Here’s a Q&A from a Mitchell Institute webinar discussing Other Transactions (OTAs):
Audience question: There’s lots of new platforms being developed or being procured under OTAs. Where do you see any of the shortfalls of the OTA?
Mark Shackelford: I would suggest being a bit careful with OTAs as well as with mid-tier acquisition. A lot of these newer strategies for dealing with acquisition are really focused on prototypes. OTAs in fact in general are intended to be ways to get a prototype moving. Now a prototype’s a good idea to understand where technology is going and what the maturity of technology is, but prototypes don’t always lead you to faster.
I’m familiar with one program and portfolio that I work with where there’s a prototype activity that’s scheduled to last five years they had to change the definition of the prototype to make it work within five years and then there’s a follow-on five-year production process. So what could have been about a six or seven year program using traditional acquisition lines have taken at least 10. Now good news I suppose is you can get the OTA going without the help of the JCIDS process and you can move things along much quicker in that partnership with with industry, but once again it’s it’s the how you apply the tool that matters here.
Before I go on, I’ll just clear up some confusion. OTAs and Middle Tier are completely separate concepts. The former is a non-FAR contracting tool, the latter a 5000-series acquisition tool. OTAs don’t have any five-year limitation, Middle Tier programs do. OTAs don’t have anything to do with the JCIDS requirements process that can take 1-3 years or more. Middle Tier skips over JCIDS. Moreover, most Middle Tier programs are not paired with OTAs. Army IVAS is one exception, and they report saving four years on their timeline!
So besides all that confusion, he makes an interesting point about rapid prototyping for Middle Tier not being completed in the 5-year timeslot. Certainly, since several Middle Tier programs are actually MDAP in size like Next Gen OPIR, the 5-year mark is arbitrary. But he provides no evidence that a single Major Capability pathway would have actually reduced the timeline from 10 years to six or seven. Indeed, going through the JCIDS alone would have added a couple years, going through a Milestone B might take another year or more, and then the major contract award would take two more years. There’s five years of documentation time to slap back on.
OK, onto more OTA negativism, this time from the Air Force RCO chief Randy Walden:
The RCO’s history until recently, we’ve never used an OTA. We’ve stuck to the traditional cost plus — fixed price where it makes sense. It is a tool and if the tool makes sense, use it. If the tool is just something that you want to go use but you don’t understand how it’s used or the purposes by which you want to use it, then you’re probably in the wrong business. So the goal here is use the right tool. If it does help you go faster, great. But I think the [Shackelford’s] point is, most the time it doesn’t help you go faster. It’s really for a demo or a prototype, and that’s where the best use is and that’s what we’re using it for. The goal here is we use the right tool for the program.
Can’t really argue with using the right tool for the job. But most of the RCO’s past major programs (that we know about) like the B-21 and the X-37B are major pieces of hardware that engage with traditional prices. Taking over ABMS is a new endeavor for the AF RCO, which brings it into closer contract with nontraditionals.
I’ve heard that OTAs don’t necessarily help you go faster, such as compared to an MAC IDIQ for example, but they allow the government to tailor contracts to allow for engagement with nontraditionals. This is particularly true for intellectual property. Nontraditionals are scared of working prototypes with DoD, for the good reason that DoD will demand government-purpose rights to that small prototype effort, then broadcast out all their IP in a major development RFP that is intended to be won by a traditional prime.
OK, and here’s a comment from the last panelist, Dwyer Dennis:
I just wanted to add one additional thought. I think you have your finder on it too, is that with the OTA, because of the way they’re executed and at what level and the definition behind it, it’s even harder to be transparent and to get the communication up with understanding, and thus to continue advocacy with the Hill by your own services and so forth. So the OTA used correctly, as Waldo just said, with prototyping and so forth, is a great tool but be careful to run a whole program on an OTA because in the end you have to maintain advocacy over all.
I guess I’m not really following. I suppose that FDPS loses insight into what obligations went where if they use a consortium manager. But the program office often does have that insight. I also suppose that there aren’t CDRLs for EVMS, but it’s not like EVMS is actually useful. As the founders of EVMS understood, it was all about “whiz bang” charts that provide zero value except showing outsiders that they are top managers and opens the funding streams from Congress. (BTW, cost and software data reports are still required on OTAs.)
I think this idea that without standard DFARS data requirements there is zero insight and understanding is wrong-headed. The program office and contractor should always be collecting data, running tests, showing capabilities, etc. None of this will come out as a clean financial performance metric — “we have a cost performance index of 1.00” — but contextual reporting of on-the-ground progress is far superior. It’s hard to describe how useless traditional metrics are in normal defense programs, but they give everyone a “warm and fuzzy.”
Conclusion
As the GAO and DoDIG are also investigating OTAs and often have negative things so say, I’ve also been hearing more and more pessimism from the ranks. My presumption the last couple years has been that OTAs will face a backlash and stop being used as widely. FY 2021 use of OTAs only grew over FY 2020 because of Operation Warp Speed. If you cut that out, growth was flat. [Update: DoD OTAs without Covid went from $7.6B in FY 19, to $8.6B and $10.2B the following two years — so there was reasonable growth in FY 21.]
Defense acquisition is marked by pendulums of reform, and nothing indicates to me that leaders are willing to stop that pendulum from swinging back to where DoD was in 2009 after the WSARA reforms. At the same time, nothing indicates to me that OTAs are a panacea for anything, or that significant improvement cannot be achieved within the FAR/DFARS — even in questions of intellectual property. The real questions are not in contracting or acquisition which have seen perennial reform, but requirements, budgeting, oversight, and workforce.
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