Other Transactions: The Agreements Officer Conundrum

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Other Transactions, for the Department of Defense (DOD), 10 U.S.C. 2371, 2371b and Procurement for Experimental Purposes (10 U.S.C. 2373) have no statutory requirement for the involvement of an “agreements officer.” They certainly do not require an agreement to be signed by an agreements officer who is a warranted contracting officer under the Federal Acquisition Regulation (FAR). Many warranted contracting officers who act as OT agreements officers bring with them the undesired baggage of previous practice and learning that is inapplicable to OTs. There is a strong tendency to inject unnecessary FAR contract clauses and FAR-thinking into an OT environment.

The Original Pattern

DOD’s original other transactions authority (sec. 251, Public Law 101-189) was vested in the Director, Defense Advanced Research Projects Agency (DARPA). DARPA’s interim other transactions (OT) guidance, issued in March 1990, contained no mention of an “agreements officer”. Technical oversight of a project was provided by a “scientific or technical officer”. “Agreement administration” was to be provided by the director of the DARPA Contracts Management Office (CMO). The first OT agreement was signed in April 1990 by the director of DARPA. Subsequently in testimony before a Senate committee the Deputy Secretary of Defense, Donald J. Atwood, said DOD concurred with the agreement.

Several early agreements were signed by the DARPA director. After experience had been gained, signature authority was delegated to the DARPA deputy director for management. In all early agreements the key government official interacting with industry was the DARPA program manager designated scientific or technical officer. Negotiation support was provided by DARPA legal counsel. The director and deputy director of DARPA’s CMO both had broad contracting experience outside, as well as within the FAR system. Gradually the role of CMO was expanded.  Some DARPA contracting officers were eager to operate in the new environment and understood OT contracting was fundamentally different compared to operating under a highly regulated purchasing system. Within a few years about half of CMO contracting officers were delegated OT agreements officer signatory authority and had the time of their careers. Others, however, proved incapable of operating effectively in the OT environment. Through these changes the program manager remained central. Once it became common to designate CMO agreements officers, the program manager was designated agreements officer’s representative (AOR).

The program manager, as the AOR, continued to play the central role in crafting the vision of the project typically memorialized as Article I, Scope of the Agreement. The AOR took the lead in negotiating the Task Description Document and in defining payable milestones, which were used both as a financing mechanism and management tool. The AOR also represented the government in making changes to the agreement and approving milestone payments once the project was underway. Most projects were executed through a team approach with other team members including legal counsel, financial management, and contracted support in addition to the AO and AOR.

The director of procurement policy in the Office of Secretary of Defense pushed for FAR concepts to be embedded in OTs. DARPA found input from DPAP to add no value to its agreements or process. The introduction of procurement contracting officers to the process as AOs did not mean other signatories were eliminated. For many agreements, the DARPA director conducted a “murder board” to make sure a win/win agreement had been negotiated and that technology rather than bureaucracy drove the agreement structure. To emphasize the importance of OTs, the 100th OT was signed by Paul Kaminski, Under Secretary of Defense for Acquisition and Technology.

Today’s Conundrum

The way DARPA integrated contracting officers into the AO role worked rather well. However, DARPA is a relatively flat organization that resists outside interference with its operations. Examples of early DARPA projects executed as OT agreements are worth studying today. In contrast to DARPA, most AO’s find themselves surrounded by a procurement bureaucracy with layers of reviewers and checkers above them. Even an AO that is well schooled in OTs and has the freedom of contract spirit may succumb to organizational inertia or lore in such an environment. For AO’s required to switch back and forth between AO and procurement contracting officer roles, the challenge can be frustrating and daunting. That this problem has not been identified and corrected is a leadership failure. It seems that DOD leaders, even those that purport to value OTs, do not really understand the potential of OTs or how different they can be from FAR contracting.

For the Department of Defense the current (Nov. 2018) Other Transactions Guide states:

Agreements Officer (AO). A warranted individual with authority to enter into, administer, or terminate OTs. To be appointed as an AO, the individual must possess a level of responsibility, business acumen, and judgment that enables them to operate in the relatively unstructured environment of OTs. AOs need not be Contracting Officers, unless required by the Component’s appointment process.

Language has consequences. The language used by the Guide tends to undercut its ostensible freedom to delegate OT signature authority to personnel other than warranted contracting officers. Very few, if any, organizations in current practice have chosen to delegate AO authority to anyone not holding a contracting officer’s warrant. This typically means that the AO works in a contract management office and performs duty as a Federal Acquisition Regulation (FAR) contracting officer as well as an OT agreements officer. That is the first part of the problem. The duties and responsibilities of FAR contracting officers and their education and training are fundamentally different from what is needed in an OT environment. The first duty of a FAR contracting officer is to ensure compliance with a myriad of regulations almost all of which are inapplicable to OTs. Per FAR Part 1 1.602-1):

   (a) Contracting officers have authority to enter into, administer, or terminate contracts and make related determinations and findings. Contracting officers may bind the Government only to the extent of the authority delegated to them. Contracting officers shall receive from the appointing authority (see 1.603-1) clear instructions in writing regarding the limits of their authority. Information on the limits of the contracting officers’ authority shall be readily available to the public and agency personnel.
    (b) No contract shall be entered into unless the contracting officer ensures that all requirements of law, executive orders, regulations, and all other applicable procedures, including clearances and approvals, have been met.

Note that the Guide language quoted above incorporates the identical authority language of FAR – “enter into, administer or terminate…”  Thus, the initial words of each section may carry the suggestion for many that the two positions of agreements officer and contracting officer are essentially similar. However, “limits of their authority” and section (b) of FAR 1.602-1 are in most cases the essential characteristics of the FAR contracting officer’s environment. Leadership is expecting a lot from its workforce if it requires individuals to switch back and forth from operating in a highly regulated purchasing system environment to a freedom of contract mode and perform both jobs well.

The DOD Guide’s use of the term “warranted” intellectually ties AO’s to the FAR contracting officer tradition. No warrant is needed to sign an OT agreement. What is needed is delegated statutory authority. DARPA recognized this in its initial implementation of OT agreements authority in 1990. Unnecessarily applying language from FAR processes to OTs sends the wrong message and results in confusion. There are other sources of confusion as well. There are “Agreements Officers” under the DOD Grants and Agreements (DODGARS) system that have no authority to sign or administer OT agreements.

In addition to bringing unnecessary baggage to the OT environment, FAR schooled AO’s tend to under value key aspects of OTs. In Strategic Institute conferences and educational sessions, we have pointed to negotiation of the “vision statement” as a crucial step in getting goal-oriented thinking into the agreement; including alignment of the goals of the parties (or discovery of disconnects). Other key elements are the (1) identification and description of key milestone events as part of the payment and management structure of the agreement, and (2) the task description document. There are instances when rather than developing these components of the agreement mutually in conjunction with industry, AO’s have simply said to their industry counterpart, “you write it.” The opposite case also exists where the AO imposes these elements unilaterally on industry. These and other elements of OT agreements call for substantial participation by the project’s program manager or equivalent.

Another problem with AO’s in current practice is that the importance of the OT execution team, which has long been emphasized by Strategic Institute and also shows up in the DOD Guide, tends to be undercut. Language saying that the AO is the only official who can award, administer, or terminate an agreement smacks of the traditional role of the procurement contracting officer. The person with properly delegated authority designates the roles other government officials will play in the agreement, including administration, approving payable milestones, changes, and termination, can all be memorialized in the agreement itself.

Fixing the Problem

Some senior DOD leaders value OTs as fast and flexible contracting instruments. Most fail to understand how flexible OTs can be and what potential they have to advance the state-of-the-art and achieve needed new capabilities quickly and affordably. Without leadership understanding and direction, OTs will not achieve their full potential. The AO conundrum results from this lack of understanding. The incoming leadership team at DOD needs to receive critical information on the potential of OTs. Existing organizations will likely turn to Defense Pricing and Contracting or Defense Acquisition University that will be unable to fully inform them.

The DOD OT Guide was contemplated as a “living document” to be revised based on lessons learned. It has not been updated since its original issuance. Decades ago, the Packard Commission showed the way. If you want an excellent acquisition system, model the elements of your system on systems that have achieved excellence. DOD and other government agencies have been content to tweak business as usual rather than embrace true innovation and seek excellence. Until this happens the AO conundrum and other inhibitions of the full potential of OTs will continue.

OTs allow for excellence, but that achievement depends on a skilled workforce.

 

written by Richard Dunn

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