Other Transactions: Getting the Team Right

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The optimum way to execute Other Transactions is with a team of knowledgeable professionals. Before even starting on execution, an organization new to OT contracting should get together a larger group, including not only the core execution team but other supporting disciplines to make sure the OT ‘spirit’ or vision takes hold and grows within the organization. Part of that spirit is avoiding unnecessary delays in execution, unnecessary process, and developing a win/win approach to negotiations. Team implies people working together not dividing a project into bailiwicks and operating on separate parts independently.

This brief article which is not meant to be comprehensive focuses primarily on the government execution team but is applicable in part to an industry team as well. Moreover, while the industry team may not be particularly familiar with OT contracting they may be well schooled in commercial contracting. Thus, on occasion industry may need to coach the government team on commercial reality and common sense practices.

A core execution team typically consists of program manager (or equivalent), contracting and legal specialists. All need to be imbued with a “can do” spirit and prepared to cast “business as usual” concepts aside. Experience shows that the tendency to revert to FAR-based business-as-usual concepts is strong. Team members need to constantly remind each other that they are operating in a “freedom of contract” mode with relatively few legal or regulatory constraints. Goals rather than rules are the primary guide for a project.

The team leader is typically the technical or program manager, the individual that has a mission to accomplish and budget to support it. The team leader may, but need not necessarily, be primary negotiation spokesperson and sign or execute the agreement on behalf of the government. This depends on local practice and delegation of authority. The agreement will typically designate the team leader (often styled as agreement officer’s representative) as key decision maker for various approvals and modifications to the agreement. In agreements with technical milestones as payable events the team leader will play the primary role in negotiating and structuring the payable events and their associated payments. This should be done in the light of a systems engineering view of project events generally on the critical path to successful conclusion. Payments associated with deliverable reports and events not on the critical path should generally be avoided.

As can be seen from the previous paragraph the role of the contracting specialist whether or not styled as “agreements officer” is fundamentally different from the role of a FAR contracting officer (see e.g., FAR 1-602-1(b)). Research and development including prototype projects are as FAR 35.002 states “unlike contracts for supplies and services.” The fundamental role of the contracting officer in FAR contracting simply does not exist in OT contracting. One reason OT contracting went into decline for several years was due to the dominance of FAR-schooled contracting executives being in charge of OT policies. The parameters and restrictions of the OT statutes must be adhered to, but the statutes are primarily enabling statutes. The exact role the contracting specialist plays in OT contracting will depend in large measure on the degree to which the ‘spirit’ of OTs is embraced.

Some lawyers assigned to an OT execution team will need an attitude adjustment compared to their role in procurement contract review. Just saying “no” will often be the wrong answer in OT contracting. Lawyers need to engage in intellectual heavy lifting to explore the possibilities of OT contracting in order to be real contributors to the team. Constructs of intellectual property, contract financing, contract oversight and other matters familiar in procurement contracting are often an impediment to optimum solutions in OT contract. Government lawyers need to get beyond their comfort zone and become familiar with contracting practices in other contexts. Well-equipped lawyers can play a powerful role in OT contracting.

Team building does not end with formation of the OT execution team. In some cases it will become apparent one or more team members just cannot get the spirit of OTs or vision of the project. Interpersonal relations among the team are important as is the right team attitude. It is best to identify and replace a team member who constantly reverts to “business as usual” attitudes as early as possible. The team must continually be aware of the ultimate goal of any project – getting needed capabilities to the force or fleet in a timely and affordable manner. Focus is on the ultimate state of the project without undue distraction from near term organizational issues.

The kinds of issues the team will confront are many and varied and only a couple will be mentioned in this article as examples of avoiding common mistakes and misperceptions. Aside from specific issues mentioned below, having a grounding in advantages accruing from innovation in military technology and tactics; and, the competitive advantage from new techniques and processes in many lines of endeavor is extremely useful background for team members.

One of the first issues organizations confront is the assertion that the organization cannot execute OTs because it does not have RDT&E appropriations. It is certainly true that RDT&E funding is most common in OT contracting. As with many other myths associated with OTs it is not true that only RDT&E funding can be used. A basic fiscal law analysis is applied. First, what is the purpose of the project? Second, what are the purpose limitations of the appropriations to be applied? Defense Production Act funded projects have been executed using OTs. Operation and Maintenance funds are also potential candidates. O&M funds can be used for upgrades of existing systems. Upgrades often involve non-recurring engineering efforts and testing as part of the upgrade. These type activities fit within the purview of OTs. Here is where the broader group mentioned in the first paragraph including comptroller input can be useful.

In getting away from business as usual concepts avoiding cost-reimbursement contracting is one of the most important. Milestone payments based on observable achievements can aid in the allocation of risk, provide cash flow to performers and most importantly be important tools of project management. Failure to achieve a milestone as scheduled forces a management decision. Is the problem performer poor performance? Was the milestone incorrectly structured? Has an unexpected event been the cause? The answer to these and other questions should result in management action which may include mutual or unilateral termination – “fail early.” Possibly the milestone should be restructured or some other action taken. The point is: the project should not go ahead in cost reimbursement auto-pilot style, but corrective action of some sort decided and taken. As suggested above the project technical leader who will often be the overall project leader is the key decision maker.

This short article is not intended to be a definitive discussion of OT team formation and team building. It is intended to be thought provoking and point to the need for giving serious consideration to what an OT execution team should look like and how it might operate. For organizations that want to engage in OT contracting, but lack either contracting or legal support internally, team formation and team building can be particularly challenging. Leaders of supporting organizations need to be committed to providing the “can do” support OT contracting requires.


*To learn more join us February 21-22, 2018 in Clearwater FL @ Other Transactions: Instruments for Innovation