Unrecognized and Underutilized OT Authority (DOE)

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    Lists of the various agencies with Other Transactions (OT) authority have been included in various articles and guides. The number of agencies that have some form of OT authority is much greater than indicated in published lists. Statutory authority to enter into other transactions, other similar transactions, other arrangements and so forth exist in statutes of several agencies. Even agencies that recognize they have OT authority have in some cases failed to use it or used it in a very restrictive manner.

    This article primarily highlights the Department of Energy’s use of other transactions, i.e., contractual instruments that are not standard procurement contracts, grants or cooperative agreements. More specifically this discussion points out the opportunity to invigorate the use of the other transactions authority (OTA) conferred on DOE by multiple provisions of its enabling statutes.

    Congress has conferred various versions of other transactions authority on DOE in at least four statutory provisions. DOE has implemented only one statutory provision by regulation and done so in a highly restrictive manner. Monetary commitments via other transactions (OT) amount to a fraction of one percent of DOE’s external research, development and demonstration budget. According to the Government Accountability Office in the years 2010 to 2014 DOE never had more than three active OT agreements in place at any given time.

    Other agencies with OTA have made successful use of the authority in a variety of ways including small research projects, joint venture or consortia arrangements, and high-profile prototype projects. DOE first received OT authority in its original enabling legislation in 1977 but it was never implemented. Congress conferred additional authority modeled on DOD’s OT authority in 2005 but DOE has implemented it in a conventional and restrictive manner. In addition to closely tying this authority to the way it uses cooperative agreements, DOE was also influenced by DOD’s misguided regulations on TIAs, Technology Investment Agreements (32 C.F.R. Part 37).

DOE’s OT Authority. DOE’s original OT authority is codified at 42 U.S. Code section 7256 (a):

The Secretary is authorized to enter into and perform such contracts, leases, cooperative agreements, or other similar transactions with public agencies and private organizations and persons, and to make such payments (in lump sum or installments, and by way of advance or reimbursement) as he may deem to be necessary or appropriate to carry out functions now or hereafter vested in the Secretary. [emphasis supplied]

This language was patterned closely on section 203 of the National Aeronautics and Space Act (then 42 U.S.C. 2451, currently 51 U.S.C. 20113). This is the basis for NASA’s OT agreements which are called Space Act Agreements. As an example, The Commercial Orbital Transportation System public private partnership that developed the Falcon 9 space launch vehicle was conducted using this authority. NASA has obligated billions of dollars of appropriated funds under this authority. NASA uses its OT authority in a variety of funded, unfunded and reimbursable arrangements.

    Section 1007 of The Energy Policy Act of 2005 (P.L. 109-58), now codified as subsection (g) of 42 U.S.C. 7256 added new OT authority:

In addition to authority granted to the Secretary under any other provision of law, the Secretary may exercise the same authority to enter into transactions (other than contracts, cooperative agreements, and grants), subject to the same terms and conditions as the Secretary of Defense under Section 2371 of title 10 (other than subsections (b) and (f) of that section). [Subsections b and f refer to DARPA/delegation of authority and support accounts]

     DOE implemented this authority with its Technology Investment Agreement regulations (10 C.F.R. Part 603) modeled closely on DOD’s TIA regulations. However, DOE apparently took DOD’s TIA regulations at face value not understanding they address only a small fraction of the authority available under section 2371 of title 10. DOD conducts very little assistance, less than one per cent of its research and development budget, but TIAs apply only to assistance awards. Section 2371 overlaps assistance but has a much broader scope. For additional insight see Dunn, Appropriate Contractual Instruments for R&D, The Government Contractor (July 12, 2017).      

    In addition to the basic authority of subsection (g) (1) quoted above, subsection (g) (8) refers to section 845, P.L. 103-160. This is DOD’s OT prototype authority (currently codified at 10 U.S.C. 2371b). Prototype projects under this provision are statutorily “under the authority of section 2371…”  DOE has either interpreted this authority as not applicable to DOE or for some other reason not implemented it. DOE clearly has a research, development and demonstration mission set. Demonstrations can be particularly effective when executed as prototype projects. As an example, under the Joint-Unmanned Combat Air System project the X-47 accomplished the first landing by an autonomous aircraft on an aircraft carrier and won the 2013 Collier Trophy.

    The fourth version of OT authority available to DOE is found in the enabling legislation of the Advanced Research Projects Agency-Energy (ARPA-E). Section 16.538 of title 42 U.S. Code reads in part as follows:

(f) Awards – In carrying out this section, the Director may provide awards in the form of grants, contracts, cooperative agreements, cash prizes, and other transactions. [emphasis supplied]

    It should be noted that the OT language in this section is unencumbered by any of the restrictions applicable to DOE’s version of 10 U.S.C. 2371. The operative language is “the Director may provide awards in the form of…other transactions.” Thus, it may be used for any ARPA-E project on such terms as the ARPA-E director determines.

     The DOE has shown a disinclination toward embracing flexible and innovative contracting beginning with its founding. The sources of this disinclination are not entirely clear. It might be a simple bureaucratic fear of doing anything other than that which is clearly within the bounds of business as usual. It may be an overly restrictive view of the Federal Grant and Cooperative Agreement Act (31 U.S.C. 6301 et seq.) which is sometimes interpreted as bifurcating all Federal contracting into procurement and assistance. The original Office of Management and Budget guidance on the Act dispelled the idea that all Federal contractual relationships were so divided. It may be that DOE is simply inward looking and satisfied with available contracting processes. The use of OTA by the Defense Advanced Research Projects Agency, NASA and other agencies clearly demonstrates that DOE’s interpretation of its legal authority has been overly restrictive resulting in few instances when it has used the authority.

    The original grant of OT authority (“other similar transactions”) in section 7256 (a) of its enabling legislation was entirely ignored. When Congress enacted additional authority to encourage use of OTA in 2005 DOE implemented part of the authority (section 2371) in a narrow and restrictive manner and ignored prototype authority (section 845/2371b). DOE has not allowed ARPA-E to implement the authority granted to it separate from DOE’s restrictive interpretation of the 2005 authority.

    It appears that offices in charge of contracting at DOE, those administering procurement and assistance as well as their supporting legal offices, have been reluctant to adopt new ideas and cast-off business as usual, thus restricting DOE’s ability to engage in innovative contracting. To take advantage of DOE’s existing authority (1) strong executive leadership is necessary, and, (2) implementation should be vested in offices with mission and budget. Supporting contracting and legal offices should clearly provide necessary administrative support but not impose restrictive policies merely because projects are to be conducted in new and innovative ways.

    A full discussion of the implications and potential of OTs to execute important agency missions is beyond the scope of this article. Without considering what is possible beyond business as usual, there is little motivation to adopt new and different approaches. The few examples mentioned barely scratch the surface of the possible when pre-ordained business as usual is abandoned and a “freedom of contract” approach is embraced.  

written by Richard L. Dunn