How, in the overly bureaucratic world of government contracting, the military services have and are able to leverage emerging technologies and quickly test and evaluate them for warfighter use? One potential technique that is underutilized is 10 U.S. Code section 4023.
***
Section 4023 of 10 U.S. Code is titled “Procurement for Experimental Purposes.” The text is not very long and seems straight forward. It shouldn’t be too hard to understand. Yet, the authority of this statute is little used. Its origins and how it might be used seem mysterious to many acquisition professionals. Hardly anyone appears to be aware of the provision’s deep history, going back a century, or its early uses. This article attempts to elucidate the history of the statute, shine a light on some of its language, and suggest its potential. The text of 4023:
(a) Authority.-The Secretary of Defense and the Secretaries of the military departments may each buy ordnance, signal, chemical activity, transportation, energy, medical, space-flight, telecommunications, and aeronautical supplies, including parts and accessories, and designs thereof, that the Secretary of Defense or the Secretary concerned considers necessary for experimental or test purposes in the development of the best supplies that are needed for the national defense.
(b) Procedures.-Purchases under this section may be made inside or outside the United States and by contract or otherwise. Chapter 137 of this title applies only when such purchases are made in quantities greater than necessary for experimentation, technical evaluation, assessment of operational utility, or safety or to provide a residual operational capability.
The origins of the statute go back to the Air Corps Act of 1926. With the Air Corps Act of 1926 the Army’s Air Service became the Air Corps. This was an era when most military airplanes looked pretty much like the planes that fought in World War I, biplanes with fabric covered fuselages and wings. Section 10 (k) of the Act related to contracting for aircraft, designs and related accessories that might be useful for experimentation in developing the best aeronautical equipment. The text of section 10:
10 (k) The Secretary of War or the Secretary of the Navy may at his discretion purchase abroad or in the United States with or without competition, by contract, or otherwise, such designs, aircraft, aircraft parts, or aeronautical accessories as may be necessary in his judgment for experimental purposes in the development of aircraft or aircraft parts or aeronautical accessories of the best kind for the Army or the Navy, as the case may be, and if as a result of such procurement, new and suitable designs considered to be the best kind for the Army or the Navy are developed, he may enter into contract…for the procurement in quantity of such aircraft, aircraft parts, or aeronautical accessories without regard to the paragraphs (a) to (e) hereof.
The secret history. A good place to start toward understanding section 4023 is 1929. In June of that year, Col. Benjamin Foulois became chief of the Material Division, Wright Field, and was promoted to Brigadier General. Foulois was a pioneer aviator who flew with the Wright Brothers as a passenger/observer. When the initial aviation training facility at College Park, Maryland was shut down, Foulois received orders transferring him to Ft. Sam Houston, Texas along with a Wright Flyer aircraft and the admonition “teach yourself to fly.” Foulois proved to be an innovator. He modified the Wright Flyer with wheels rather than skids obviating the need for a launching rail and permitting what became the conventional way to take-off and land an aircraft. In addition, he invented a rudimentary safety belt.
In 1929, the Boeing Co. began the development of an aircraft embodying many new technologies. Designed as a mail carrier, it was capable of modifications to carry passengers. In 1929, mail was the primary commercial cargo for aircraft, as paid airline passengers averaged less than twenty per day in the United States. Boeing’s Monomail model 200 was a monoplane that featured all metal construction, a cantilever low-wing design, streamlined fuselage and retractable landing gear. It looked very different compared to other aircraft of its day.
The year 1929 also marked the stock market crash which led to the Great Depression. The economic upset that resulted put great fiscal pressure on many government programs including national defense appropriations. A technique to assess the utility of an aircraft without purchasing one would prove particularly useful under conditions of distressed budgets.
The Boeing model 200 first flew in May 1930. The Army (Wright Field) and Boeing entered into an agreement to jointly evaluate the model 200 with the potential for purchase by the Army. The model 200 went through a series of experiments. These included performance trials comparing characteristics with retractable landing gear and fixed landing gear with aerodynamic spats. Trim tabs proved more effective than an adjustable horizontal stabilizer. Trim tabs became standard in the aviation industry. The testing showed a need for an adjustable pitch propeller and additional power. Joint evaluation did not result in a purchase of the aircraft although the Army had reserved the designation Y1C-18 for it. Boeing subsequently used the aircraft in its mail operations and later converted it to passenger configuration as its second model 221.
Design features demonstrated on the model 200 were soon incorporated into Boeing’s twin-engine model 215 of 1931 which became the B-9. An Army-Boeing agreement resulted in collaboration in the design of Boeing’s model 248 which became the P-26, the Army’s first pursuit aircraft with all metal construction. The Army purchased P-26s in quantity.
Both the newly demonstrated technologies and innovative contracting techniques were embraced by other companies. The Martin model 123 was a privately funded all metal twin-engine bomber which was delivered to the Air Corps in 1932 for official trials as the XB-907, later designated XB-907A with up-rated engines. It was purchased in January 1933 as the XB-10 receiving Air Corps serial number 33-139. Martin received a contract for quantity production.
Meanwhile Boeing had put the lessons from the model 200 to good use and its model 247 first flew in early 1933. This was a streamlined twin-engine all metal 14-passenger airliner with advanced features such as anti-icing, an early autopilot, trim tabs, an aeronautical radio and other features. Other companies joined in with advanced airliner designs. A year later, the Lockheed 10 and Douglas DC-2 were on the market. By 1935 U.S. airlines flew 450,000 passengers compared to 6,000 just five years earlier.
By the 1930’s the optimism that World War I had been the “war to end all war” was fading. Japanese expansion into Manchuria and the rise of dictators in Europe caused some to believe the world was headed toward another conflict. James Nagle described this period in his History of Government Contracting (George Washington University, 1992). A tug-of-war took place between those trying to tighten controls on government contracting and those who wished to ease the reigns allowing greater discretion to build up the industrial base and prepare the best equipment for future eventualities. According to Nagle:
Improved aircraft leapfrogged over revolutionary designs introduced just a few months before. Traditional concepts of competitive bidding straitjacketed the ability of the services to keep pace.
During the Great Depression Congress layered the procurement process with statutes whose purposes were totally different from timely delivery of acceptable goods and services…what was produced was not as important as how it was produced.
Benjamin Foulois, who had pushed use of Air Corps Act techniques as head of the Material Division, became Chief of the Air Corps in December 1931. He continued to advocate for innovative contracting techniques and occasionally involved himself personally in contracting matters. Fate now dealt Foulois and innovative contracting a losing hand thanks to overactive journalism, politically motivated members of Congress, and a large-scale aviation tragedy.
As a result of the Air Mail Act of 1930 the rate structure for the carriage of airmail changed. The new structure favored carriers which could transport heavier loads. This tended to benefit larger airlines that flew multi-engine aircraft to the exclusion of smaller companies that flew smaller often older models. The cost of transporting airmail was cut in half under the new rate structure. An enterprising reporter publicized one case which seemed to indicate a larger company profited inappropriately from the loss of a route by a smaller competitor. The story of possible fraud and collusion in the award of airmail contracts blossomed into a national scandal. After the change of administrations, Democratic congressmen (including a future Supreme Court justice) alleged that the Hoover administration was a party to fraud in the award of airmail contracts. In February 1934, President Roosevelt directed his Post-master General to cancel the airmail contracts after his Secretary of War assured him the Air Corps could carry the mail. The contracts were duly cancelled. Most histories of this incident fail to mention that years later the courts found the cancellations to be unjustified. Furthermore, in October 1934 the Department of Commerce ruled that commercial aircraft carrying passengers or operating at night had to be multi-engine.
The result as described by Alfred Goldberg, The History of the United States Air Force 1907-1957 (Van Nostrand, 1957) was:
Without proper planes, equipment, ground organization or experience in this kind of transport operations, the flyers attempted to carry on a service the airlines had taken years to develop. On top of these troubles, the first flights on February 19 coincided with the beginning of a period of freezing blizzards, ice storms, squalls, and wind storms from one end of the country to the other. The crashes began almost immediately, and within three weeks nine flyers had been killed flying mail. Public reaction [was] angry and annoyed.
Foulois had carried out the President’s order without objection and came in for criticism as the man in charge of the airmail fiasco. In addition, the Army Judge Advocate General had opined, despite the clear words of the statute, that section 10 of the Air Corps Act did not provide authority for non-competitive award of production contracts. This plus Foulois’ close association with contracting in an atmosphere where allegations of fraud and collusion were being thrown about further undermined his position. Secretary of War Dern continued to support Foulois, but he retired in December 1934 when his term as Air Corps Chief expired.
Luckily for the Air Corps, and America in general, the process that resulted in the development of the B-17 was already underway when Gen. Foulois retired. In 1939 as war clouds darkened, the Army submitted a legislative proposal to extend the experimental purposes provisions of the Air Corps Act beyond aircraft to ordnance, signal and chemical warfare activities. Business- as-usual contracting procedures were too slow when threats were emerging. Timely responses were required. Radar, advanced radios and electronic devices, new explosives and fuses, and chemical warfare defense were critical issues. Congress enacted new legislation, but it included a proviso that normal contracting rules applied if purchases were made in quantity.
Immediately before and during World War II, Congress passed a plethora of laws designed to speed up production and fielding of needed capabilities. This included authority to award “education” contracts to teach commercial companies techniques needed for production of unique defense equipment. Despite the critical need for speed and flexibility, there were still those who wanted things to go slower and follow familiar rules. This approach was exemplified by the Truman Commission, which criticized poor management of projects in cases where the sheer scope and speed of the buildup made some derelictions understandable.
Most of the wartime laws lapsed by their own terms shortly after the conflict ended in 1945. The thought arose if flexible contracting laws made sense in wartime, why not provide similar flexibility in peacetime to help in deterring future wars? This resulted in the Armed Services Procurement Act of 1947. Formal Advertising and low bid were still the preferred method of contracting; however, many exceptions were provided permitting negotiated procurement. In practice many of these exceptions were also deemed to permit limited competition or sole-source procurement. There were, however, two flies in the ointment. Many of the New Deal/Depression era socio-economic programs remained a drag, diverting government procurement from focusing on providing needed capabilities in a timely fashion. The second was the President of the United States, Harry Truman chairman of the wartime Truman Commission. Truman transmitted the signed legislation to the Secretary of Defense along with a cover letter. The cover letter noted the flexibility of the statute and directed the Secretary to issue detailed regulations and assure his contracting officers abided by them. The first Armed Services Procurement Regulation (ASPR) contained three hundred pages of regulation. The regulations and their bureaucratic offspring thereafter grew and grew. The last chapter in Nagle’s History of Government Contracting is titled “The Modern Era: A Sea of Paperwork.”
So, one might ask, what happened to procurement for experimental purposes? It basically became lost in the sea of paperwork and bureaucracy. Contracting Officers generally do not search for statutory authority to carry out their mission. They look to applicable regulations and follow the rules. The statute continued to exist and was codified in an Army version (10 U.S.C 4504) and an Air Force version (10 U.S.C 9504) in 1956. The 1993 Report of the Acquisition Law Advisory Panel in connection with deliberations leading to enactment of the Federal Acquisition Streamlining Act found that the statute was only being used for some highly classified special access programs. The Panel recommended the statutes be retained and consolidated.
To end the “secret” part of the history we add a brief word on classified programs. Highly classified programs have their own “bureaucracy,” namely added overhead costs related to stringent security requirements for participating personnel and security for facilities where hardware is built and tested. Despite this they can proceed much faster than programs burdened with the more mundane bureaucracy of business-as-usual. The focus is on mission not issues extraneous to timely delivery of needed solutions to problems.
Losses to surface to air missiles in the Viet-Nam conflict followed by Israel’s serious losses in the Yom Kippur War raised finding a solution to a high level. One possible solution was to reduce the radar, heat and visual signature of an aircraft to greatly increase the difficulty detecting it. After preliminary studies, DARPA launched a program to develop an experimental survivable test-bed. The contract for HAVE BLUE, the stealth demonstrator, was signed in November 1975. The first flight took place in December 1977 despite a machinists’ strike at Lockheed Skunkworks. Progress was so impressive that SENIOR TREND, a program to deliver an operational aircraft, was initiated prior to the demonstrator’s first flight. The first flight of the F-117 Night Hawk occurred in June 1981. The F-117A was declared operational in 1983 – just six years from the start of its formal program. This was a system embodying never previously understood technology. Surprisingly the critical technology insight came from Soviet open-source scientific literature which was not specifically related to radar. This was not an incremental step in combat aircraft design but something entirely new. Compare the dates mentioned to recent major systems! It was certainly thrilling to see the results of F-117s in action over Baghdad on television on the first night of Desert Storm even if we in the TV audience did not know exactly what was happening. Lesson – major systems can be developed in a few years rather than in decades.
4023 Today. Section 4023 (former section 2373) as it appears (mostly) today came about because of a conversation I had with Bill Greenwalt in the Russell Senate Office Building in 2015. Bill was a key staffer on the Senate Armed Services Committee chaired by Senator John McCain. We discussed innovative contracting. I recounted the history of what was then 10 U.S.C. 2373 and its origin as part of the Air Corps Act of 1926. Bill was clearly intrigued. Senator McCain had moved on from his opposition to the Army’s Future Combat System (FCS) OT in the early 2000’s and was looking for ways to improve and accelerate acquisition of new defense capabilities. Bill had many ideas on how to revitalize then section 2373. This included adding new domains. Our discussion included that enumerated domains were not exclusive but some technologies such as software and robotics that affected the enumerated domains were also included. Bill also had ideas about extending the scope of experimentation and its follow on. Retaining residual operational capability was added. Examples of this included DARPA’s demonstration of a subcaliber automatic weapon for jungle operations that was part of its Project Agile. DARPA purchased a thousand off the-self AR-15 automatic rifles. Shipped to Viet-Nam they equipped ARVN troops and U.S. Rangers. In a 6-month demonstration they proved superior to all other automatic weapons then in use. This led the U.S. Army to develop the M-16. The test weapons remained in use after the demonstration. Bill’s revised language was included as part of the National Defense Authorization Act of 2016.
There has been an addition since the watershed 2015 amendment. The word “telecommunications” was added to the domains included in the statute in 2018. I have never tracked this down. Possibly somebody thought “signals” was limited to smoke signals or semaphore communication. Or more likely some DOD lawyer had insisted on a narrow construction of the statute and the change was a pushback from that opinion. It has not been uncommon to find DOD lawyers objecting to anything different from business-as-usual. They fail to recognize that 4023 and other innovative contracting approaches are remedial statutes aimed at overcoming the traditional “costs too much, takes too long” system for delivering needed new capabilities to warfighters and others who need them. Under the normal rules of statutory construction remedial statutes are to be liberally, not narrowly, construed.
At the introduction of this article, I suggested that the statute should not be too hard to understand. There are a few issues worth discussing and clarifying.
The first issue is the term “Chapter 137 of this title…” Former chapter 137 of title 10 contained provisions of the Armed Services Procurement Act (ASPA) including the Competition in Contracting Act (CICA). Congress revised the designations of codified acquisition provisions of the U.S. Code in closely succeeding waves of revision. Rather than repeatedly renumbering provisions it created the concept of “legacy” provisions which, though repealed, related to their successor provisions. Reference to “chapter 137” indicates ASPA and CICA and implementing regulations (FAR) do not apply to section 4023.
Next, we should address “by contract or otherwise”. The word “contract” in conjunction with the words “buy” and “Purchases” implies but is not necessarily limited to a purchase or procurement contract. The word “otherwise” is illustrated by some of the historical examples mentioned above. It can relate to a bailment agreement where one party takes possession of another party’s property for the benefit of (1) the receiving party, (2) the granting party, or (3) for their mutual benefit. It might encompass a joint development followed by testing and experimentation. Contracts can take many forms and as long as they support “experimental or test purposes” they are authorized by section 4023. Note, items purchased do not need to be experimental themselves but rather support experimental or test purposes. Arrangements can be fully funded by the government, partially funded or not involve an exchange of funds.
Section 4023 can be used in conjunction with other authorities. For example, a device used as part of a prize competition (10 U.S.C. 4025) could be purchased or otherwise used in a test program. Likewise with respect to a development that takes place as a result of 10 U.S.C. 4021 research. A 4023 test program might transition into a prototype project under 4022. “Outside” the United States authorizes off-shore acquisitions. These might include adversary technology purchased from a customer country of an adversary. As with “other transactions” the most important use of section 4023 is a use that has not yet been invented – hint, hint.
With respect to process, as with “other transactions”, few traditional rules apply. Fiscal laws apply and a delegation of authority is needed. The statute does not require a contracting officer, but the delegation of authority or other organizational policy may impose such a requirement. Paperwork can be minimal. A simple memorandum for the record, recounting compliance with the statute and delegation of authority, is all that is needed. The contract documentation can be extremely simple depending on the nature and scope of the project.
For the uninitiated it is probably best to form a team of motivated, critical thinkers who have been educated in innovative contracting to explore the use of section 4023’s potential. The team should probably be led by a “program manager” that is, someone with a mission to accomplish and a budget or resources to accomplish it.
Written by Richard L. Dunn
Related Article: Understanding Section 4023 – Rapid Acquisition for Experimentation, Research and Testing
For those serious about rapid procurement and innovative acquisition, consider taking the best Other Transactions training taught be the literal pioneer.
Leave a Reply