A Problem with Other Transactions

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There is a problem with Other Transactions as implemented by DOD. The problem is that DOD leadership, beginning with the Secretary of Defense, does not understand the potential and power of Other Transactions (OTs), an obvious lack of vision.  Key acquisition leaders, Ellen Lord, James Geurts, Bruce Jette and William Roper seem to think that OTs are a niche authority, just another tool in the toolkit.  This view not only limits the potential of OTs but leads to organizational and educational failures.

Throughout DOD OTs are considered merely another type of contracting instrument – FAR light. OTs are very different as they allow for commercial-like flexibility to best accomplish research, development and delivering new capability. They allow for business arrangements that simply cannot be realized by using the highly regulated purchasing system (FAR).  OTs, unlike the FAR, have been created as an alternative specifically to advance the state-of-the-art and delivering new capability more efficiently.  Therefore, OTs should be project-centric not contracting office-centric, and the key person on an OT team should be a program manager, not a contracting officer.  The official with a mission and money (budget) to accomplish a goal should be central to developing the vision for a project.  Failure to understand this leads to a cascade of functional misalignment, inadequate education, and misinformation about the purpose and potential uses of OTs.

OTs begin with a question “what is the problem we need to solve” not a preordained requirement.  Acquisition per the FAR does not begin until agency needs are known and requirements defined (FAR 2.101). Requirements are frequently loaded with irrelevant or nice to have but not essential features.  It is common to develop requirements without key inputs from technologists and representatives of industry (not just the defense industry) and even obscure the problem that needs to be solved.  If an OT is the contracting mechanism chosen to execute a requirement the first step should be understanding the problem and testing the various elements of the requirement against that problem and its potential solutions.

Asking what problem is to be solved and arriving at an informed decision leads to formulation of a goal as the problem’s solution.  That then requires development of strategy to reach the goal.  The strategy once formulated can be transformed into a vision of the scope of the project (aka vision statement).  The vision should incorporate a win/win scenario between the government and various participants (“participants” plural since OTs are not restricted to being two-party agreements).

DOD has not implemented OTs this way. Instead DOD has relegated the execution and education to organizations that are experts in a highly regulated purchasing system (FAR) with preordained contract structures and serious limitations on terms and conditions to be included in agreements.  This reminds me of the saying, “you can’t solve a problem with the same thinking that created it.”  Little attempt is made to overcome organizational stove pipes to improve collaboration and teaming, failing to capitalize on the Millennial generation’s propensity for collaboration.  OTs are seldom executed by true “teams” of intelligent, motivated personnel freed from representing an organizational “party-line.”  Instead the contracting bureaucracy is overlaid onto OTs.  Many business as usual bureaucrats have little idea of how OTs have been used and could be used.  To them any variation from the status-quo seems risky.

Articles on this website point out some of the ways OTs have been used. Both an article and a video highlight the Commercial Operations and Support Savings Initiative (COSSI).  An R&D investment of $100 million over two years resulted in documented savings of O&M and procurement funds of $3 billion over ten years. It seems criminal that this program is not being replicated.  Various articles mention the Technology Reinvestment Project (TRP) that involved creation of true multi-party consortia. Joint funding agreements as well as unfunded agreements have been created.  Today faux-consortia (knock offs of multi-award task order contracts) are considered innovative uses of OTs.  Major programs have been conducted as OTs. An Arsenal Ship lessons learned report is available on-line.  If DOD’s acquisition leaders were aware of the potential of OTs as demonstrated in the past they would be providing leadership to reform OT organization and use. It is hard to believe they do not care which leaves the likelihood that they do not know.  Senior leaders are busy people so that suggests they are not getting the staff support they need.

DOD leaders have ignored Congressional direction to create a “preference” for using OTs (sec. 867, NDAA 2018).  Nor have they implemented the mandate for education and training (10 U.S.C. 2371 (g)).  The education mandate places “management” and “technical” personnel before “contracting” as it should. Education needs to start with commanders of systems commands, program executive officers and heads of R&D organizations. Program managers need to know they play a key role in developing the vision for a project to be executed with the flexibility of an OT.

In sum, DOD is characterized by ignorance and apathy when it comes to the potential of Other Transactions.  The acquisition staff that leaders rely upon for advice are lacking in experience and unwilling or unable to recommend or support decisions that need to be made.  DOD will fail to field needed new capabilities as quickly, effectively, and affordably as it might until it understands and exploits the potential of OTs.  That is a real problem.