Podcast: OTAs and everything else with Ben McMartin

In a special webinar event of the Acquisition Talk podcast, I spoke with the excellent Ben McMartin. He is a managing partner at the Public Spend Forum, and before that was chief of the Acquisition Management Office at the Army’s CCDC Ground Vehicle Systems Center. He has been at the center of the recent rise of Other Transactions contracting in the Department of Defense, founding the Acquisition Innovation Roadshow and leading the Joint Acquisition Agility Summit.

In the episode, Ben argues that Other Transactions — a method of contracting outside the Federal Acquisition Regulation — is not simply a way to cut corners or move faster. Instead, it is a way to collaborate with industry, which is particularly important in the research and development stage. If the level of collaboration with industry starts to feel “dirty and wrong,” then you’re almost doing it right! This is important because R&D efforts cannot be priced like commodities. Instead, the contract terms must be flexible to updated information. What matters is how much funding is available, and what are the relevant alternative actions that could be a better use of funds.

Ben provides a ton of insights on contracting, barriers to entry, and more:

• Why industry buy-in will drive continued OTA growth
• How OTA consortia grew up in response to researchers wanting to outsource bookkeeping
• What are the two ways to OTA?
• How to determine value outside of price
• The lack of success stories with follow-on production

Two big insights for me were: (1) prototyping must be increased at the subsystem level using OTAs and other authorities like 2373 for experimental purposes, and then rather than transition to an OTA production follow-on, should more realistically be transitioned to the large primes for integration; and (2) that there is no objective cost for real innovative products from non-traditionals, the buyer must know the technologies and relevant analogies and do a more subjective evaluation to triangular a “fair and reasonable” price.

Podcast annotations

Other Transactions contracts are limited to research and prototyping work, but if a prototype effort was successful under an OTA it can result in using the OTA for follow-on production (if the option was specified ahead of the prototype). I see this as a crucial next step to continue the growth of OTAs because the big bucks are in production. However, it seems that this option is rarely exercised, and instead the results of the prototype are used to formulate a competitive solicitation for full-scale development. I asked Ben about OTA follow-on production:

From the current status of how it’s used, I can’t give you a success story. I apologize. There are some success stories, by the way — but, the reality is that prototype projects are completed, and then to go into production there are a number of things that are happening in between. The data is being put into a traditional RFP like you said and then competed. Or companies at the prototype level are engineering firms, they have no desire to produce things, but license them out.

The problem for follow-on production is that many prototype OTAs destined tor non-traditionals won’t be doing full-up systems, but instead might contribute novel subsystems. The government could do a follow-on production and then GFE it to the prime contractor to integrate onto a platform — and does this fairly regularly — but usually the government focuses on the total end item. Here’s Ben on that:

The requirements process, if it’s for a full-up system, dictates who the players are going to be. I have seen some really nice requirements, shout out to the ground vehicles system community — that have come out and looked at a problem set of capabilities — this is how you build a system from the ground up — come out with a prototype solicitation for capabilities in the robotics sphere, and then you build up different capabilities, and then you’re able to transition those to whoever your OEM manufacturing company is going to be, or your assembly shop.

The Optionally Manned Fighting Vehicle, for example, has restarted the program and is planning to enter a government design team to compete with industry. The government can use OTAs to administer contracts for prototype subsystems where the contract can be treated in a more relational manner to facilitate agile processes. I’d like to see that competition, and think that government needs these kinds of skills in order to be able to contract smartly for acquisition more broadly. One of the biggest benefits in my mind is the ability for government officials — through their interaction with prototyping work — to better define value without deference to sets of processes. Here’s Ben:

Subjective is a bad word in federal contracting. Guess what? These things are subjective. Sorry. That’s an uncomfortable place to work. But at the end of the day, you’re making value judgments on whether a technology will prove out, what impact that technology will have, where it will fit in to the system, and whether it will transition and field. No one wants to hear that. They all want to hear that it’s a numbers game, and everybody plugs into a matrix and it spits out the answer, but that’s not how it works.

 

… The only factor price has to me in new technology development is how much money you have for the solution. If I only have $5 million, I’m interested in the best $5 million or less solution there is to solve my problem. That’s really all I care about money wise. I know the pricers and auditors are having a heart attack.

Here’s a little more around the topic. Ben argues that getting a massive cost volume in a traditional source selection to a specific requirement is the easiest form of pricing. Here’s how pricing works in prototyping and R&D:

… The commercial items group team out of Boston recently published a white paper on pricing OTs. That whitepaper goes right to this issue, you’re going to get different solutions with different pricing models. You have to draw analogy and correlation to commercial technologies in order to do pricing, and that’s the most advanced form of pricing.

In any case, if the government does more subsystem prototyping intended for transition to an integration effort by the OEM, then the “significant” participation of the non-traditional would qualify the large incumbent contractor to receive an OTA with a follow-on production option. That could be a huge driver of OTAs, but it would also face backlash from observers who find that the majority of OTAs go to incumbent primes. Here’s another quote I liked:

The FAR does one thing great — it protects folks so you can assembly line procurement below the level of the attorney.

Thanks Ben!

I’d like to thank Ben McMartin for joining me on the Acquisition Talk podcast. I’d also like to thank the Public Spend Forum and George Mason’s Center for Government Contracting for putting on the Webinar event, which can be viewed on YouTube here. You can read blog posts from Ben on the Public Procurement Perspectives, including his introductory post, on policy making, and barriers to entry. Ben also contributed to the DoD’s Other Transaction Guide. Here’s a great Webinar with Ben on the details of OTAs. And here’s the thoughts Ben posted the day of our conversation:

– Technology modernization will ultimately depend on inspiring the working level practitioner; not enacting law or writing policy.

– Bashing “OTA Consortia” demonstrates one’s ignorance of alternative acquisition structures.

– If your level of collaboration with industry feels “dirty and wrong” then you’re almost doing it right!

– Send the money where you see success. Programs must transition or die.

– If your default position is to request “other than cost or pricing data” for every procurement, then it’s time to skill up.