Oct 25, 2018

By William Weisberg,

Every year, the swallows return to Capistrano, the leaves change (at least here in Northern Virginia), and something comes along to revolutionize federal procurement.  LPTA procurements.  Data rights clauses.  FAR part 13. Fixed-price development contracts (if you are old enough to remember those pre-FAR days).  And now…” Other Transaction Authority” (“OTA”).  Avoid all of those pesky statutes and regulations and move FAST!  Sounds good? Sure.  What does it mean?  Read on.

Here is the good news: Congress gave OTA authority to several designated federal agencies (DOD, DOT, HHS, DOE, and DHS).  The lucky program offices (or whatever each agency is calling them) have authority to enter into agreements that are not subject to normal procurement regulations. Goodbye FAR, so long CICA.  (Whether they have actual funding is another issue entirely.)

Even better (or not, depending on your perspective), DOD OTAs are designed for non-traditional defense contractors: basically, contractors not covered by the Cost Accounting Standards within the last year.  Even traditional defense contractors can get in on the action if they team with non-traditional contractors performing a “significant” share of the work.  The rules differ for other agencies, but you get the idea.

Now, the bad news (again, depending on your perspective): OTAs are designed for R&D and for “rapid prototyping” of new technology.  They are not designed to replace standard supply or services contracts.  How do we know?  Because GAO, in a bid protest filed by Oracle, told us so.  Oracle America, Inc., B-416061 (May 31, 2018).  In Oracle, GAO laid down some important markers.  First, GAO has jurisdiction over the issue of whether an OTA or a traditional contract is the appropriate vehicle for a procurement.  Second, while OTAs are good vehicles for R&D and similar programs, they are not appropriate for purchasing already developed items, and particularly commercial items already in production.  Third, if the OTA is drafted properly and includes follow-on production of an item developed or prototyped in the OTA, then the OTA can support what is, in effect, a sole source contract.  And what contractor doesn’t love a sole source contract?

So, what should an interested contractor (or other entity) do?  Here are a few suggestions:

  • Keep an eye on FedBizOpps.gov…potential OTAs are listed, although the OTA language is often buried in the RFI or other early notice boilerplate. And just because something is listed as a potential OTA doesn’t mean that your commercial item is not appropriate for the procurement.  (Which would likely revert to a standard contract.)
  • Figure out early if your organization is eligible for an OTA “as is,” or whether you need to either prepare to team with another firm, or create a special purpose entity (carefully, with assistance of counsel and accounting professionals), or look in the nooks and crannies of the OTA-enabled agencies, which often described specific parameters for eligibility.

And the major takeaway: May you pro-actively sell R&D or prototyping to an OTA-enabled agency?  Sure you may.  But can you sell it?  That is the topic for another post.

 

About the Author:

William Weisberg, Esq
Of Counsel

William Weisberg is a government contracts attorney with 30 years of experience. Bill received his undergraduate degree from the University of Virginia (where he was an Echols Scholar) in 1983 and his law degree from the George Washington University in 1986. Bill practiced with large international law firms for over 25 years, the last 10 of which he led his firms’ Government Contract and Grant practice groups. Bill formed his own boutique government contract firm in 2013.

 

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