… some observers question whether OTs are effectively bringing nontraditional contractors into the defense marketplace. A DOD Inspector General report examining other transactions from FY1994-FY2001 found that OTs did not attracted significant numbers of nontraditional defense contractors to do business with DOD. The report found that of the 209 prototype agreements examined, traditional defense contractors received 95 percent of the $5.7 billion in funds awarded.
A recent analysis of FPDS-NG data by Federal News Network had similar findings. According to the report, from FY2015-2017, while nontraditional defense contractors were awarded most of the new OTs (66% vs. 33% for traditional defense contractors) the dollar-value of the OTs favored traditional contractors ($20.8 billion vs. $7.4 billion for nontraditional contractors). Some observers have questioned the accuracy of the data published by Federal News Network.
According to Charlie McBride, President of Consortium Management Group (which manages two consortia working with DOD through OTs), 88% of the total dollar value of awards to CMG Group have gone to nontraditional prime contractors, and nontraditional entities have participated in the remaining 12%.” This debate highlights the lack of authoritative data on OTs. The currently available data may not accurately reflect the extent to which nontraditional contractors are engaged in OT agreements.
FPDS-NG does not collect data regarding subcontractors or consortia composition, making it difficult to determine the nature and extent to which nontraditional defense contractors and entities may be working under OT agreements with DOD directly or as subcontractors.
That was from the excellent Moshe Schwartz along with Heidi Peters in the CRS report, “Department of Defense Use of Other Transaction Authority: Background, Analysis, and Issues for Congress.”
For anyone who has used FPDS data, they know there is a lot of nuance and other difficulties. The consortia issue is important. Whoever is managing the consortia might be labeled a traditional contractor when in fact the majority of the funding flows to the nontraditional. Sometimes there is confusion about OTs, some thinking that they are only awarded to a consortium or that consortia are preferred.
Another aspect that the authors bring up is how OTs may be provided to a defense prime with the understanding that a nontraditional contractor will have a major role providing a component or subsystem. Often, new entrants to defense don’t engage as primes, but are introduced as a subcontractor.
These are important considerations, and the proper analysis would have to add such context to each contract obligation. Certainly there are other considerations that would be stumbled upon as well. The effect may be that the lower levels are fully following Congressional intent for OT agreements, but that data aggregated at the top levels — having lost important context — will make it appear as though OTs are being abused and flowing to powerful defense incumbents without the protection of oversight. Such an outcome would be unfortunate, and very well may have been what occurred during the 1994-1998 experience with OTs. It should serve as a warning to those trying to navigate policy with highly aggregated data — just because it’s the only data available doesn’t always mean it is the data useful for a correct interpretation.
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