Space Development Agency: Why was Using an OT the Second Choice?

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With the enactment of section 867, National Defense Authorization Act (NDAA) of 2018, Congress directed that DOD shall “In the execution of…prototyping programs…establish a preference for using transactions other than” procurement contracts. The DOD Other Transactions Guide issued in November 2018 contains a chart summarizing the legislative history of Other Transactions (OT) authority. For 2017 (2018 NDAA) the Guide mentions the Congressional education mandate (sec. 863) but does not reference section 867. This leaves it to the military departments and defense agencies to implement the preference as well as the education mandate. Implementation of Congressional directions in both these provisions of law by various DOD organizations has varied between inconsistent and non-existent.

The difference between what Congress has required of DOD organizations and how they operate was illustrated by a recent protest against the Space Development Agency (SDA). In August 2021 SDA released a traditional Federal Acquisition Regulation (FAR) request for proposals (RFP) for Tranche 1 of its Transport Layer supporting the national security space architecture. This had been preceded by a Tranche 0 which might have been considered a prototype project for subsequent tranches. The earlier tranche was also conducted as a standard procurement.

Early in October on the day proposals were due Maxar Technologies protested the RFP. According to media reports Maxar protested on the grounds that SDA’s approach put too much financial burden and risk on industry. It was alleged this disadvantaged smaller companies and favored larger companies. It further alleged that this violated government procurement rules. Subsequently SDA cancelled the RFP and the Government Accountability Office (GAO) dismissed the protest. In cancelling the RFP, the acting director of SDA asserted that SDA was trying something new and that various orbital planes of the program would be conducted with “full and open competition”. There would be multiple opportunities for companies to receive an award. He also announced that a new solicitation would be issued using OT authority.

Here it might be noted that not only do government officials have difficulty in casting off FAR-speak and think, but media reports of OTs often contain inaccuracies as they did in this case. Air Force magazine’s on-line Daily Report contained a brief blurb on the protest and re-solicitation mentioning that it would be using a “different acquisition authority.” Air Force magazine apparently thinks the standard procurement system works great and seldom mentions OTs or suggests OTs can play a role in improving defense acquisition. Space News inaccurately reported that OTs were first authorized by NDAA 1994, and that prototype authority was granted in 2015, misinformation abounds.

Initially considering the above, if Tranche 1 is a prototype project why wasn’t an OT preferred as the first approach rather than adopted when the traditional approach failed? More profoundly, what is the prototype project? The Program Solicitation references 10 U.S.C. 2371b but does not contain the words “prototype project.” The statute is applicable to prototype projects and follow-on production efforts after a successful prototype project. The draft OT agreement issued as part of the solicitation references a “prototype constellation” but does not specify whether the prototype project consists of the first two orbital planes which appear to be the subject of the solicitation, six orbital planes, and where the prototype project ends, and “production” begins. Five years of operational support for the deployed system is included in the pricing of the agreement. Is this part of the prototype project or a follow-on activity?

The Program Solicitation and draft OT agreement contain various elements, such as test and evaluation, that could be considered prototyping within the broad definition of the DOD OT Guide. However, the Guide which generally provides guidance and not mandatory direction contains this mandatory language “…potential follow-on activities, to include follow-on production shall be included in the solicitation and any resulting OT Agreements” (emphasis in the original). Contrary to this it is unclear what activities described in the Program Solicitation constitute the “prototype project”, what the success criteria are, and what the follow-on “production” activities are.

FAR-language that adds to the confusion is sprinkled throughout the Program Solicitation and draft agreement. For example, the FAR-language of firm-fixed price is juxtaposed with “events based Milestone Payments.” Why unnecessarily import a FAR-concept of fixed price to an OT agreement. This suggests thinking that is mired in the limitations of FAR, i.e., payments are either fixed price or cost-based. This and other examples show a profound lack of OT education and understanding just how different OTs can and should be from the limitations and concepts of FAR contracting.

Perhaps this discussion provides the answer to why OTs were the second choice. SDA leadership has shortchanged the SDA project and contracting team by not providing the opportunity for education and experiential learning, which Congress requires in section 863. Mired in FAR-think, SDA has missed fundamental issues such as clearly defining what the prototype project is. As a result of lacking key knowledge, they are not in a position to comply with the legal requirement creating a preference for using prototype OTs in conducting their mission.

Decades of expert study and review have proffered solutions to substantially improve defense acquisition, these are known and lessons have been learned. The policies to support these are in place and have been Congressionally mandated (the law).  Let’s stop making excuses and just get to it!  Replacing stagnate old-think with new greater understanding begins with education.

written by Richard L. Dunn