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April 14, 2020 By cs

Newest DoD industry guidance clarifies repayments, makes prototyping easier

As part of its ongoing effort to bolster the defense industrial base, the Pentagon has issued two new pieces of guidance — one focused on workers, and one focused on prototype contracts.

Overall, the department has now issued 17 different actions, ranging from basic guidance for industry to memos changing how the department pays contractors, since March 5.

In an April 6 memo, acquisition head Ellen Lord changed the rules for issuing prototype contracts through other transaction authorities.

OTAs are small contracts awarded to companies of any size, in theory targeted at nontraditional defense contractors, with the purpose of conducting research or prototype efforts on a specific project; they are not subject to Federal Acquisition Regulation rules.

By comparison, SBIR contracts are targeted at small businesses in order to act as seed money for them to conduct research and development efforts; they are subject to the FAR rules.

Keep reading this article at: https://www.defensenews.com/coronavirus/2020/04/09/newest-dod-industry-guidance-clarifies-repayments-makes-prototyping-easier/

The Contracting Education Academy at Georgia Tech has established a webpage where all contract-related developments related to the coronavirus (COVID-19) are summarized.  Find the page at: https://contractingacademy.gatech.edu/coronavirus-information-for-contracting-officers-and-contractors/

Filed Under: Government Contracting News Tagged With: CARES Act, contract payments, coronavirus, COVID-19, DoD, FAR, guidance, nontraditional, OTA, other transaction authority, pandemic, Pentagon, prototype, prototyping, SBIR, small business

April 10, 2020 By cs

The challenges facing ‘non-traditional’ contractors

As the Department of Defense (DoD) focuses on reforming its acquisition system to move “at the speed of relevance,” one critical goal is to better recruit and engage with “non-traditional contractors” to deliver the weaponry and services necessary to maintain our technological edge and national security.

The DoD must understand why these firms are not interested in or aware of supplying and supporting new and cutting-edge products and services. What do we now need for the DoD to increase its business partnerships with non-traditional contractors, and thus bring more ideas, entrepreneurial spirit, and new products and services to the defense market sooner to maintain our military edge?

Pressure to Perform

Today’s defense acquisition system is under tremendous pressure to improve performance. Threats to national security change rapidly. As has been the case with many disrupted, former Fortune 500 and brick-and-mortar firms, business and consumer preferences in all forms of services and products continue changing for DoD, upending old economic models.

In this case, the customer is the U.S. citizen and the product is continued, unparalleled national defense. Success historically has depended on a powerful defense industrial base, which has been changed dramatically. The federal government formerly was a very significant contributor to research and development (R&D), including that leading to new weaponry. However, according to a National Science Foundation report, published by the American Association for the Advancement of Science, between 1965 and 2017, government’s share of R&D spending dropped from 65 percent to 22 percent in constant dollars. The DoD therefore is not the same big player it once was in the overall economy.

Adversaries are making rapid progress. This means that America’s best minds, who develop the technology that powers advances across our economy, increasingly must include national defense in their area of responsibility and work. DoD must reset how it conducts acquisition and learn to thrive by tapping into this new “industrial base” to find solutions from non-traditional contractors for providing the capabilities necessary to meet present and future security challenges.

Rules and Barriers

Former Defense Secretary Ashton Carter highlighted this issue in a speech in Silicon Valley, California, in which he indicated that hardware and software being developed could support the DoD. Carter wished to reduce bureaucracy and increase research investment, by using the technical and entrepreneurial brains of this recent American technology success story. While those brains are not as involved in government-funded research as they used to be, partly because government does not invest in research as much as in the past, they are still patriotic. “They feel they too are public servants,” Carter said, “and wish to have somebody in Washington they can connect to.”

What issues surround this challenge, and what progress has been made? One view held by many is that existing acquisition rules and barriers to entry are too high. Government and the DoD acquisition regulations are cumbersome and complicated, discouraging non-traditional firms from competing for business against traditional defense contractors, as well as inside the Beltway think tanks and trade associations. Complicated contracting rules favor those who already understand and are established within the system. Other issues include the perception that the market is not large enough, that the effort isn’t worth the hassle, that firms must give away their intellectual property, that new cost accounting and compliance systems are required, and that government personnel simply don’t understand how industry works.

However, the defense market is increasing in size, which may at some point become more attractive to non-traditional contractors. The 2020 spending bill authorizes $738 billion in military spending, a $22 billion increase over 2019. While defense spending does not match the levels of past years, it is significant. These increases may make the DoD a more attractive, lucrative market for innovative, non-traditional commercial contractors, including those previously wary of federal contracting obligations and risk.

Defining a Non-Traditional Contractor

What exactly is a non-traditional contractor? As defined in statute and in the Defense Federal Acquisition Regulation Supplement (DFARS) 212.001, a “non-traditional defense contractor” is:

an entity that is not currently performing and has not performed any contract or subcontract for DoD that is subject to full coverage under the cost accounting standards … for at least the 1-year period preceding the solicitation of sources by DoD for the procurement (10 United States Code 2302(9)).

n addition, the Federal Acquisition Streamlining Act (FASA) of 1994 intended to lower procurement barriers by giving preference to commercial firms, products, and services, which the DoD includes in the DFARS definition of non-traditional contractors, including the reasons for it:

iii) … contracting officers may treat supplies and services provided by non-traditional defense contractors as commercial items. This permissive authority is intended to enhance defense innovation and investment, enable DoD to acquire items that otherwise might not have been available, and create incentives for non-traditional defense contractors to do business with DoD.

With current increased funding and statutory changes encouraging commercial contracting procedures, there is renewed interest in use of “Other Transaction Authority (OTA),” a contract method seen as a means to get the complicated and restrictive Federal Acquisition Regulation (FAR) out of the way under certain circumstances. OTA creates a “blank slate,” as few statutes and rules apply. The Fiscal Year (FY) 2016 National Defense Authorization Act (NDAA) allowed transitioning of DoD programs from R&D and successful prototype to production by using OTA non-competitively. Contracting risk may increase for individually developed OT mitigating terms and conditions. The FAR conversely prescribes various solicitation provisions and contract clauses to use, depending on the circumstances.

The DoD typically awards OTs to companies directly, or through a consortium, which are then subcontracted to a member company or companies. Recent data indicated that, of $5.8 billion thus obligated, a third ($1.9 billion) went to individual companies and the remaining $3.8 billion went to consortia or consortium management companies. These figures look very small compared with total DoD annual contract obligations of more than $300 billion, but OTA is increasing rapidly. The Government Accountability Office (GAO) Report 20-84 documents OTA use increasing from 248 in FY 2016 to 618 in FY 2018.

However, the evidence is inconclusive thus far whether OTA use is increasing non-traditional contractor participation. OTA spending increased from $845 million to $3.98 billion between 2015 and 2018, with 93 percent of that from the DoD. Growth came from extending DoD’s OTAs and redefining non-traditional contractors, including doubling prototype project ceilings from $250 million to $500 million. Of 148 awards from 2015 to 2017, non-traditionals received 98, but only $7.4 billion of $21 billion in funding. The nonprofit Rand Corporation expressed concerns about OTA results and risks back in 2002, concluding that it was unable to quantify OTA results. Most recent Government Accountability Office data (GAO 20-84) indicates that “companies that typically did not do business with DoD participated to a significant extent on 88 percent of the transactions awarded during this time.”

OTs limit DoD’s ability to access financial records to verify properly stated contractor costs and limited intellectual property rights from projects. In 2017, Defense Innovation Unit Experiential (DIUx, now DIU) awarded 48 prototype contracts, of which two went to production, with no fieldable systems, according to a congressional staff member.

Without data about the use of OTAs and the results as compared to typical FAR-based contracts, there is no assurance that OTAs are working as intended. Are agencies working with truly non-traditional contractors, are innovative products and services being produced, is the government saving money, and are the deals involving the intellectual property rights protecting the appropriate party?

The Trusted Capital Marketplace (TCM) is a new DoD initiative under the current administration with similar goals of enlisting non-traditionals, in response to Executive Order 13629 (signed in 2012), calling for public-private partnerships; and Sect. 1711 of the FY 2018 NDAA, calling for a “Pilot program on strengthening manufacturing in the defense industrial base.”

The SecDef [Secretary of Defense] must carry out a pilot program whose activities include: contracts, grants, or OTAs to support capabilities of small and medium sized firms; purchase goods or equipment for testing; “purchase commitments… including cost sharing with funding from nongovernmental sources”; issuing or guaranteeing loans; and “giving awards to third party entities to support investments in small and medium sized manufacturers working in areas of national security interest, including activities to support debt and equity investments. …

As discussed in an article by Lt Col Mark Massaro, USAF, TCM intends to connect innovative defense and technology companies with trusted investors, helping them find capital and funding to continue research, development, or operations, thus precluding their engaging with “adverse actors.” TCM would aim to bring together innovation sources and investors without incurring adverse foreign influence.

Recently, the Commerce Department added Chinese telecom Huawei Technologies to the “Entity List,” making it harder for Huawei to buy and sell with U.S. companies. Last year’s NDAA banned government Huawei and ZTE product use. Those two firms are among other banned high-profile Chinese companies. TCM might allow non-traditional firms to identify investment sources without worrying about their origins.

However, why is venture capital not already investing in firms that the DoD finds important? Many emerging technologies come from lower-tier subcontractors to major prime contractors. As in large weapon systems contracts, primes normally find components and suppliers to integrate with, matching a trusted source of capital investment, like TCM. Will primes buy up promising firms or not fund emerging technology if ineligible for use on a weapon system, focusing instead on protecting their current programs?

Impediments

Any efforts to attract non-traditionals must also include a reexamination of the FAR itself as an impediment. Are expanded definitions of non-traditionals within commercial contracting and FAR Part 12 enough? The recent Section 809 Panel covered this in their July 2019 Final Report, under “Dynamic Marketplace Framework.”  The panel believes that the DoD’s commercial buying is flawed, starting with its narrow commercial product or service definitions, and recommended replacing those authorities with new ones.

The panel believes that competition improves through documented market research (not currently required), because readily available market products and services exist through existing private-sector tools. The market already sets consumer prices, since they are publicly available for comparison and evaluation. Replacing public advertising, contracting officers (COs) could use market research and competition and waive some requirements for small and non-traditional contractors, which would make it easier to do business with the DoD.

The panel recommended removing some FAR-based government commercial buying clauses, asking instead that Congress clarify which laws apply to commercial prime and subcontracts, therefore reducing the commercial subcontractor burden on DoD prime contracts, as intended by FASA.

The report adds that today’s domestic-origin requirements are not aligned with modern, global supply chains, resulting in increased costs, barriers to entry for some U.S. businesses, and innovation disincentives. Products bought under both the Buy American Act and the Berry Amendment can result in high pricing for DoD. Exempting domestic purchasing preferences for commercial goods could permit innovative products regardless of origin, yet still protect a defense-unique supply base.

Additionally, DoD buying-offices are hard to find, physically and organizationally, making it difficult for potential new suppliers to create customer relationships. A recommended “Market Liaison” would help non-traditional and other suppliers navigate the process and improve accessibility by answering questions and connecting industry to the right officials.

While existing FAR market research guidance is not an impediment, it should go further to create effective DoD-industry communication according to the panel.  Clearer definitions and improved guidance would ensure that DoD employees better understand and use tools to enhance industry coordination in developing market research. A current reluctance to communicate creates an information barrier impeding the use of technological opportunities to expand industry participation. As a result, the DoD lacks knowledge of emerging industry technologies and capabilities.

Finally, the panel believes that many contracting officers are comfortable using FAR Part 15 source-selection procedures, versus Simplified Acquisition Procedures under FAR Part 13, a preference that creates unnecessary complexity. Simplified procedures provide far more flexibility to solicit and contract non-traditionals for the right products and services.

A 2013 University of Maryland report, Non-Traditional Commercial Defense Contractors, authored by the late Jacques S. Gansler (former Under Secretary of Defense for Acquisition, Technology, and Logistics) and scholars William C. Greenwalt, and William Lucyshyn, documented similar barriers to non-traditional participation. One example given was a reliance on cost data for determining price reasonableness, versus commercial pricing. Commercial items are exempt from Cost Accounting Standards and the Truth in Negotiations Act because those firms do not have government-unique accounting compliance systems. The authors also documented various domestic source restrictions, which create a complicated process misaligned with today’s commercial supply chain. A 1996 Logistics Management Institute study stated that such domestic preference mandates are not in the commercial world.

The report also discussed the increase in FAR (and DFARS) Part 12 contract clauses applicable to commercial contracting since FASA. These government-unique regulations cause commercial companies either to expand compliance costs or refuse prime contracts.

Non-traditional commercial contractors have played a significant role in supporting U.S. national security … despite initial successes, commercial acquisition has not become ingrained in the DoD acquisition culture and faces severe pushback on many fronts. …

The report recommended:

  • Combat instances of requirements “gold-plating” … military-unique requirements, standards, and practices. …
  • Re-establish incentives to … use existing authorities to access commercial firms for more than just COTS [commercial off-the-shelf] solutions.
  • Ensure that the DoD rapid acquisition organizations … are maintained and fully utilized as a means to field solutions (especially commercial ones) faster.
  • Identify and implement “best commercial acquisition practices” (by commercial sector and DoD application) … .
  • Encourage the establishment of “non-traditional commercial entities” in private sector firms that are exempt from unique government and DoD rules and oversight.
  • Expand the use of Other Transaction Authority (OTA) agreements … and to access non-traditional commercial subcontractors under a FAR Part 15 contract with a traditional defense prime contractor.
  • Improve market research … to better understand what commercial capabilities are available … .
  • Plan for a path to commerciality for non-traditional contractors when leveraging the commercial market for DoD-unique requirements.
  • Establish a new Section 800 Panel to recommend specific … changes that inhibit the acquisition of commercial items.
  • Periodically benchmark costs of compliance with government and military-unique requirements, laws, regulations, practices, certifications, and standards.

Thus far, DoD has had mixed success in gaining the participation of non-traditional contractors to improve its acquisition outcomes:

  • Increased acquisition funding has not yet created a significant increase in DoD contracting participation by non-traditional contractors, beyond OTA.
  • Statutory encouragement for commercial sources and expanding the commerciality definition to non-traditional contractors has failed to achieve the anticipated success.
  • The TCM initiative is new, so results do not yet exist. Given its limited use of investor financing, a dramatic increase in non-traditional contracting participation is not expected.
  • Increased use of OTA is still small compared to overall DoD contracting obligations, and it remains specialized in nature. Data indicate traditional contractors may realize most financial benefits, nonquantifiable program outcomes, and potentially higher contract risk compared to FAR-based contracts.
  • Cited report recommendations, particularly related to market research, are most meritorious moving forward. As the DoD relies increasingly on commercial products, services, technology and experts, we must learn and engage with industry, particularly non-traditional contractors.
Next Steps

There must be increased proactive DoD engagement and wider communication and understanding of business practices and motivations through improved market research of an expanded view of industry. Current interaction between government and industry is often between the DoD and DoD-unique (traditional) contractors — but not today’s non-traditional, commercial industry. Necessary continuous monitoring of existing and fast-changing industry products and services by defense program and contracting officials is largely limited to government’s traditional contractors. This may leave out those firms developing technology for commercial or non-defense markets. DoD program and contracting officials, from top to bottom, must learn through all available means to continuously and routinely apply strategic and tactically oriented market research practices from industry. Existing commercial contracting authorities and market research tools to meet mission needs must be redisseminated and reemphasized to DoD’s acquisition workforce. We must all learn how to appreciate market research to achieve short-term results, as well as the long-term program acquisition strategies necessary to acquire DoD technological and mission superiority.

Understanding who and where they are and their motivations is crucial to developing requirements and acquisition strategies that will attract participation by non-traditional contractors. Traditional contractors supporting the DoD are far different from those in the commercial sector. Contracting officers today learn about the FAR and contracting principles, policy, and procedures, but little about industry best practices. Only very recently have terms such as “category management” or “supply chain” entered the lexicon of government contracting officers.

It may be simple common sense to realize that, just as most of us in our personal lives generally acquire products and services from firms that did not exist just a few years ago, the DoD acquisition system must expand its sources beyond the same (and ever-decreasing and consolidating) traditional contractors it has come to rely on. This requires a cultural change and reorientation for DoD acquisition professionals. But it also requires giving DoD acquisition professionals the resources, including the time to learn, adjust, and engage with an expanded view of industry in aligning DoD requirements to the best technological war­fighter tools that American industry offers.

The sources of market research relied on today requires reconsideration. For example, the professional associations of government acquisition members are themselves segmented along government and industry sectors, leaving little cross-communication. Attend each of them (as I have done) and you realize that no overlap exists between their members or expertise. The various association communities are oriented along defined niches, for government and its contractors, with other forums designed for commercial firms and their supply chain. Similarly, supply chain managers within industry know very little about and have little interest in how government works. The cultures and eco-systems, from entry-level to chief executive in both industry and government, too often have little understanding of each other’s practices and motivations. To the extent that there is government-industry cross-training or communication, it occurs between government acquisition staff and, typically, prior government staff now working for a traditional contractor. This internal, closed system has limited the view of potential capabilities offered by the wider commercial sector. The DoD must learn how to recruit the many new, commercial firms potentially capable of meeting defense needs.

Statutory and regulatory change may be necessary to optimize the integration of commercial industry, including small business, and open the door to today’s non-traditional contractors. But DoD program and contracting officials must expand their view of national capabilities and proactively engage with industry communities with which they are unfamiliar.

Defense program outcomes will improve, as always, through better market research prior to acquisition planning.  We must increase robust market research to find true commercial, non-traditional providers, and then align government requirements to leverage their developments.  Let’s get started!


The author of this article, which first appeared in the March-April issue of Defense Acquisition magazine, is Michael P. Fischetti, who is a professor of Program Management at the Defense Systems Management College at Defense Acquisition University in Fort Belvoir, Virginia.  The author can be contacted at Michael.Fischetti@dau.edu.

Filed Under: Government Contracting News Tagged With: acquisition, acquisition planning, acquisition workforce, agile, agility, bureaucracy, commercial off-the-shelf, commercial products, commercial purchasing, Cost Accounting Standard, Defense Industrial Base, DFARS, DoD, domestic-origin requirements, FAR, FASA, industrial base, market research, national security, non-traditional contractors, OTA, other transaction authority, R&D, research, research and development, Section 809 Panel, simplified acquisition, small business, source selection, speed of relevance, threats, Trusted Capital Marketplace, Truth in Negotiations Act

April 1, 2020 By cs

Today’s complexities demand more chefs, fewer cooks

If you’re a cook, you had better become a chef!
Do you know the difference?

A cook can follow a recipe and prepare a nice meal, but a chef can take a variety of wide-ranging ingredients, understand how they complement each other, and create a gourmet feast.

Have you ever watched “Chopped” on the Food Network? Each chef contestant is given a basket of eclectic ingredients and a challenging schedule to fix an epicurean dish that their customers, the judges, will fawn over.

Sound familiar? We live in an increasingly complex acquisition world where just following a Department of Defense Instruction (DoDI) 5000.02 recipe will not suffice to provide your customer, the Warfighter, with the “dish” needed for success. For example, if you were to have taken the Defense Acquisition University’s Intermediate Systems Acquisition course 10 years ago, you would have been shown a single, phased-approach model, the Defense Acquisition Management System (shown below in Figure 1).

Five years later, with a recognition that software is developed and procured differently than hardware, DoDI 5000.02’s refresh would have exposed you to six different models, a combination of hardware and software-dominant paths. An appreciation that the break between phases is not a smooth process led to the revamping of the hardware model, as well (Figure 2).

Today, our acquisition world’s complexity has expanded even more, recognizing that different situations require different urgencies, tools, and solutions. This has resulted in the Adaptive Acquisition Framework, whose latest draft includes the 2019 DoDI 5000.02 process as only one of the six potential paths to acquiring the best Warfighter solution (Figure 3).

You need to become a chef! Gone are the days of being able to simply follow the prescribed Milestone A, B, C recipe. But how to make the change? First, you need to understand the circumstances presented to you. What is the “speed of relevance” for your program? How flexible and/or stable are the requirements? Have you established an enduring conversation with your customer to discuss requirements options? Then you will need to apply a thorough understanding of the major ingredients that will spell success or failure for any program. What are they? Let me suggest the following as a start.

Acquisition Pathway

Where does your effort fit into the new Adaptive Acquisition Framework? Are you trying to exploit some new innovative technology and provide the Warfighter with residual operational capabilities? Explore the Middle-Tier Acquisition (MTA) Rapid Prototyping path. Is there some proven technology, perhaps exploiting a commercial use, that you can produce quickly and field within 5 years? If so, then, MTA’s Rapid Fielding path might be right for you. Is software the major acquisition product, perhaps an upgrade to a command and control product? Why not follow the Software Acquisition path? Of course, there is nothing evil about the traditional Major Capability Acquisition path, which can and should be tailored to meet your specific needs. But it is crucial that you understand the requirements and benefits, along with the risks, of taking these different acquisition pathways, and then choose the pathway most appropriate for your program.

Contracting Strategy

Congress recently expanded some tools for finding and getting the right defense industry contractor on-board for our programs. Beyond traditional contracting vehicles based on the Federal Acquisition Regulation, Other Transactions (OTs), and Commercial Solutions Openings (CSOs) have provided some great additional options. Are they right for your program? Does your program meet the Three Ps of OTs — purpose, prototype, and participation? Many of your colleagues have embraced these contract vehicles, as evidenced by a rapid increase in OT use over the past several years. However, beware of statements that imply one contract vehicle is superior to all others. Some dishes need salt, and some need sugar. Just because both flavorings are white granular substances doesn’t mean it is appropriate to use them interchangeably. A good understanding of contract strategy differences can mean the difference between success and failure. If risk is too high and you’ve demanded a fixed price contract, industry proposals will reflect that. In such a case, you can likely gain flexibility and save money using a cost-reimbursable vehicle. You can often save time using an OT, but not always. The experts say that if you’re using OTs for the sole purpose of saving time, don’t! Always remember the reason you choose a particular contracting vehicle is to properly incentivize the contractor to provide your end users with the product they need, when they need it.

Funding Strategy

How will you get the money to run your program? Beyond the traditional Planning, Programming, Budgeting and Execution (PPBE) system that requires 2 years of foresight for acquiring funds, are there other sources of more immediate funding? Are you aware that the DoD has a Rapid Prototyping Fund administered by the Under Secretary of Defense for Research and Engineering? Could that bridge the 2-year gap between a great technological opportunity now and establishing your long-term funding line through PPBE? If you can go faster via additional funds, have you explored getting on your service’s Unfunded Requirements List or pursued Reprogramming Requests? You need a thorough grasp of all of your options to get the required money, in the right appropriations, at the right time. Depending on your total budget, you will have a variety of reporting and accountability requirements. Have you accounted for those in your timelines? Can they be waived, when appropriate? Understanding your program deeply enough to predict the funds needed, in the appropriations category needed, will allow your team to ensure the money is available in time.

System Engineering, Metrics, and Risk/Opportunity Management

What is your path to getting the technical solution to work? Are you prototyping the hard stuff first — i.e., “the quickest path to failure,” as Dr. Bruce Jette, the Army’s Acquisition Executive would say. One of the most important system engineering tasks is to develop and maintain a rigorous risk and opportunity management plan. With today’s need for products to be delivered at the speed of relevance, it is essential that your team thoroughly recognizes the risks facing the proposed solution. How can those risks be mitigated? Will they be assumed, transferred, controlled, or avoided? And don’t forget about opportunities. Are any available that would increase speed or performance? What resources are needed to enable pursuit of those opportunities?

This risk/opportunity management plan is not to be built and put on a shelf, but to serve as a steady guide as the product matures. If your product is software, do you understand the Risk Management Framework and how to best exploit its virtues to improve your software product? Is agile software development the right methodology for getting your software matured and in the users’ hands? If not, why not? A good strategy for developing the technical solution for the warfighter’s requirement is essential to your program’s success.

Integrated Testing

Employing a collaborative effort with the warfighter and tester, have you established a test and evaluation plan to ensure that your product meets that customer’s needs? What type of testing does your product and chosen acquisition path demand? A program manager’s worst nightmare is to contract for a product and successfully execute that product, only for the warfighter or tester to find it inadequate. If you follow a rapid prototyping pathway, you should engage in a test-learn-fix-test approach with multiple user test points in a series of small, targeted events, while maximizing modeling and simulation to increase your speed. A Test and Evaluation Master Plan will be required for the traditional Major Capability Acquisition approach; however, you should tailor it to increase testing’s influence on your development efforts. Like many of the functional offices, these vital activities can appear to program managers as impediments. However, they serve a vital role. Engaging with them early and developing a common understanding of schedule and technical requirements can foster an environment of mutual support toward the common goal of getting war-winning technology faster into the hands of the warfighters. Still, you also need to ensure that it stays in their hands. So, it is crucial that you track sustainment and producibility, starting early in the design process.

Sustainment and Producibility

One of the potential pitfalls of the rapid prototyping path could be the neglect of production and sustainment costs in the effort to ensure that the product reaches residual operational capability within the 5-year window dictated by Congress. Studies have shown that, by the time the Preliminary Design Review is conducted, approximately 80 percent of the program’s life-cycle cost (LCC) is determined, even though only a small percentage of the program’s cumulative costs has been spent. This early design work is the place where the team has the best opportunity to impact LCC. By the time of the Critical Design Review, the LCC commitment is approximately 90 percent (Figure 4).

Production, logistics, and other considerations must be exhaustively understood and prioritized early or your program could easily become unaffordable. Prototyping emphasizes an experimental philosophy in order to get innovative technology to work. Without a strong program manager emphasis, there is little incentive to focus on future LCC drivers — i.e., production, operations, and support. Also, award fee contracts, which allow for profit margins to be influenced subjectively, and to include consideration of items such as affordability and sustainability, are highly discouraged. This may dissuade the government/contractor team from paying much heed to these longer-term factors. Like a chef who has visualized the flavor and presentation of the final dish early in the cooking process, your team must emphasize sustainment and producibility early in the design process to ensure that the final product is technologically superior, producible, and affordably sustainable.

As a former senior manager of manufacturing at one of our industry partners, which produced the interiors of the canceled VH-71 Presidential Helicopter, I can testify how early design decisions can subvert manufacturing’s ability to produce an affordable product.

Yes, a number of other factors must be decided on, managed, and tracked in order to produce a successful product for our warriors. Your team cannot forget to ensure the myriad other elements—such as environment, safety, and occupational health, spectrum certification, airworthiness, unique identifiers, energy policy, etc.—that must all be addressed for the program to succeed. However, the thorough understanding and vetting the above six major ingredients will allow you to master the complexities of today’s acquisition world. With that mastery, you will no longer feel the need to open up the DoDI 5000.02 cookbook to find the recipe for creating a good product. Instead, when you open up the basket of ingredients that the requirements and acquisition community has handed you, you’ll be able to create a gourmet, masterful acquisition strategy.  Bon Appétit!


David Riel is the author of this article, first published in the March-April 2020 issue of Defense Acquisition magazine.  Riel is professor of Acquisition Management at the Defense Acquisition University in Kettering, Ohio. He formerly had a 20-year career with the U.S. Air Force, including work with industry.  The author can be contacted at David.RIel@dau.edu.

Filed Under: Government Contracting News Tagged With: acquisition workforce, adaptive acquisition, Adaptive Acquisition Framework, Defense Acquisition System, DFARS, DoDI 5000.02, FAR, life-cycle costs, middle tier acquisition, other transaction authority, other transactions, rapid prototyping, testing

March 12, 2020 By cs

Pilot IRS to return with new focus areas and significantly more funding

In the next three to six months, the IRS plans to issue new solicitations through its experimental contracting vehicle.

The IRS is considering tripling down on its experimental procurement vehicle Pilot IRS — an incremental funding program the tax agency uses to identify and develop cutting-edge technologies—with the second iteration of the program coming in the next few months, with three new focus areas and more than three times the funding up for grabs.

The first iteration of Pilot IRS sought to update the Federal Procurement Data System-Next Generation, or FPDS-NG, using robotic process automation tools to improve data quality and limit the amount of manual data entry.  As with other alternative procurement methods like other transaction authority contracts, the Pilot IRS program uses a multi-phased funding approach that rewards vendors that meet milestones in a timely fashion.

Three weeks after issuing the solicitation in August, the IRS made five awards for the first phase, totaling $25,000. Since that time, “Two firms continue to receive funding, and have demonstrated return on investment rates of roughly 30-80% reductions in time required to make corrections to and improve the data in FPDS-NG,” according to a program update posted last Wednesday to beta.SAM.gov.

Keep reading this article at: https://www.nextgov.com/emerging-tech/2020/03/pilot-irs-return-new-focus-areas-and-significantly-more-funding/163526/

Filed Under: Government Contracting News Tagged With: beta.SAM.gov, experimental purchasing authority, FPDS, FPDS-NG', IRS, milestones, OTA, other transaction authority, Pilot IRS, security clearance

March 5, 2020 By cs

GAO declines to limit DoD’s ‘experimental purchasing’ authority

In its recent decision in Air Tractor, Inc., the Government Accountability Office (GAO) held that the Department of Defense (DoD) may, at its own discretion, begin a project with agreements under its prototyping Other Transaction (OT) authority, and award later phases of the same project on a sole source basis under its experimental purchasing authority.

In the decision, GAO discussed distinctions between these avenues, and gave a broad reading to the DoD’s authority to award contracts for experimental work.

The past few years have seen a swell of interest in DoD’s ability to sidestep the Federal Acquisition Regulation (FAR) and use more flexible OT authority to enter into contracts.  Thus far, the majority of this interest has centered on DoD’s OT authority to enter into prototype projects, now codified at 10 U.S.C. § 2371b.

One of the most powerful features of DoD’s prototype OT authority is that DoD may award a sole source follow-on production contract for a successful prototype. Congress included some limitations on this authority to award sole source follow-on production contracts at 10 U.S.C. § 2371b(f).   For example, in its decision in Oracle America, Inc., GAO confirmed that DoD must comply with all notice and other specific preconditions at the prototyping stage in order to award a sole source follow-on production contract.

However, prototype OT authority is not DoD’s only authority to award sole source contracts. The Competition in Contracting Act (CICA) itself allows for sole source awards in certain circumstances. In DRS Sustainment Systems, GAO held that DoD need not comply with 10 U.S.C. § 2371b(f) to award a sole source production contract where DoD invokes one of CICA’s exceptions to separately justify the sole source award.  In addition, under 10 U.S.C. § 2373, DoD has authority to make sole source purchases for items it “considers necessary for experimental or test purposes in the development of the best supplies that are needed for the national defense.”

In Air Tractor, GAO held that DoD properly relied on its “experimental purchasing” authority under 10 U.S.C. § 2373 to purchase a set of full production light attack aircraft for use in “experiments” to determine the best use of such planes in combat support.  GAO found that this purchase was acceptable because it met the requirements of § 2373 alone, regardless of the Air Force’s initial use of its § 2371b prototype OT authority to compare various candidate aircraft.  GAO confirmed that while it will exercise jurisdiction to ensure agency compliance with various statutory authorities to award non-procurement contracts, GAO will not impose requirements beyond those stated in the statutes.  In upholding the Air Force’s acquisition strategy, the Air Tractor decision provides valuable insight as to the broad scope of § 2373 “experimental purchasing” authority.

Keep reading this article at: http://www.mondaq.com/unitedstates/Government-Public-Sector/895672/GAO-Declines-To-Limit-DoD39s-Experimental-Purchasing-Authority

Filed Under: Government Contracting News Tagged With: acquisition strategy, Air Force, CICA, competition, DoD, experimental purchasing authority, experimentation, FAR, GAO, OTA, other transaction authorities, other transaction authority, prototype, prototyping, sole source

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