Consortia-based OTAs larger, but slower growing than stand-alone OTA

The same day I dropped the podcast on Stephanie Halcrow and Moshe Schwartz’s event on industry consortia, the GAO released its own report Other Transaction Agreements: DOD Can Improve Planning for Consortia Awards. The GAO goes further into the issues related to tracking OT awards going to consortium management firms and ultimately the performing companies.

They have a nice chart showing how the 2014-2021 period really was a blossoming of consortia, with 22 of 28 consortia tracked being created in that time. And 20 of the 28 consortia are managed by one of four organizations: ATI, CMG, NSTXL, and SOSSEC. ATI is by far the largest with $19 billion out of $24 billion total tracked. It would be interesting to compare that list to the 42 consortia discovered by Stephanie and Moshe.

One chart from the GAO that caught my eye was the obligations awarded to consortia compared to stand-alone awards. It shows that even though consortia-based OTs are greater — $6 billion in FY 21 compared to $4 billion of stand-alone — the stand alone awards grew faster since FY 19. Consortia-based OTs grew 15% over those two years compared to 54% for stand-alone.

Relatedly, GAO presented a chart on consortia-based OTA awards from the following activity breakout: Research, Prototype, and Production. The vast majority were Prototype, with Production barely making a dent. This indicates that either: (1) production/scaling of OT-based technologies occurs on FAR-based contracts; (2) the technologies haven’t yet gotten there; or (3) they are failing to scale. The total value of Production OTs to consortia was a paltry $400,000 in FY 19, $8.5 million in FY 20, and $21 million in FY 21.

I also tagged the companies in the the OTA dataset from SAM.gov and found slightly different figures. It shown in the table below (in millions). But the numbers are close enough to have relative confidence that the vast majority of production OTAs are stand-alone awards. Production OTAs have grown from just $14 million to $1 billion in two years time. Just $20 million went through consortia in FY 21. Most traditional contractors like SAIC, Textron, Northrop, and Booz Allen Hamilton had negligible production OTAs. Only L3 Harris nabbed a big one in FY 21 with $101 million.

Most production OTAs went to “other than” traditional contractors. That is a subjective list, and includes Microsoft, Palantir, Elbit and Sig Sauer as the top four. Not sure if any of them have CAS-covered contracts and would therefore be “traditional.” However, most other production OTAs are for companies unknown to me until you get to Anduril and lower down is Shield AI.

I’ll be interested to see what the FY 2022 data has to say. The full dataset should be in by the end of the calendar year (a three month lag in reporting). But none of the above provides any evidence to say that consortia-based OTAs or stand-alone OTAs are a better route, whether for prototype or production. I remain cautiously hopeful that OTAs will continue to grow rather than plateau, particularly in the use of production authority.