On January 9, 2018, Department of Defense (“DoD”) issued Class Deviation 2018-O0009, designed to reduce barriers to entry for innovative entities through streamlining the awards process for research and development contracts. This Class Deviation allows for the use of simplified acquisition procedures and excuses certain procurement obligations when DoD awards contracts and subcontracts valued at less than $7.5 million to “nontraditional defense contractors”[1] or small businesses. The Class Deviation implements Section 873 of the National Defense Authorization Act (“NDAA”) for FY 2016, Pub. L. 114-92, as amended by Section 896 of the NDAA for FY 2017 (Pub. L. 114-328).

The Class Deviation, titled “Pilot Program for Streamlining Awards for Innovative Technology,” expands exceptions to certified cost or pricing data requirements under FAR 15.403-1(b) to include contracts or subcontracts valued at less than $7.5 million awarded to small businesses or nontraditional defense contractors.[2] The exceptions apply to awards pursuant to (1) a broad agency announcement for the acquisition of basic or applied research (see FAR 35.016(b)(2)); (2) the Small Business Innovation Research (“SBIR”) Program; and (3) the Small Business Technology Transfer (“SBTT”) Program. Nontraditional defense contractors and small businesses awarded contracts or subcontracts valued at less than $7.5 million pursuant to a broad agency announcement under FAR 35.106 or the SBIR Program are also exempted from requirements for audits and records examination under FAR 52.215-2. The exceptions expire on October 1, 2020.

The Pilot Program, housed within DoD’s Defense Pricing/Defense Procurement and Acquisition Policy (“DP/DPAP”), will soon be caught up in a restructuring at DoD. DP/DPAP is within the Office of the Under Secretary of Defense for Acquisition, Technology, and Logistics (“USD(AT&L)”), which faces imminent reorganization mandated by section 910 of the 2017 National Defense Authorization Act.

The Streamlining Awards for Innovative Technology Pilot Program is another attempt by DoD and Congress to attract private-sector innovation to bring the latest technologies to the warfighter. The Department has also experimented with the Defense Innovation Unit Experimental (“DIUx”), created under the Obama Administration to reduce barriers to entry by awarding contracts on an accelerated timeline. The Section 809 Panel is also examining barriers to entry, particularly for nontraditional contractors with new technologies of interest to DoD.  The Pilot Program is intended to work alongside the DIUx initiative to provide forward momentum for DoD in opening the door for nontraditional contractors through streamlined procurement procedures. This Class Deviation could be a small step in opening that door but time will tell whether there are enough cutting-edge high tech companies who can and will take advantage.

Editor’s Note: Covington is Outside General Counsel to the 809 Panel.

[1] A nontraditional 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 prescribed pursuant to 41 U.S.C. 1502 and the regulations implementing such section, for at least a one-year period preceding the solicitation of sources by DoD for the procurement.”

[2] Unless an exemption exists, certified cost or pricing data currently is required for contract actions in excess of $750,000. See FAR 15.403-4(a)(1).

Tags: Department of Defense, Federal Acquisition Regulation, National Defense Authorization Act
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Photo of Sandy Hoe Sandy Hoe

Sandy Hoe has practiced government contracts law for more than 45 years.  His expertise includes issues of contract formation, negotiation of subcontracts, bid protests, the structuring of complex private financing of government contracts, preparation of complex claims, and the resolution of post-award contract…

Sandy Hoe has practiced government contracts law for more than 45 years.  His expertise includes issues of contract formation, negotiation of subcontracts, bid protests, the structuring of complex private financing of government contracts, preparation of complex claims, and the resolution of post-award contract disputes through litigation or alternative dispute resolution.  His clients include major companies in the defense, telecommunications, information technology, financial, construction, and health care industries.

For several years, Sandy also practiced telecommunications regulatory law, appearing before numerous state public utility commissions in hearings to open the local exchange markets for new entrants under the Telecommunications Act of 1996.

For many years, he has been active in the Public Contract Law Section of the American Bar Association, where he was an author of the section’s original publication of “Subcontract Terms and Conditions.”  From 1999 to 2011, Sandy co-chaired the Section’s committee on Privatization, Outsourcing and Financing Transactions and from 2005 to 2008 served on the Section Council.  Prior to his service in the ABA, for six years he was on the Steering Committee of the Section on Government Contracts and Litigation of the District of Columbia Bar, including three years as co-chair.

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Photo of Raymond Biagini Raymond Biagini

A distinguished counselor and litigator, Raymond Biagini has risen to national prominence in a number of high-profile tort cases, defending commercial and government contractors in:

“Contractor on the Battlefield” tort litigation;
the Exxon Valdez litigation;
the Cell Phone Radiation Hazards lawsuits;
the “Fen-Phen”…

A distinguished counselor and litigator, Raymond Biagini has risen to national prominence in a number of high-profile tort cases, defending commercial and government contractors in:

“Contractor on the Battlefield” tort litigation;
the Exxon Valdez litigation;
the Cell Phone Radiation Hazards lawsuits;
the “Fen-Phen” litigation;
the nationwide Repetitive Stress Injury suits;
claims arising out of “friendly fire” accidents during Operation Desert Storm; and
“war crimes” allegations filed against manufacturers of military weapons systems sold to Israel.

Ray is widely recognized for his expertise in defending “contractors on the battlefield” in tort litigation, and he has established ground-breaking legal principles at the federal appellate level which immunize defense contractors from tort liability arising out of combatant scenarios.

Ray also has an extensive product liability prevention practice, counseling companies on mechanisms for reducing their tort exposure for products and services sold to government and commercial entities. He is significantly involved in counseling companies selling “homeland security” products and services, such as chemical/biological detection devices, perimeter security systems, biometric identity products, and airport security systems. Ray conceptualized and authored key provisions of the SAFETY Act, a new federal statute that is part of the Homeland Security Act of 2002. The SAFETY Act protects companies from tort lawsuits arising out of the sale of homeland security products and services. 

Ray has represented some of the world’s largest aerospace, defense and pharmaceutical companies, including Kellogg Brown & Root, Lockheed Martin, BAE SYSTEMS, Boeing, Textron, SAIC, Teledyne, Eon Labs, Unisys, and Philips Electronics. He is a frequent public speaker on risk mitigation techniques.

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