In the Government’s response to the pandemic, Operation Warp Speed, both Other Transactions (OTs) and the Defense Production Act (DPA) were used. In testimony before the Senate Armed Services Committee, a DOD witness seemed to lump use of these authorities together as part of DOD’s innovative approach to the crisis. Others have since suggested the DPA as a solution to various supply chain and industrial base problems, advocating its increased use. Whether expansion of the DPA beyond strictly national security matters is wise is beyond the scope of this article.
In the case of research and development (R&D), OTs or other non-procurement agreements are the appropriate contractual instrument, for (DOD) and other government agencies, to use in lieu of procurement contracts. This brief essay shows that for most uses of DPA funding, OTs not procurement contracts are the appropriate contractual instrument. As in the case with R&D many contracting offices will ignore the law and logic noted here. The main reasons for this is (1) most procurement personnel are un- or under educated in using an approach other than Federal Acquisition Regulation (FAR) contracts and (2) that senior leadership has neglected to direct business process reforms that could be of immense importance to increase the effectiveness and efficiency of their agency’s business operations.
This discussion is limited to actions taken pursuant to Title III of the DPA. The DPA authorizes the President to take certain actions to create, maintain, protect, or expand industrial base capabilities in support of the national defense. The key powers (10 U.S.C. 4533 (a)) granted to the President are:
The President may make provision- (1)
(A) for purchases of or commitments to purchase an industrial resource or a critical technology item, for Government use or resale;
(B) for the encouragement of exploration, development, and mining of critical and strategic materials, and other materials;
(C) for the development of production capabilities; and
(D) for the increased use of emerging technologies in security program applications and the rapid transition of emerging technologies-
(i) from Government-sponsored research and development to commercial applications; and
(ii) from commercial research and development to national defense applications.
Take note of the quoted language. Only subsection (a) (1) (A) includes the words “purchases of or commitments to purchase.” Other subsections relate to “encouragement”, “development”, “increased use”, “rapid transition” from “Government-sponsored research and development” to “commercial applications”, and “commercial research and development.”
Under FAR 2.101 acquisition means the acquiring by contract with appropriated funds of supplies or services by and for the use of the Federal Government through purchase or lease, whether the supplies or services are already in existence or need to be created. Acquisition begins at the point when agency needs are established, and requirements defined. The purpose of a FAR contract is to acquire supplies and services for the Federal Government with appropriated funds.
DPA actions typically include a purpose other than the Government’s acquisition of supplies and services. This may include the creation or expansion of private production facilities, developing new production methods or incorporating new technologies. For purposes other than the Government’s acquisition of supplies and services for its own use, a contractual instrument other than a FAR procurement contract would be appropriate. Use of a FAR procurement contract is inappropriate.
The failure of Government procurement offices to fully embrace OTs for R&D and prototyping and their unimaginative use of OT authorities in cases where they have been used shows a need for a separate contracting organization or for specialized teams protected from the business-as-usual bureaucracy. The same can be said for execution of DPA projects. Mindless application of FAR procurement contracts, including the associated overhead and compliance mentality of that system, are not appropriate for DPA contracting. The supply chain and sub-tier suppliers including innovative and small businesses should not be burdened with the non-value added rules imposed by the FAR and other Government specific requirements. The point of the DPA is to strengthen the national industrial base to support national security missions. It is not a jobs program for Government procurement personnel or intended to convert the national industrial base into a Government run enterprise.
written by Richard L. Dunn