The Department of Defense (DoD) has once again emphasized its willingness to engage with commercial companies and other non-traditional contractors to try to expedite and simplify its procurement of innovative technologies. In particular, the Defense Information Systems Agency (DISA) indicated that it plans to enter directly into Other Transaction Authority (OTA) agreements, and DoD issued a class deviation for a commercial solutions opening (CSO) pilot program.

These developments, in connection with the continued promotion of OTA agreements by DoD’s Defense Innovation Unit Experimental organization (DIUx), provide commercial companies with additional incentives to enter into creative collaborations with the U.S. Government.

DISA OTAs

On June 29, DISA issued a News Release on its website to highlight the agency’s commitment to using its recently granted Other Transaction Authority to drive innovation and solutions to the warfighter. DISA recognized that the traditional procurement rules encompassed by the Federal Acquisition Regulation (FAR) and Defense Federal Acquisition Regulation Supplement (DFARS) can discourage potential partners and thus slow or prevent access to goods and services that would benefit our nation’s defense. As a potential solution for concerns associated with traditional procurement contracts, DISA explained that OTA agreements can provide more flexibility, which in turn permits the agency to “approach acquisitions in a commercial-like manner with some restrictions.”

As noted in an earlier post, there are many benefits for contractors that proceed with an OTA agreement in lieu of a traditional procurement contract. In addition to generally providing the benefit of a more rapid acquisition process, a significant advantage of an OTA agreement is that the FAR, DFARS, and many of their accompanying compliance obligations do not apply. For example, although DoD may want to include cost requirements in an OTA agreement, neither the cost principles in FAR Part 31 nor the Truth in Negotiations Act are applicable by law. DoD also retains flexibility to negotiate intellectual property rights that may deviate from default rights established under the Bayh-Dole Act, Part 27 of the FAR, and Part 227 of the DFARS.

The lack of set rules, however, may prove challenging for established contractors that have structured internal business systems based on FAR-based contract requirements and may not know where to begin in negotiating an OTA agreement. At the same time, entities that are not familiar with the FAR may have difficulty negotiating with DoD contracting officers who may try to impose the same forms and clauses that would otherwise apply under traditional procurement contracts. Small entities in particular may not have the resources to fully assess the consequences of agreeing, for example, that all costs incurred under an OTA agreement comply with FAR Part 31. Accordingly, both private and government negotiators need to understand that an OTA agreement is meant to be “commercial like” and can and should be drafted to meet the parties’ needs with or without reference to traditional contracting frameworks.

Although DISA has to date relied on other agencies to support its OTA agreements, it plans to enter into OTA agreements directly in the future using a CSO process that is similar to a process initially developed by DIUx. Only time will tell whether DISA will be able to retain sufficient flexibility in negotiations to maximize the benefits of OTA agreements while also addressing their challenges.

CSO Pilot Program

On June 26, three days before the DISA News Release, DoD issued a class deviation for a pilot program that allows contracting officers to use a simplified CSO process for standard procurement contracts to acquire “innovative commercial items, technologies or services.” The deviation permits DOD components to award traditional procurement contracts through a peer-reviewed process that will be deemed competitive without head-to-head competition between proposals. The pilot program implements Section 879 of the National Defense Authorization Act for Fiscal Year 2017, which represents another congressional push for DoD to use non-traditional processes to pursue cutting-edge technologies.

Much like the CSO process initially applied by DIUx and adopted by DISA for OTA agreements, the pilot program allows DoD contracting officers to select proposals received in response to a general solicitation that is similar to a broad agency announcement without being limited to basic or applied research projects. Instead, eligible projects only need to be “innovative,” covering completely new technologies, processes, or methods—including research and development—in addition to new applications of technologies, processes, or methods that are already in existence.

Specific limitations and requirements that traditionally apply to prototype projects and circumstances involving limited competition will not apply to the pilot program’s CSO process. However, awards valued at more than $100 million will be subject to prior approval and congressional reporting requirements. In addition, unlike OTA agreements, awards will need to be issued under the pilot program on a fixed-price basis.

Contracting officers will be required to post a notice of availability of a pilot program CSO at least annually and, in limited situations, may advertise a CSO in scientific, technical, or engineering periodicals. Proposals submitted in response to a CSO will not be evaluated against each other because they will not be submitted in response to a common performance work statement or statement of work. Thus, like awards resulting from the CSO process used by DIUx and DISA, as well as broad agency announcements generally, there can be more than one awardee working on similar projects.

Following DISA’s approach, contracting officers implementing the pilot program may ultimately reference CSO evaluation procedures that have already been established and tested by DIUx. Importantly, the pilot program’s concept of “innovative” development is based on criteria initially established by DIUx, and contracts awarded under the pilot program likely will support many of the same goals as OTA agreements.

The authority to enter into a contract under the pilot program is scheduled to expire on September 30, 2022, although existing pilot contracts in effect at that time will be permitted to continue performance until completed.

 

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Photo of Susan B. Cassidy Susan B. Cassidy

Ms. Cassidy represents clients in the defense, intelligence, and information technologies sectors.  She works with clients to navigate the complex rules and regulations that govern federal procurement and her practice includes both counseling and litigation components.  Ms. Cassidy conducts internal investigations for government…

Ms. Cassidy represents clients in the defense, intelligence, and information technologies sectors.  She works with clients to navigate the complex rules and regulations that govern federal procurement and her practice includes both counseling and litigation components.  Ms. Cassidy conducts internal investigations for government contractors and represents her clients before the Defense Contract Audit Agency (DCAA), Inspectors General (IG), and the Department of Justice with regard to those investigations.  From 2008 to 2012, Ms. Cassidy served as in-house counsel at Northrop Grumman Corporation, one of the world’s largest defense contractors, supporting both defense and intelligence programs. Previously, Ms. Cassidy held an in-house position with Motorola Inc., leading a team of lawyers supporting sales of commercial communications products and services to US government defense and civilian agencies. Prior to going in-house, Ms. Cassidy was a litigation and government contracts partner in an international law firm headquartered in Washington, DC.

Photo of Jennifer Plitsch Jennifer Plitsch

Jennifer Plitsch leads the firm’s Government Contracts Practice Group, where she works with clients on a broad range of issues arising from both defense and civilian contracts including contract proposal, performance, and compliance questions as well as litigation, transactional, and legislative issues.

She…

Jennifer Plitsch leads the firm’s Government Contracts Practice Group, where she works with clients on a broad range of issues arising from both defense and civilian contracts including contract proposal, performance, and compliance questions as well as litigation, transactional, and legislative issues.

She has particular expertise in advising clients on intellectual property and data rights issues under the Federal Acquisition Regulations (FAR) and obligations imposed by the Bayh-Dole Act, including march-in and substantial domestic manufacturing. Jen also has significant experience in negotiation and compliance under non-traditional government agreements including Other Transaction Authority agreements (OTAs), Cooperative Research and Development Agreements (CRADAs), Cooperative Agreements, Grants, and Small Business Innovation Research agreements.

For over 20 years, Jen’s practice has focused on advising clients in the pharmaceutical, biologics and medical device industry on all aspects of both commercial and non-commercial agreements with various government agencies including:

  • the Department of Veterans Affairs (VA);
  • the Department of Health and Human Services (HHS), including the Biomedical Advanced Research and Development Authority (BARDA), the National Institutes of Health (NIH), and the Centers for Disease Control (CDC);
  • the Department of Defense (DoD), including the Defense Threat Reduction Agency (DTRA), the Defense Advanced Research Projects Agency (DARPA), and the Joint Program Executive Office for Chemical Biological Defense (JPEO-CBRN); and
    the U.S. Agency for International Development (USAID).

She regularly advises on the development, production, and supply to the government of vaccines and other medical countermeasures addressing threats such as COVID-19, Ebola, Zika, MERS-CoV, Smallpox, seasonal and pandemic influenza, tropical diseases, botulinum toxin, nerve agents, and radiation events. In addition, for commercial drugs, biologics, and medical devices, Jen advises on Federal Supply Schedule contracts, including the complex pricing requirements imposed on products under the Veterans Health Care Act, as well as on the obligations imposed by participation in the 340B Drug Pricing program.

Jen also has significant experience in domestic sourcing compliance under the Buy American Act (BAA) and the Trade Agreements Act (TAA), including regulatory analysis and comments, certifications, investigations, and disclosures (including under the Acetris decision and Biden Administration Executive Orders). She also advises on prevailing wage requirements, including those imposed through the Davis-Bacon Act and the Service Contract Labor Standards.