yes.

  • The strategic underpinnings motivating DoD to increasingly embrace OT authority are still present, and will continue to be.
  • The Navy’s utilization still has room to grow when compared to its counterparts.
  • Recent legislative changes to the authority facilitating the use of OTAs:
    • Increasing approval thresholds (FY 2018 NDAA)
    • Allowing for Prototype OTs to be issued as part of the SBIR program (FY 2018 NDAA)
    • Broadening follow-on production language to include sub-awards issued under consortia (FY 2018)
    • Adding language clarifying that that a follow-on production contract can be awarded when the prototype is successfully completed as part of a consortium (FY 2019 NDAA)

Quick Look at recent OTA Trends

Based on current spending levels, FY 2019 has the potential to become another growth year in the DoD OTA market. FY 2019 OTA spending is currently just over $3B.*

*FY 2019 reflects spending through approximately March 2019

In addition, consortia continue to be the largest single source for OTA awards. Consortia-based spending accounts for about 75% of overall OTA spend between FY 2014 and FY 2018.

*FY 2019 reflects spending through approximately March 2019

While the vast majority of the work being purchased via OTAs is categorized as Defense-based R&D, since FY 2017 an increasing amount of agreements have been classified under other sectors:

Entry Points into the OTA Space:

With the flexibility that OTAs offer the government comes a somewhat disparate set of ways by which they become known. The below is a list of the most common ways that OTAs are put into place:

  • Broad Agency Announcements (BAAs): OTs are among the several contract types that can result from a BAA (in addition to cooperative agreements, grants, and procurements contracts)
  • Federal Procurements Websites: Announcements of efforts that are anticipated to result in OTs can occur through sites like FBO
  • Defense Innovation Unit: DIU issues OTs using Commercial Solution Opening (CSO) procedures.
  • Phase(s) within a traditional procurement: Specific increments or segments of a larger program may utilize OTs as part of the acquisition strategy.
  • Commercial Solution Openings (CSOs): CSO-based efforts are announced through procurement websites like FBO, in addition to the announcements made through DIU and the FEDSIM CSO page.
  • Consortia: Consortia have become the primary means through which OTs are being into place.
  • Partnership Intermediary Agreements: As noted above, requirements going through PIAs can utilize a number of acquisition methodologies, to include 2371b authorities.
  • Middle-Tier Acquisitions: As noted above, at the acquisition phase, contracting officials are to use expedited means for the procurement, which may include OTAs.
  • Multi-year Open Solicitations: Similar to open BAAs, but specifically for Prototype OTs. One example is the DHS Silicon Valley Innovation Program.
  • SBIRs: The FY 2018 NDAA included express authority to allow for the award of OTs for Prototypes in the Small Business Innovative Research Program (SBIR).

(This section was updated on August 21, 2019)

What are the legislative and regulatory authorities?

The below chart provides a quick summation of the legislative or regulatory authorities that apply to the above noted methodologies.

(It should be noted that the above is not an exhaustive list of all the possible regulations or legislative authorities that apply in terms of ‘rapid contracting’ or acquiring innovative capabilities.)

What are the ‘Need to Knows’ for Industry?

Not one single point of entry: These methods are being used by multiple offices, across multiple agencies, using various ways to publish them. Participating in this space requires additional alertness across the federal space (which GovWin can help simplify and streamline).

New and non-traditional entrants: These methods are in part designed to attract non-traditional government contractors, which adds to the sandbox of competitors in the field.

Potential for production / downstream contracts: Part of the goal of the OTA and Middle-Tier Acquisition authorities is to more quickly get to production or deployment, and this is where a company can potentially solidify a position for a given capability or technology in subsequent years. Taken more broadly - especially with respect to Pitch Days or the WERX challenges where production contracts are not a stated part of the acquisition - the opportunity here for industry is to potentially capture downstream contracts or work by participating early in the development cycle.

Multiple industries at play: The innovative technologies or capabilities being sought are not restricted to one sector or industry.

Changes in acquisition policy / strategy are part of larger strategic shifts:  Within DoD, the sense of urgency surrounding the need for more rapid capability development and deployment is driven in part by strategic shifts that can be characterized as needing to ‘strengthen the competitive edge’ (to use a phrase from the 2018 National Defense Strategy). These shifts have included changes in priorities, organizational changes, and, as highlighted above, adjustments in how agencies acquire and get access to cutting edge capabilities.