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Defense CSO vs Prototype OT vs 2373

Defense CSO vs Prototype OTs vs Procurement for Experimental Purposes

 

Defense Commercial Solutions Opening (CSO) Pilot Program Prototype OT (10 USC 2371b)

Procurement for Experimental
Purposes (10 USC 2373)

Description
A competitive program authorized by Section 879 of the FY17 NDAA to acquire innovative commercial items, technologies, or services that directly fulfill requirements, close capability gaps, or provide potential technological advances. OTs are contractual instruments other than standard procurement contracts, grants, or cooperative agreements. Prototype OTs may be used to acquire a reasonable number of prototypes to test in the field before making a decision to purchase in quantity. Prototype OTs provide a streamlined path to award a non-competitive follow-on Production OT or FAR contract. Procurement for Experimental Purposes (commonly referred to as “2373”) authorizes the government to acquire quantities necessary for experimentation, technical evaluation, assessment of operational utility, or to maintain a residual operational capability. 2373 can be competitive or non-competitive and awarded using a contract or other mechanism. The scope of the authority was expanded in the 2016 NDAA, and now allows acquisitions in the following eight areas: Ordnance, Signal, Chemical Activity, Transportation, Energy, Medical, Space-Flight, and Aeronautical Supplies. 
Common Applications
  • Commercial products and services
  • IT product and services
  • R&D studies for commercial technology
  • Commercial technology maturation
  • R&D activities to advance new technologies and processes and prototyping or models to evaluate feasibility or utility of a technology
  • To address perceived obstacles to doing business with the government by non-traditional vendors to include intellectual property rights and compliance with cost accounting standards
  • For flexibility to tailor agreements to reach non-traditional vendors with innovation research development and demonstration (RD&D) solutions
  • For negotiable funding arrangements, payment milestones, and length of agreement to achieve research and prototype projects
  • Purchase ordnance, signal, chemical activity, transportation, energy, medical, space-flight, and aeronautical supplies, including parts and accessories, and designs thereof, necessary for experimental or test purposes to develop best supplies for national defense.
Pros
  • Streamlined evaluation process based on technical merit increases flexibility to select innovative commercial solutions
  • Commercial technology enables rapid delivery of capability
  • Attributes of an OT can enable faster development and potential fielding of capability
  • Reduces barriers to entry for non-traditional vendors; allows greater government access to commercial innovators that do not typically do business with the government
  • Provides a potential avenue to access to third party funding (e.g., venture capital)
  • OTs offer flexible approach to managing intellectual property, enabling greater access to commercial innovators that do not comply with traditional government data rights
  • A path has been established to allow for a streamlined, non-competitive follow-on production contract or agreement (production OT, FAR contract, etc.)
  • Agencies that have been designed with OT authority have options for OT implementation to include Commercial Solution Opening pilot program, existing consortia OTs, or development of a unique internal OT
  • May leverage COTS for prototyping solutions
  • OTs are not subject to traditional GAO protests, unless the application of an OT is challenged to be inappropriate (they can be challenged in the court of federal claims)
  • Standard cost accounting requirements are not required under an OT, enabling greater access to commercial innovators that previously did not want to share cost data with the government
  • Ability to use in conjunction with science and technology OTs (10 USC 2371) or incentive prize competitions (10 USC section 2374a) enable rapid transition of emerging technologies into fielded systems for testing and evaluation
  • Potential to use this authority to procure higher quantities of supplies; definitions in statutory language can be broadly interpreted
  • Provides a flexible and fast vehicle to use to acquire products outside the US
  • Can be executed quickly and non-competitively; does not require a sole source J&A but only a D&F signed by the Contracting Officer or Head of Contracting Activity
Cons
  • Data rights and licenses of commercial technology increases burden on Government to ensure specialized rights are explicit
  • Pursuit and execution of an OT requires highly experienced and empowered staff; lack of guidance, structure, and processes can challenge and intimidate inexperienced staff
  • Government assumes increased risks without the process, precedent, and protection of the FAR
  • Flexible arrangements in intellectual property and cost accounting data can have long-term negative implications for the government
  • Pursuit and execution of this provision, especially when used in combination with an OT, requires highly experienced and empowered staff; lack of guidance, structure, and processes can challenge and intimidate inexperienced staff
  • Government is essentially in a sole-source negotiation with vendor; loses negotiation leverage on pricing and favorable terms and conditions
  • Use of this authority is still relatively unknown; lack of guidance and established precedent increases risk to the government
Restrictions
  • Meaningful proposals and varying technical and scientific approaches must be reasonably anticipated
  • Limited to fixed-price or fixed-price incentive contract arrangements
  • Awards exceeding $100 million require approval from USD A&S or military service acquisition executive
  • Requirement to promote competition in accordance with DFARS 215.371-2 does not apply
  • Authority expires on September 30, 2022
  • FAR/DFARS N/A
  • Agencies must be explicitly authorized by Congress to use OTs
  • Contracting Officer must have Agreement Officer authority to execute OTs
  • Cost sharing requirements apply if no significant participation by non-traditional defense contractors
  • Limited to requirements that have a prototyping element
  • OTs can only deliver limited quantities of prototypes
  • Prototype project must address anticipated follow-on activities, competitive procedures must be used to award prototype project, and successful completion of prototype project required to transition to follow-production vehicle
  • May not exceed $500M without USD R&E or USD A&S approval
  • FAR/DFARS N/A
  • SECDEF delegation required (currently delegated to DARPA and selectively within Air Force)
  • Contracting Officer must have Agreement Officer authority to execute
  • Purchases limited to quantities necessary for experimentation, technical evaluation, assessment of operational utility, or safety or to provide a residual operational capability
Statute References
Defense CSO Pilot 10 USC 2371b 10 USC 2373