A Veteran Lawyer’s View on OT Consortia

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An article recently published in The Government Contractor magazine (5/5/2021) on an Inspector General report on Consortium Other Transactions (OTs) was followed by a Practitioners Comment of mine.  Richard Kuyath, former government contracts counsel at 3M, provided some kind words and interesting thoughts on my commentary.  For perspective I should note that many look to small companies for innovations that may have applicability to defense, space or other government programs. Often unnoticed are huge companies that are highly innovative, industry leaders that sell products to government.  Many would also willingly contribute to government research, development and prototyping if only government’s business practices in those areas were not so onerous.  Companies like 3M once participated in a business association, Integrated Dual-Use Commercial Companies (IDCC), that tried to promote expanded use of OTs and friendly intellectual property provisions.  IDCC still exists but 3M and other big companies dropped out when they found government not really interested in accommodating industry needs other than as a supplier of goods.

Dick Kuyath’s take on my comment:

I thought your Practitioner’s Comment was well-written. Your knowledge and insight regarding OTs continue to amaze me.
As you probably remember, 3M was the consortium lead (CMO) in two different OT “true” consortia, which I believe met your tests. (If these tests were, in fact, met, it was because I carefully read all your articles on OTs I could find so I more clearly understood how the consortium should be structured before I drafted the consortium’s agreements.)
You noted that in most of the current OT “consortia,” there is no agreement among the “members,” merely individual agreements between the members and the CMO. In contrast, each OT consortium where 3M was the lead had a consortium agreement among each of the consortium’s members, and it was signed by each member. The Consortium Agreement prepared by 3M spelled out who were the members, their rights and obligations visa vie the other members and the funding agency, the consortium’s committees, the consortium’s lead member (CMO), and how payments would be made to the consortium members, etc.
You also noted that in most of the current OT “consortia” there is no apparent association or common purpose among the members, each of which competes against the others for the award of sub-projects to be awarded by the CMO to individual firms on behalf of the Government. In contrast, each of the two 3M OT consortia had a common purpose. For example, the CBRTA’s common purpose was to perform R&D tasks to develop defenses against terrorist attacks. Each award of an R&D task order under the OT was made by the funding agency.
You further noted that in most of the current “consortia”, there is a question whether, at the time of award of the OTA, the arrangement between the Government and CMO is a legitimate use of OT authority. The CMO is the only entity in privity with the Government, and there is no intent that the CMO will perform any research or conduct a prototype project.
In contrast, in the two 3M OTA consortia, 3M was not only the CMO but also a consortium member that would perform R&D tasks. In addition, each member of the consortium signed the OTA and had privity of contract with the Government.
You also noted that the DoD IG’s report’s reading of the OT statute in regarding prototype OT competition requirements is clearly wrong, in at least one instance. The report says, “[s]pecifically, DOD contracting personnel did not always compete base OT awards to the maximum extent practicable.” You also noted that what the statute requires is “to the maximum extent practicable, competitive procedures shall be used.” § 2371b(b)(2). You further noted that competitive procedures are not defined in the statute, and the Office of the Secretary of Defense’s OT Guide (Nov. 2018) points out that competition can take many forms. The report speaks in terms of “formal competition”—words not appearing in the statute and clearly not required.
The CBRTA’s funding agency for its prototype OT also had difficulty interpreting the statutory competition requirements for prototype OTs, and this interpretation varied, depending upon who was the funding agency’s cognizant attorney at the time. If I recall correctly, the funding agency’s cognizant attorney when the CBRTA OT was first awarded interpreted the prototype OT competition requirements to apply to the initial award of the OT but not to each task order issued thereunder. (Two different consortia competed in response to a competitive RFP for the initial award of the OT, which resulted in the award of the CBRTA’s OT.)
The funding agency’s initial cognizant attorney for the CBRTA was replaced after a couple of years and the new attorney had a different interpretation of the statutory competition requirements for prototype OTs. I don’t remember the details of the new interpretation other than it caused many delays in the award of new task orders under the CBRTA.

Dick’s comments stand on their own, but I will emphasize a single point. If a multi-party OT agreement (whether styled a consortium or not) meets the “competitive procedures” criteria of the statute, why should there be an additional requirement for competition in sub-agreements? That is FAR-think imported to OTs!  Competition may, often will, make sense. But so may collaborations or other contractual structures. The IG’s analysis is simplistic. It would be fair to say they have little idea concerning the statutory intent or potential of OTs. – The article authored by Dick Kuyath and Carl Vacketta in 1998 on OT terms and conditions is still worth reading today.

I finished the Practitioner’s Comment of the IG report in The Government Contractor by noting a lack of education results in scarcity of an innovative workforce to execute OTs and other non-traditional government business practices. The lack of education is confirmed by Dick Kuyath’s comments. Most contracting offices involved in OTs today are unaware of many lessons learned and practices more in accord with the statute.  The replication of a so called consortium model really amounts to a multiple award task order contract administered by a support contractor. I have tried to persuade consortium management firms to help government reform the model. The message has not been received or perhaps there is no incentive to change.

written by Dick Kuyath and Richard Dunn

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