Consortia: The Lost Vision

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First, don’t get me wrong. Other Transaction (OT) consortia as commonly practiced today are a welcome advance over business as usual. They serve a number of purposes from moving money quickly on to contract, to attracting non-traditional performers, and, in some cases encouraging collaboration among consortia members. There are other virtues as well. Keep that in mind in considering the following comments. Multi-party arrangements can be very useful but in current practice they seem to have obscured other potential uses of OTs with individual companies and have failed even to optimize collaborative multi-party arrangements. 

The most common current use of OTs is to form consortia. Perhaps it would be best to refer to them as “so-called” consortia. Many of the OT consortia currently in operation can more accurately be termed multiple award, task order (MATO) contracts. The government awards an ostensible OT to a consortium management firm that does not engage in research and development or prototyping but helps to create and administer the MATO arrangement. In many cases there is no agreement among the companies that perform research but merely individual agreements with the consortium management firm.

These arrangements not only misuse or misconstrue the term consortium but miss out on the power of true consortia. The Merriam Webster definition of a consortium is: an agreement, combination, or group (as of companies) formed to undertake an enterprise beyond the resources of any one member.

The definition from a legal dictionary is: a group of separate businesses or business people joining together and cooperating to complete a project, work together to perform a contract or conduct an on-going business.

What is often missing today is the association, the working together of different businesses with a common goal. Typically current consortia have a relationship that flows from government funder, through consortium management firm, to an individual performer awarded funding pursuant to a competitive request for project proposals limited to consortium members. There is no guarantee “members” of the consortium will work together or that any individual company will ever receive funding. Does an arrangement like this really fit within the definition of a consortium?

Many of the early OT projects were multi-party arrangements where companies cooperated on proposing and executing the project often co-funding the project with the government. The DARPA led Technology Reinvestment Project (TRP) during the course of two fiscal years in the early 1990’s funded 194 dual-use projects involving multiple parties (without using the term consortia) with $760M which leveraged approximately $1B in private resources. Today’s consortia devote little effort to leveraging private investment.

There are a variety of consortia models. One study categorized them as (1) industry/government partnerships, (2) industry partnerships (with government funding), (3) industry partnerships (with no government funding), and (4) publicly funded partnerships. In addition to the many relatively small partnership arrangements funded by TRP many large consortia have been formed.

Some large consortia include – Microelectronics and Computer Technology Corporation; Semiconductor Manufacturing Technology (SEMATECH) consortium, the National Center for Manufacturing Sciences, Software Productivity Consortium, U.S. Advanced Battery Consortium, Electric Power Research Institute, for example. Some of these have served their purpose and dissolved. Others are still in operation. DOD and other government agencies played a role in most of these using varying funding mechanisms. Other consortia (OLI Systems and X/Open) did not involve government participation. NASA instigated the Commercial Orbital Transportation System (COTS) public private partnership that resulted in SpaceX developing the Falcon9 space launch vehicle. NASA entered into an “other transaction” termed a Space Act Agreement for COTS.

Consortia can be structured in a variety of ways. They can be vertically integrated, horizontally integrated or a hybrid. Competitors can work together on problems that are common across the industry. Consortia called research joint ventures became so common in the 1980’s that Congress created a form of anti-trust protection under the National Cooperative Research and Production Act. . A wide variety of research joint ventures have registered under the Act.

DOD organizations seem to be slavishly following a single model of what are referred to as consortia. Senior leaders, program managers, and their supporting finance, contracting and legal staffs have failed to take advantage of the flexibility of OTs in creating powerful arrangements to conduct DOD’s business. Intellectual capital, expertise, key resources, and private funding can be arrayed in ways unique to particular domains or problem sets.

The current consortia are certainly convenient for government organizations that want to obligate dollars quickly. They are, however, not necessarily the most efficient and effective way to apply government funding to solve important problems and create needed capabilities. DOD needs to undertake serious study of how OTs can help it solve problems and field innovative solutions in timely and cost effective ways. One way to start is to study past success stories. Approaches that were successful in the past and all but forgotten today can spur new thinking and new approaches.

Below are illustrated just a couple examples of how the government can encourage the creation of consortia to meet program needs or interact with existing consortia.

 

 

 

 

 

 

 

 

 

 

written by Richard L. Dunn

 

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