Defense Pricing and Contracting: Fiscal 2020 in Review

Key Takeaways

• Contracting activity at DOD has maintained pace through the pandemic despite the shift to full-time telework.
• The number of defense contract actions decreased in fiscal 2020 while total obligations (i.e., spending) increased, suggesting DOD spent more with fewer contractors.
• DOD’s use of Other Transaction Authority continued to rise in fiscal 2020, with obligations related to COVID-19 totaling $7.7B.

Defense Pricing and Contracting is an organization in the Office of the Under Secretary of Defense for Acquisition and Sustainment that oversees the training and governance of the defense acquisition workforce. Recently, the DPC published a short report on acquisition trends concerning the Department of Defense’s novel coronavirus response and the use of Other Transaction Authority in fiscal 2020. This post summarizes the main points from the report.

COVID-19 Response

Noting the unprecedented nature of the challenge posed by the COVID-19 public health crisis in fiscal 2020, the DPC played a formative role in implementing Congressional acquisition mandates, supporting the defense contracting workforce through the shift to full-time telework, and communicating with industry to ensure the ongoing health of the Defense Industrial Base (DIB). Despite the year’s challenges, the defense contracting workforce followed on success it achieved in fiscal 2019.

Compared to fiscal 2019, the DPC oversaw a 4% decrease in contract actions in fiscal 2020 while seeing an 11% increase in contract obligations for the Military Services. In other words, although the number of contract actions carried out by the Military Departments declined last fiscal year in comparison to 2019, the amount spent rose. These trends separated even further in the third and fourth quarters of fiscal 2020 with the DOD notching an unusual 11% decrease in contract actions and 9% increase in contract obligations.

These trends suggest that a fewer number of contractors across the DOD earned a higher amount of contract dollars. This makes sense given that only certain types of contracted work continued in the midst of the COVID-19 crisis, but it is cold comfort to those contractors trying to survive a broad stoppage of work. The data cited by the DPC also indicates that the DOD responded poorly to the spending authority granted by President Trump’s invocation of the Defense Production Act. Despite being granted significant funding in the CARES Act, the DOD spent more with a smaller number of vendors rather than more with a larger number. This did not support the DIB as a whole.

Other Transaction Authority (OTA)

The other acquisition trend noted by the DPC involves the department’s use of OTA. Since being granted the authority by Congress in 2015 to use OTA for a broader range of acquisitions, the DOD has obligated a growing number of dollars. The total spent via OTA in fiscal 2015 totaled $620M. By fiscal 2020, that total had ballooned to $16.3B, of which the DOD spent $7.7B on COVID-19 related requirements.

The DPC did not note this in its report, but OTA spending on COVID-19 requirements focused in part on vaccine development. Otherwise, requirements related to the development of information technology infrastructure for telework (considered COVID-related spending) took up a considerable portion of that OTA spending. In short, industry partners doing medical research or offering technology solutions previously unused by the DOD did well through the award of OTAs, as did those working on modernization programs.

The DPC’s data, far from revealing a record-breaking year for the DOD, shows instead the uneven nature of the department’s pandemic response. While the advent of telework may have helped the DOD’s contracting community continue to perform its duty, the resulting activity benefitted some in industry while leaving others behind.