Congress continues to broaden and show support for flexible contracting authorities meant to foster business innovations for delivering the fruits of federally funded research and development (R&D) more effectively. Sections 842 and 843 of the recent National Defense Authorization Act (NDAA) of 2023 amend Other Transactions (OT) authority. The Act amends 10 U.S.C. § 4022, stating that the authority for noncompetitive follow-on awards includes transactions for prototypes, even where no notification is provided within the original request for proposals. This nullifies GAO’s Oracle protest decision which I criticized in a 2018 article in The Government Contractor. Additionally, in section 842, authority is provided to the Department of Defense (DoD) for a follow-on production contract or transaction expected to cost the DoD more than $100 million – if a designated official makes a required determination in writing and notifies the congressional defense committees. Also, the Act codifies the definition of “prototype project” by conforming it to the definition in the 2018 OSD OT Guide. According to the committee report, the description of prototype projects added by Section 843 is “not meant to be restrictive and should not be read to change the intent or purpose of the glossary entry in the Other Transaction Guide.” This affirms that the OT statutes are remedial thus to be interpreted broadly. Prototype project includes, among other items listed, “a pilot or novel application of commercial technologies for defense purposes.”
The Act creates a three-year pilot authority to use OTs for installation or facility prototyping. This was probably not necessary, given the broad scope of the prototype definition, but it addresses a general misunderstanding. OTs have been placed into poor or erroneous conceptual boxes due to a lack of education, and are often victim of misinformation and lore.
The committee report states that to make the best use of the authority in this section, “we strongly encourage the Department to invest in continuous and experiential education for management, technical, and contracting personnel, as well as attorneys, to understand how to effectively and innovatively use other transaction authority and explore flexible means to achieve mission results more quickly and with more value added.” The committee report adds “attorneys” to the list of personnel that need education. This need was identified and is being reflected. This statement emphasizes the truly poor job the DoD is doing to educate its workforce as was mandated by Congress (10 U.S.C. 4021 (g)) several years ago. Why such a glaring problem with actionable solutions is allowed to persist is anyone’s guess.
Section 861 also contains interesting provisions that support the civil-military integration policy of 10 U.S.C. 4811 and, subject to positive policy guidance, may serve as a basis for reviving the COSSI program or similar as discussed in various resources on this website. Strategic Institute plans to delve into these issues more deeply in future articles and podcasts.
Sec. 842 – MODIFICATION OF AUTHORITY OF THE DEPARTMENT OF DEFENSE TO CARRY OUT CERTAIN PROTOTYPE PROJECTS The House bill contained a provision that would amend 10 U.S.C. § 4022 to clarify that the authority for noncompetitive follow-on awards includes transactions for prototypes, even where notification was not explicitly provided within the original request for proposals, if other requirements are met. The Senate bill contained a similar provision, and the NDAA agreement includes the Senate provision with a modifying amendment. Under Section 842, authority is provided to DoD for a follow-on production contract or transaction expected to cost the DoD in excess of $100 million, if a designated official makes a required determination in writing and notifies the congressional defense committees. Sec. 843 – OTHER TRANSACTIONS AUTHORITY CLARIFICATION Based on the House bill, the NDAA agreement’s Section 842 clarifies the definition of “prototype project” and creates a three-year pilot authority to use other transactions for installation or facility prototyping. “Prototype project” includes, among other items listed, “a pilot or novel application of commercial technologies for defense purposes.” According to the committees, the list of prototype project types added by Section 843 is “not meant to be restrictive and should not be read to change the intent or purpose of the glossary entry in the [DoD] Other Transaction Guide.” From Committee Report: The committees stated that to make the best use of the authority in this section, “we strongly encourage the Department to invest in continuous and experiential education for management, technical, and contracting personnel, as well as attorneys, to understand how to effectively and innovatively use other transaction authority and explore flexible means to achieve mission results more quickly and with more value added.” Sections 842 and 843 can be expected to continue the trend of increased use of OT authorities by DoD. Sec. 861 - STRATEGY FOR INCREASING COMPETITIVE OPPORTUNITIES FOR CERTAIN CRITICAL TECHNOLOGIES 7 (a) STRATEGY.—Not later than one year after the date of the enactment of this Act, the Secretary of Defense shall submit to the congressional defense committees a 10 comprehensive strategy to— (1) increase competitive opportunities available 12 for appropriate United States companies to transition critical technologies into major weapon systems 14 and other programs of record; and 15 (2) enhance the integrity and diversity of the 16 defense industrial base. 17 (b) ELEMENTS.—The strategy required under sub18 section (a) shall include the following: 19 (1) A description of methods to increase opportunities for appropriate United States companies to 21 develop end items of critical technologies for major 22 weapon systems, rapidly prototype such end items, 23 and conduct activities that would support the transition of such end items into major weapon systems 25 and programs of record, including— (A) continuous experimentation or military 2 utility assessments to improve such end items; 3 (B) evaluation of how to integrate existing 4 commercial capabilities relating to such end 5 items of appropriate United States companies 6 or entities in the defense industrial base into 7 major weapon systems and programs of record 8 in the Department of Defense; 9 (C) efforts that improve the ability of appropriate United States companies or entities in 11 the defense industrial base to maintain, afford, 12 or manufacture major weapon systems or components for such systems; and 14 (D) development of alternative supply 15 sources for components of a major weapon system to ensure the availability of component 17 parts and to support supply chain diversity. 18 (2) Processes to improve coordination by the 19 military departments and other elements of the Department of Defense to carry out the strategy required by this section. 22 (c) DEFINITIONS.—In this section: 23 (1) The term ‘‘appropriate United States company’’ means— (A) a nontraditional defense contractor, as 2 defined in section 3014 of title 10, United 3 States Code; or 4 (B) a prime contractor that has entered 5 into a cooperative agreement with a nontraditional defense contractor with the express intent 7 to pursue funding authorized by sections 4021 8 and 4022 of title 10, United States Code, in the 9 development, testing, or prototyping of critical 10 technologies. 11 (2) The term ‘‘major weapon system’’ has the 12 meaning given in section 3455 of title 10, United 13 States Code. 14 (3) The term ‘‘critical technology’’ means a 15 technology identified as critical by the Secretary of 16 Defense, which shall include the following: 17 (A) Biotechnology. 18 (B) Quantum science technology. 19 (C) Advanced materials. 20 (D) Artificial intelligence and machine 21 learning. 22 (E) Microelectronics. 23 (F) Space technology. 24 (G) Advanced computing and software. (H) Hypersonics. (I) Integrated sensing and cybersecurity. (J) Autonomous systems. (K) Unmanned systems. (L) Advanced sensing systems. (M) Advanced communications systems.