Past and prologue: DOD “Other Transactions” 1989 – 2017 Presentation to IDCC Presented by: Richard L. Dunn Consultant February 1, 2017

“It’s a revolution. Somebody’s bound to be offended.” John Adams 1776, 1918, and today? “Freedom is very precious…so precious it must be rationed.” Vladimir I. Lenin “It’s a revolution. Somebody’s bound to be offended.” John Adams

Contents Why Other Transactions (OTs)? (or, why not business as usual?) Where did DOD OTs come from? What are OTs? Where might OTs be going? Progress and needed actions. Questions and other subjects welcome.

Why OTs instead of business as usual? What's wrong with business as usual? Defense systems cost too much and take too long. The “defense ghetto” caused by the current contracting process isolates the defense industry from the vast majority of U.S. high tech companies. DOD’s own studies show it pays nearly a 20% premium for DOD specific rules that have no commercial counter-part and have never been tested for any added value. Many estimates of the cost-premium are higher. One size does not typically fit all.

Where DOD OTs came from. Early Federal contracting – no laws, inherent authority. Non-traditional approaches – grants, research joint ventures, etc. National Aeronautics and Space Act (1958). DARPA science and technology OTs (1989). DOD-wide and prototype OTs (1994). Amendments over the years.

What are OTs? The typical negative definition – OTs are not standard procurement contracts, grants or cooperative agreements. They are not CRADAs. Depending on the specific OT authority they may be used as (1) acquisition instruments, (2) assistance instruments, or (3) something entirely different. Standard procurement and assistance rules do not apply nor do standard IP provisions. OTs may be fully funded, partially funded (cost shared/jointly funded), or unfunded. Funds may flow in either direction. OTs are contracts entered into under what is essentially a “freedom of contract” regime.

Most of DOD ignores key policies FAR 35.002 -- General. The primary purpose of contracted R&D programs is to advance scientific and technical knowledge and apply that knowledge to the extent necessary to achieve agency and national goals. Unlike contracts for supplies and services, most R&D contracts are directed toward objectives for which the work or methods cannot be precisely described in advance. FAR 35.003 -- Policy. (a) Use of contracts. Contracts shall be used only when the principal purpose is the acquisition of supplies or services for the direct benefit or use of the Federal Government. Grants or cooperative agreements should be used when the principal purpose of the transaction is to stimulate or support research and development for another public purpose. 10 U.S. Code 2371 (a)Additional Forms of Transactions Authorized.— The Secretary of Defense and the Secretary of each military department may enter into transactions (other than contracts, cooperative agreements, and grants) under the authority of this subsection in carrying out basic, applied, and advanced research projects. The authority under this subsection is in addition to authority provided in section 2358 of this title to use contracts, cooperative agreements, and grants in carrying out such projects.  

Where might OTs be going? Niche authority or general alternative to business as usual? Will the FAR mentality restrict OTs from ever reaching their full potential? Will DOD’s negative leadership on OTs continue? The real test – (1) adopting a dual-use S&T strategy and (2) viewing OTs as a full up alternative to FAR contracting for systems acquisition.

Early progress in DOD 1990 to 2000 - Gazelle Agreement - Technology Reinvestment Project - Prototype Projects - COSSI and others Set Backs 2000 to 2010 2000 amendment (cost sharing) 2005 McCain FCS hearing 2008 S. Assad

Research on OT’s Early research: IDA study (1995) & GAO report (1996) RAND studies Kuyath & Vacketta (1998) IDA research on Future Combat System (FCS) program LMI (2007) report – extensive interview and survey data Academic Research – Naval Postgraduate School and others GAO report on IP “Injecting New Ideas and New Approaches” (2009) Congressional Research Service studies

Recent Partial Recovery and Current Stumbling Blocks to full potential OT funding obligations have been on the increase in the past few years ACC-New Jersey thinks it is an OT center of excellence Recent OSD conference on OT’s (November 2016) DIUx and Commercial Solutions Opportunity DPAP OT for prototype Guide (2017) State of training and experience

Action Needed Legislative changes to both 10 U.S.C. 2371 and 2371b – eliminate “regulation” and substitute “training” for 2371; eliminate cost sharing and dollar thresholds for 2371b Administrative – revitalize OT training Administrative - remove DPAP from OT policy position Administrative – create innovative contracting policy office (2371, 2371b, 2373, & 2374a) Administrative – rescind OT-P Guide and re-write Administrative- other