In 2018 and 2019, $11.4 billion was spent through [Other Transactions Authority] OTAs, over twice as much as was spent on [Small Business Innovation Research] SBIRs during that time. It was also more than twice the $4.9 billion in OTA contracts awarded from 2015- 2017.
A more thorough assessment of this expenditure, though, exposes a disconnect in program objectives and the acquisition incentives and metrics driving DoD behaviours.
According to Stephen Rodriguez, Founder of One Defense, a firm specializing in helping high-tech companies develop and implement strategies to enter the defence and security markets, “government stakeholders view money on contract as a metric of success rather than evaluating how many start-ups actually moved to [a] program of record.” As a result, “more often than not, [OTAs] are used by DIU and major consortium owners to justify moving money to traditional contractors more quickly, effectively hurdling FAR Part 13 via prototypes and demonstrations.”
Govini’s data offers useful detail. United Launch Alliance, Lockheed Martin, Northrop Grumman, and Boeing rank fourth, sixth, eighth, and tenth on the list of recipients of this contracting mechanism designed primarily to engage small and non-traditional defence suppliers.
That was Tate Nurkin writing in DefenceIQ, “The Future Direction of the U.S. Defence Innovation Ecosystem.” See more from Tate on acquisition and China’s military in my recent podcast with him.
Tara Murphy Dougherty from Govini seemed was surprised at how many large primes received OTAs. USD(A&S) Ellen Lord said she’d look into it. To me, it doesn’t seem all too damning where ULA, LM, NG, and BA are ranked. If Raytheon were #1, General Dynamics #2, and BAE Systems #3, then we would have to start asking to what extent non-traditionals participated in the projects. Scrutiny may be warranted. But that’s not the case. The fact that those primes weren’t mentioned is just as significant as the fact the others were.
OTA’s comprised just over 1/4 of total prototype funding in BA 6.4 between FY18 and 19 — and roughly 16 percent of BA 6.1-6.4. I wonder if the hey day of the OTA will be over soon. Not so much because of the participation of large primes will bring scrutiny. Indeed, if the Army pulls off FARA satisfactorily, then it could look good for making it regular practice in BA 6.1-6.4.
I suppose larger trends worry me. The new one to pile on the rest is whether Covid-19 will result in some procurement fiasco which will bring experimentation to an end. Contracting officers may get a harsh reminder of legal punishment.
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