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OT Planning

OT Planning

The Government Team

A small, dedicated team of experienced individuals works best when planning an OT Agreement The mutually agreed terms and conditions of the parties to an OT. Absent exceptional circumstances, it will take the form of a legally binding written instrument.. In addition to the Project Manager, end user, and warranted AO A warranted individual with authority to enter into, administer, or terminate OTs. To be appointed as an AO, the individual must possess a level of responsibility, business acumen, and judgment that enables them to operate in the relatively unstructured environment of OTs. AOs need not be Contracting Officers, unless required by the Component’s appointment process. , the agency needs to secure the early participation of subject matter experts on their cross-functional team, such as legal counsel, comptrollers, contract administrative support offices, and small business representatives to advise on agreement terms and conditions. Adequate advance planning for both the award of an OT agreement and any expected follow-on activity is an essential ingredient of a successful program. Early, continuous communication and collaboration among all cross-functional team members will enhance the likelihood of a successful project.

A Special Note on Agreements Officers A warranted individual with authority to enter into, administer, or terminate OTs. To be appointed as an AO, the individual must possess a level of responsibility, business acumen, and judgment that enables them to operate in the relatively unstructured environment of OTs. AOs need not be Contracting Officers, unless required by the Component’s appointment process.

  • Appointments – Each DoD Component with contracting authority that enters into OTs should establish a formal process for selecting and warranting AOA warranted individual with authority to enter into, administer, or terminate OTs. To be appointed as an AO, the individual must possess a level of responsibility, business acumen, and judgment that enables them to operate in the relatively unstructured environment of OTs. AOs need not be Contracting Officers, unless required by the Component’s appointment process. and for terminating their appointments. Formal processes should ensure that AOs are individuals who have demonstrated expertise in executing, managing, or administering complex acquisition instruments, and can function in a less structured environment where prudent judgment is essential.  Follow your Agencies procedures for requirements associated with the warranting process for AOs.
  • Business Acumen – The AOA warranted individual with authority to enter into, administer, or terminate OTs. To be appointed as an AO, the individual must possess a level of responsibility, business acumen, and judgment that enables them to operate in the relatively unstructured environment of OTs. AOs need not be Contracting Officers, unless required by the Component’s appointment process. is expected to possess a level of responsibility, business acumen, and judgment that enables them to operate in the relatively unstructured environment of OTs. AOs should not merely copy previously issued OT agreements, templates, or models. An AO should consider all possible business options, including traditional Government and commercial business practices and innovative approaches; however, the AO is ultimately responsible for negotiating terms and conditions that appropriately address the risk to be undertaken by all parties on the particular project.  The AO should ensure the sovereign rights of the Government are protected and all applicable laws are addressed. (See Myth 6)

Contract Administrative Support offices

  • Defense Contract Management Agency (DCMA) – OTs are not required to be administered by DCMA; however, DCMA may be able to support administrative functions delegated to them.
  • Defense Contract Audit Agency (DCAA) – OTs are not required to be audited by DCAA; however, DCAA is sometimes able to provide financial advisory services to support the AOA warranted individual with authority to enter into, administer, or terminate OTs. To be appointed as an AO, the individual must possess a level of responsibility, business acumen, and judgment that enables them to operate in the relatively unstructured environment of OTs. AOs need not be Contracting Officers, unless required by the Component’s appointment process. in awarding and administering OT agreements where requested.
Market Intelligence

Gaining market intelligence is an integral part of the development of the acquisition approach and is an ongoing process. To understand industry norms, the current state of technology across multiple sectors, and identify the innovative leaders in industry, the team must conduct research and outreach activities within the relevant technology sectors. Research and outreach activities can include, but are not limited to:

  • researching trade publications
  • attending technology demonstrations, conferences, conventions, seminars, and trade shows
  • compiling a capabilities database
  • conducting reverse industry days
  • participating in standards committees and communities of interest

In some cases, the team may find the following efforts beneficial:

  • conducting crowdsourcing events
  • publishing surveys
  • participating in technology focused social media groups
  • conducting industry events
  • leveraging chambers of commerce, Procurement Technical Assistance Centers, technology consortia (See Myth 7), and trade associations
  • leveraging DoD Tech scouting activities

When the team publishes surveys or requests for capabilities through the Government Point of Entry (www.FedBizOpps.gov) or other open forum, they should strive to find innovative ways to attract the right performers and encourage them to participate. Comprehensive market intelligence should identify the industry leaders and the state-of-the-art in a given technology area.

The Government should consider and employ a variety of marketing activities geared toward advertising the Government opportunity to as wide a forum as possible.  In this environment, the Government is seeking premier solutions and business partners and the traditional advertising methods (i.e. FedBizOpps and Grants.gov for TIAs) may not reach the broad breadth of potential performers that may be working in a particular industry segment.  The Government technical team members can be an excellent resource in determining advertising opportunities.  They are subject matter experts in their field and should have a good sense of how and where practitioners in their field would look for opportunities. Additionally, outside subject matter experts as well as industry sources may be consulted as the Government team creates its marketing plan.

The team should also consider the level of foreign participation it is willing to allow in the program.  Foreign providers may be excellent sources of technology and may be more advanced than U.S. options.  Certain sources of supply may only be available from foreign sources.  There may be legal restrictions that would limit foreign participation or restrict it completely, but OTs have been very successful in the past in utilizing foreign performers to broaden the potential technology options.  Even when a program may have classified elements or issues with export control, the Government team should consider allowing the performing teams the option to offer ways to include foreign participation with plans for working within any security or export control limitations.

Defining the Problem

The most important part of the team’s planning activities is defining the problem, area of need, or capability gap.  This is critical in determining the correct acquisition pathway and the correct procurement vehicle to utilize in the acquisition strategy. When issuing a solicitation for a Prototype OT, the Government provides a problem statement, area of need or interest, or capability gap and industry submits a proposed solution. Depending on industry norms, the solutions proposed for a given problem may vary significantly in technical approach, schedule, and/or cost.  The team is responsible for understanding and clearly articulating to offerors the problem, area of need, or capability gap to allow for innovative trade space for a wide-range of solutions.

Case Study: Global Hawk

Global Hawk was a 1994 Defense Advanced Research Projects Agency program for a high altitude endurance unmanned aerial vehicle (UAV) and was DoD’s first implementation of a Prototype OT.  DARPA issued a two-page description of desired performance capabilities.  In lieu of detailed Specifications or an extensive Statement of Work, DARPA’s requirement definition was for a UAV that could reach an altitude of 60,000 feet and remain aloft for 24 hours with a strict limitation on the price tag of $10 million.  DARPA allowed industry to propose their own solution sets for achieving the requirement.

Implementation and Execution:

In 1994, DARPA initially selected five contractors in Phase I through a competitive solicitation. While the original program plan was to down-select to two competing performers in Phase II in 1995, budget constraints restricted selection to only one performer in this phase.  Phase III spanned 1997 through 1999 and produced eight UAV prototypes. In the final Phase IV years of 2000- 2001, the specifications were finalized for full production and transition to the United States Air Force. This overall timeline of approximately seven years was deemed a success as traditional aerial vehicle development programs typically spanned two decades or more. The funding over seven years was approximately $372 million.

Outcomes and Lessons Learned:

  1. Allow Industry to be Innovative: DARPA’s usage of Prototype OTs allowed industry innovation through creative flexibility in UAV development while remaining within budget and meeting DARPA’s performance goals. The contractor was given wide latitude to select and defend tradeoffs of performance parameters as long as the “flyaway” price tag of $10 million was achieved.
  2. Acquisition Strategies should balance Innovation and Budget: “Design-to-price” was a distinct departure from traditional acquisition programs, which typically focus on achieving the highest possible performance, which can result in cost increases.
  3. Collaboration:  Giving the Contractor freedom to design and run the program was also a departure from the normal process of extensive government control. DARPA allowed Government and Industry to collaboratively and successfully test the limits of technology within the constraint of a price point of $10 million.
Understanding the Statutory and Regulatory Requirements

As the team plans how it will solicit, evaluate, negotiate, and award an agreement for the defined problem, it must ensure the appropriate OT statute is selected and the corresponding statutory and regulatory requirements are met. There are two different OT statutory authorities that can result in three different types of OT agreements.  The two distinct OT statutes are intended to address different needs and situations.  The team should conduct a thorough requirements analysis when selecting the appropriate authority.  Each statute has different requirements and different considerations.

In order to be compliant with 10 U.S.C. 2371, the project team must ensure the following

  1. The focus of the project is basic, applied, or advanced research.
  2. To the maximum extent practicable, the research contemplated in the instant project does not duplicate research being done under other DoD programs.
  3. To the maximum extent practicable, the funds from the Government do not exceed the total amount provided by the other parties. This resource sharing requirement is intended to highlight the dual use focus of this authority and show commitment on the part of the performing team to pursue and/or commercialize the technology in the future.  While the default position in the statute is generally a 50/50 resource share, the final amount of the share should be based on full consideration of factors such as the partner’s resources, prior investment in the technology, commercial vs. military relevance, unusual performance risk, and pre-competitive nature of the project
  4. A statement is made by the Government team that the use of a standard contract, grant, or cooperative agreement for this project was not feasible or appropriate.

In order to be compliant with 10 U.S.C. 2371b, the project team must ensure the following:

  1. The project includes a prototype per the statute and the transaction will: “carry out prototype projectsBy way of illustration and not limitation, a prototype project may involve a proof of concept, model, reverse engineering to address obsolescence, pilot, novel application of commercial technologies for defense purposes, agile development activity, creation, design, development, demonstration of technical or operational utility, or combinations of the foregoing. that are directly relevantUnder the authority of 10 U.S.C. §2371b, prototype projects must be directly relevant to enhancing the mission effectiveness of military personnel and the supporting platforms, systems, components, or materials proposed to be acquired or developed by the DoD, or to improvement of platforms, systems, components, or materials in use by the armed forces. In this context, the phrase “directly relevant” focuses on the agency determination of the direct relationship of the prototype project (as opposed to a tangential association) with the DoD mission. to enhancing the mission effectiveness of military personnel and the supporting platforms, systems, components, or materials proposed to be acquired or developed by the Department of Defense, or to improvement of platforms, systems, components, or materials in use by the armed forces;” and
  2. The Prototype OT satisfies at least one of the following conditions:
  • There is at least one Non-Traditional Defense ContractorAn entity that is not currently performing and has not performed, for at least the one-year period preceding the solicitation of sources by DoD for the procurement or transaction, any contract or subcontract for the DoD that is subject to full coverage under the cost accounting standards prescribed pursuant to section 1502 of title 41 and the regulations implementing such section (see 10 U.S.C. 2302(9)). or non-profit research institution participating to a significant extentIn evaluating the significance of expected NDC/nonprofit research institution participation, the Agreements Officer is expected to consider input from relevant technical advisors in assessing the totality of the circumstances for each proposed prototype project before making an independent judgement as to the significance of expected NDC or nonprofit research institution participation. in the prototype projectBy way of illustration and not limitation, a prototype project may involve a proof of concept, model, reverse engineering to address obsolescence, pilot, novel application of commercial technologies for defense purposes, agile development activity, creation, design, development, demonstration of technical or operational utility, or combinations of the foregoing., or
  • All significant participants in the transaction other than the Federal Government are small businesses [including those participating in the Small Business Innovation Research (SBIR) or Small Business Technology Transfer (STTR) programs] or NDCsAn entity that is not currently performing and has not performed, for at least the one-year period preceding the solicitation of sources by DoD for the procurement or transaction, any contract or subcontract for the DoD that is subject to full coverage under the cost accounting standards prescribed pursuant to section 1502 of title 41 and the regulations implementing such section (see 10 U.S.C. 2302(9))., or
  • At least one-third of the total cost of the prototype projectBy way of illustration and not limitation, a prototype project may involve a proof of concept, model, reverse engineering to address obsolescence, pilot, novel application of commercial technologies for defense purposes, agile development activity, creation, design, development, demonstration of technical or operational utility, or combinations of the foregoing. is to be paid out of funds provided by parties other than the Federal Government, or
  • The senior procurement executiveDoD – Under Secretary of Defense (Acquisition and Sustainment); Army – Assistant Secretary of the Army (Acquisition, Logistics and Technology); Navy – Assistant Secretary of the Navy (Research, Development and Acquisition); Air Force – Assistant Secretary of the Air Force (Acquisition); DARPA – Director, DARPA; MDA – Director, Missile Defense Agency (MDA) for the agency determines in writing that exceptional circumstances justify the use of a transaction that provides for innovative business arrangements or structures that would not be feasible or appropriate under a contract, or would provide an opportunity to expand the defense supply base in a manner that would not be practical or feasible under a contract.
Identifying Available Funding

The Government team should consult with their financial manager to determine the applicability of funding restrictions (e.g., prohibitions on the use of funds for certain items from foreign sources), found in appropriations statutes, to the particular OT type. For example, funding for Research OTs is restricted to Research, Development, Test, and Evaluation (RDT&E) appropriations, however, incidental funding may supplement RDT&E funds in rare instances with financial manager justification and approval. Fiscal law requirements are applicable to OTs and are contained in agency fiscal regulations.

The determination of appropriateness of available funding and fund type are independent of the choice of the award instrument; the agency decision to use an OT does not expand, nor restrict available appropriations (See Myth 8). To determine the appropriate funding type, the intent and stage of development of the effort should be considered and the Government team should consult with fiscal managers, agency legal counsel and comptrollers.  Multiple funding types may be appropriate depending on the intent and stage of the effort. For example, if the intent of the effort is developing something new, then RDT&E funds would be appropriate; however, if that development is complementary to other commercial off the shelf components (e.g. software licenses, or basic commodities), then Operation and Maintenance (O&M) funding may be appropriate, or a combination of funding types.

When OT agreements provide for incremental funding or include expenditure basedAgreements where payments are exclusively or primarily based on amounts generated from the awardee's financial or cost records. characteristics, the Government team should include appropriate provisions and clauses that address the limits on Government obligations.

Planning for Follow-On Activities

Follow-On Activities

It is important to note that the follow-on activities option is only available when a Prototype OT was awarded for the preceding program stage. It may not be used to extend a Research OT into production nor may it be used when the pre-production activities were conducted through a traditional FAR-based contract.  During the planning of the acquisition, the Government team should identify any potential follow-on prototyping and/or production activities. At a minimum, potential follow-on activities, to include follow-on production shall be identified in the solicitation and any resulting OT Agreements The mutually agreed terms and conditions of the parties to an OT. Absent exceptional circumstances, it will take the form of a legally binding written instrument.. The level of fidelity for production follow-on efforts is naturally limited by the nature of prototyping efforts. Therefore, the level of detail required as to follow-on activities need only be sufficient for prospective technology providers within the technology sector to make an informed decision whether to bid on the prototyping effort, with the understanding that size, scope and value of potential follow-on activities may vary.

Determinations

There are no statutory requirements necessitating determinations for awards for Research OTs.  The need for a determination is only applicable to the decision to award a Prototype OT.  Where the team identifies exceptional circumstances exist that justify a determination pursuant to 10 USC 2371b(d)(1)(D), the Government team should process a determination request to the appropriate designated approval authority as early as practicable. For time sensitive efforts, the Government team may elect to release the solicitation prior to the determination provided the solicitation document identifies to industry that the determination is pending, and affording an opportunity for industry to place conditions on their submitted solution, specific to the status of the determination.

Approvals

Research OTs do not have any statutory approval thresholds or requirements.   Prototype OTs are subject to statutory approval requirements at varying levels, and are divided by dollar thresholds (see OT Assistance, Policy, and Information page for recent policy documents and links. For planning purposes, when the team determines that a Prototype OT is the best award instrument, it should identify the likely approval level and authority as early as practicable and identify any agency-specific documentation and routing requirements. (See Myth 9)