Defense Department leaders and agencies have been granted much-needed flexibility to respond to the coronavirus pandemic. Last week, Under Secretary of Defense for Acquisition & Sustainment Ellen Lord delegated approval authority for Other Transaction Agreements (“OTs”) related to the coronavirus response, consistent with Section 13006 of the CARES Act.
In an April 5 memorandum, Under Secretary Lord designated approval authorities for OT prototype projects and follow-on production contracts and agreements as follows:
- Above $100 million, and up to $500 million, to the Directors of Defense Agencies/Field Activities with contracting authority, as well as the Director of the Defense Innovation Unit. This authority was otherwise vested in the Senior Procurement Executives (“SPE”) of the Military Departments, the Director of the Defense Advanced Research Projects Agency (“DARPA”), and the Director of the Missile Defense Agency (“MDA”).
- Above $500 million, to the SPEs of the Military Departments, and the Directors of DARPA and the MDA. This authority was otherwise restricted to the Under Secretaries for Acquisition & Sustainment and Research & Engineering. Approval authority for OT prototype actions between $100 million and $500 million may now be further delegated by the SPE or Director.
In addition, in lieu of providing 30 days’ advance notice to congressional defense committees of OTs above $500 million that are related to COVID-19, Section 13006 permits Under Secretary Lord or the Under Secretary of Defense for Research & Engineering to provide notice as soon as practicable after the OT’s commencement. The April 5 memorandum, however, delegates this authority to the SPE of the Military Departments, the Director of DARPA, or the Director of MDA approving any such OT.
The delegations and the removal of “prior notice” requirements are designed to strengthen the defense industrial base amid the uncertainties and challenges caused by the pandemic, while maintaining meaningful oversight and guidance over these tools. OTs are expedited, flexible vehicles for research and development, prototyping, and rapid production projects. Because they are not subject to the Federal Acquisition Regulation, they tend to foster engagement with nontraditional defense contractors and small businesses. Over the past five years, Congress has been encouraging the Department of Defense (“DoD”) to make use of such alternative acquisition pathways to increase opportunities for innovation and expand the defense industrial base by lowering the barriers to entry to contract with DoD. In December, Under Secretary Lord described OTs as a method to “allow innovation to bypass bureaucracy, reducing timelines and lowering costs to provide the best capabilities to our men and women in uniform.” Although the delegations are only effective until the COVID-19 national emergency declaration is rescinded, they are expected to fast-track approvals for prototype projects related to the virus and to encourage companies to come forward with innovative solutions when they are urgently needed.