As a part of its continuing observation and analysis of Federal acquisition industry trends, Washington Business Dynamics, LLC (WBD) maintains a close eye on how OTAs are utilized by members of the acquisition community as well as how they are evolving in response to new challenges. The concept of an OTA was introduced in 1958 when Congress established the National Aeronautics and Space Administration (NASA) in response to the Soviet Union’s launching of the Sputnik satellite. The National Aeronautics and Space Act of 1958 granted NASA with broad authority to “enter into and perform such contracts, leases, cooperative agreements, or other transactions as may be necessary.” Since the end of the Cold War and the Space Race, OTAs have evolved to enable Federal Departments, such as the Department of Defense (DoD), to take advantage of opportunities to innovate, conduct research, and develop prototypes.
In our previous “Other Transaction Authority (OTA) and Its Impact on Industry and Competitive Bidding” publication, we explained how DoD uses OTAs to accelerate the acquisition process in order to compete against foreign actors and nations. These actors may acquire innovative solutions faster due to the lack of robust rules, such as the Federal Acquisition Regulation (FAR), which protect the integrity of the competitive bidding process. Despite its unconventional nature, OTAs still undergo an approval process to conform to legal requirements. The flexibility and relative speed of awarding an OTA allows DoD to quickly adapt, prototype, research, produce, and incorporate business practice that reflect commercial best practices. An awardee of a properly executed OTA is either a non-traditional defense contractor or small business or a traditional defense contractor that adheres to one of several criteria, such as at least one non-traditional defense contractor participates to a “significant” extent.
What Are OTA Consortia?
Available OTA data has seen a significant growth in the use of OTAs when it comes to research and development (R&D) spending. From Fiscal Year (FY) 2015 to FY 2019, OTA R&D spending has risen from $1 billion to $7.8 billion. While some in the acquisition community may assume this spending has gone directly to individual companies, this is in fact not the case. Mirroring this increase in OTA R&D spending is an equally interesting increase in OTA R&D spending through consortia. According to Bloomberg Government, more than two dozen consortia have been identified, which collectively account for 60% of total OTA obligations. This begs to ask the question: what is a consortia?
Consortia are groups of similar companies and organizations that are interested in working with a Government within a specific subject area. These consortia collaborate together and work with the Government to address a wide range of issues that may impact the national security and welfare of the United States. Examples of consortia that the Government is using today include the Aviation and Missile Technology Consortium, Medical Technology Enterprise Consortium, and the System of Systems Consortium.
How Do OTA Consortia Function?
A consortium often consists of many members, and coordination among the various companies and organizations is essential. A consortium is often times led by a management organization that handles administrative matters and disseminates information from the Government to consortium members. Once established, a consortium may receive requests from the Government for white papers to address a specific subject matter. Based on the white papers produced by consortium members, the Government may select and deliver funding to one or more consortium members to execute upon their white paper.
Based on data available from Bloomberg Government, the top three consortia receiving contracts through OTAs from FY 2015 to FY 2020 (year-to-date) are the DoD Ordnance Technology Consortium, C5 Consortium, and National Spectrum Consortium.
- The DoD Ordnance Technology Consortium integrates the DoD ordnance community to work collaboratively in R&D of prototype solutions to advance and transition ordnance systems, subsystems and component technologies. It remains, by far, the largest consortium receiving OTA contracts with obligations exceeding $5 billion.
- The C5 Consortium addresses the Army’s Command, Control, Communications, Computers, Intelligence, Surveillance, and Reconnaissance (C4ISR) and cyber-technology requirements. OTA project awards have totaled $953 million.
- The National Spectrum Consortium seeks to enable and implement 5G, 5G-based technologies, and spectrum access and sharing. OTA project awards have totaled $619 million.
The Benefit of OTA Consortia
As discussed earlier, a consortia bands together like-minded companies and organizations that collaborate around common issues and subject matter impacting the Government. This naturally leads to collaboration among consortium members leads to a sharing of knowledge among those companies and organizations that are not as familiar with nascent technologies and nontraditional Government contractors. A consortium is a beneficial way to introduce new players into subject areas that may be dominated by a very few. In addition, consortia are another way in which whole industries can be reinvigorated. In the late 1980s, the United States’ market share of the semiconductor market had dropped significantly, and it was on the verge collapse. As a result of collaboration among semiconductor manufacturers via a consortium, the semiconductor market was revitalize through the collaboration of 1,000 companies, 470 universities, and 140 state and local Government representatives.
The Pitfall of OTA Consortia
Unlike traditional contracting actions where the Government has more control as to which companies or organizations will receive funding, there is less control as to which companies will receive funding and awards for OTA requirements. This lack of transparency one of the goals of OTAs, which is to introduce nontraditional contractors into Government contracting. The barrier to entry into consortia are often low, so it is common to see consortia members consisting of many traditional contractors alongside nontraditional contractors. With less control and oversight into how Government funds are flowing, OTA consortia may in fact provide additional means for traditional contractors to benefit.
Sharing the Burden and Maintaining Transparency
Consortia can be an effective means for Government Agencies to address complex subject matter that may not be accomplished through traditional contracting methods or an OTA award to a single company or organization. Consortia give the opportunity for nontraditional contractors to collaborate with traditional ones in order to introduce innovation that may not be as effective or successful through traditional. It is just as important, however, for Government agencies to recognize the importance of transparency when utilizing OTA consortia. While some consortia may publish OTA award information, such as the three identified above, others may not do so. Based on a review of 10 consortia that disclose award recipients, Bloomberg Government reports that these most likely only 40% of consortia awards. It is important to reap the benefits available from OTA consortia, but at the same time, the Government not use it as a means to avoid traditional contract awards and always ensure the integrity of competitive bidding process.
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