In this episode of the Acquisition Talk podcast, we listen in an event hosted by the Center for Government Contracting to discuss a recent paper authored by Center Senior Fellow Stephanie Halcrow and Moshe Schwartz. President of Etherton & Associates . The paper is called The Power of Many: Leveraging Consortia to Promote Innovation, Expand the Defense Industrial Base, and Accelerate Acquisition. In the episode, they discuss:
- Whether consortia have increased nontraditional participation with DoD
- Challenges in Other Transaction data collection
- How OT consortia can help DoD and industry collaborate in real time
- Dangers of adding too much process onto consortia
- How allies and foreign partners can participate
What are Consortia?
Consortia are simply agreements, combinations, or groups of companies formed to undertake an enterprise beyond the resources of any one member. In government contracting, 42 industry consortia identified by the authors, 38 of which serving DoD. Though these consortia are often associated with Other Transactions (OTs), or non-FAR contracts often intermediated by a consortium management firm, the paper opens with a word of caution: “This is not another report on Other Transaction Authorities.”
However, perhaps because of OTs, consortia have come under a lot of scrutiny. There’s a lack of visibility with standard reporting tools like FPDS-NG below the level of the consortium management firm — who actually performs the effort. The DoDIG was recently concerned with agreements officers performing due diligence on nontraditional participation and other requirements.
Because of this concern of a lack of visibility, Stephanie and Moshe set our to test the idea that data was not available. They went out and collected data from 12 different consortia, finding that more than 75% of consortia members were small businesses, and 67% of the awards by number went to nontraditional defense contractors who acted as primes. Though they conclude that consortia have helped bring in nontraditional contractors, I personally would like to the the distribution by value of award.
A rough analysis I have done of FY20 OT data finds that 56% by value went to consortium management firms. But of the remaining, roughly one-third went to the big primes and two-thirds went to other firms. Interesting to know what that looks like within the consortia, but even then it is hard to interpret without all the subcontractor data as well.
Consortia Event
To discuss the paper, Stephanie and Moshe invited an excellent panel including: Margaret Boatner, Deputy Assistant Secretary of the Army for Strategy and Acquisition Reform; David Simenc, Executive Director of Tactical Systems at SciTech Inc.; and Charlie Zisette, Executive Director of the National Armaments Consortium.
Though DARPA and DIU tend to directly award OTs to companies, the Army is a big user of consortia. When it came to Operation Warp Speed, General Gustave Perna said that it wouldn’t have been “warp speed” if it had not been for consortia. Similarly Moshe brings up an example of energetics (for munitions) where no companies responded to an Army RFP but was able to improve through collaboration with OTs. Whether or not DoD could have facilitated these outcomes without consortia isn’t as important as the fact that consortia have successfully filled that role in several cases.
However, the data issue is important for oversight. Margaret explained some of the issues when it comes to OTs:
For example, prior to 2019, there was no way within the system that you could even distinguish between a prototype OTA and a production OTA. They were just launched as OTAs in general. So trying to get the breakdown of that was very hard. We now have that ability, but there’s other difficulties in tracking these things. And in one of them in particular is tracking follow on productions of OTs.
The system doesn’t really allow you to trace the history, whether it’s a prototype OTA awarded through a consortia and then straight into a production OTA awarded to that vendor, or if we awarded through an OTA or through a consortium and then decided to compete it out or go through FAR. It doesn’t really allow you to trace from start to finish, but that data is really important to understand what technologies are transitioning, what consortia we’re using and what the outcomes of all of that is.
Tracing the history is a much larger and more complicated problem, I think, than just exposing who the performing contractor is under the consortium management firm. It’s actually a new requirement. We do not see FPDS-NG tracking SBIR Phase II to SBIR Phase III and follow on contracts. Nor do we see tracking of S&T efforts from each laboratory to programs.
In my mind, I think that tracing of follow on efforts should be done after-the-fact through program analysis. It should not be built into FPDS-NG reporting because it is hard at the time of an award to trace precedents. It will be a multidimensional problem for sure. As Project Hindsight found in the 1960s, each major weapon system has hundreds of technological “events” that had to occur for the system to be successful.
Tracking consortium management fees as part of FPDS-NG data collection feels a step too far for me, but I know it is something oversight is interested in. Again, that data is probably best served through other analytical tasks or systems.
Partnering with allies
One of the audience asks whether allies can get involved in the consortia. Moshe, who knows acquisition statute like few others, cited subsection f of 10 USC 4022 which states: “A transaction includes all individual prototype subprojects awarded under the transaction to a consortium of United States industry and academic institutions.” Moshe found this language as a barrier to expanding OT consortia to close partners like the Five Eyes.
At the National Armaments Consortia, Charlie said that “Everything’s on a munitions control list for us in armaments. Everything is pretty much ITAR regulated for us. Everything is CUI these days.” Foreign companies can still participate as subcontractors, but they cannot join the consortium as a prime because they have no way to control the flow of information within their collaborative systems. Of course, to participate, foreign companies can create United States subsidiaries with proper firewalls.
Doing business differently
I’ll quote David a couple times on some of the benefits that he perceived from using the OT consortia model. First on company growth:
We have over the past four or five years executed as much business through the consortium model and the OTA model as we have through all of our previous efforts through more traditional methods of engaging small business and non-traditional contractors combined.
Second, on collaborative building of the contract requirements:
No matter how many times you go through the review process, no matter how many RFIs you put out there, it is difficult to get a a perfect requirement. And you’re almost guaranteed to miss something in the requirements spec, having that opportunity and that forum which is facilitated through the consortium to collaborate on requirements with the government.
And finally, on simplified proposals:
We’re able to go to a one stop shop. Where a number of organizations are able to to put solicitations and then we’re able to have a simplified proposal process to get our concepts in front of the government. And the final thing is that the power of being able to have a conversation in real time with the government while I’m writing my white paper.
All these benefits and more should be well understood to help prove the power of OT and consortia models. But as Charlie mentioned, there is always the fear of process creep. “I see a tendency, whether it’s through legal or through procurement or through whatever, where we’re starting to add. And I think there’s a real danger in that. If our goal, honestly, is to get nontraditionals, then we’ve gotta look like that.”
Thanks Stephanie and Moshe!
I’d like to thank Stephanie Halcrow and Moshe Schwartz for writing a great paper and hosting this event. The paper has a list and key information about all 42 consortia, including the management fees — so check it out! I’d also like to thank Margaret Boatner, Charlie Zisette, and David Simenc for their great perspectives on the panel. You can watch the video of the event here.
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