It hasn’t attracted much attention but
is a prime example of how our acquisition system serves as a means to self-inflicted unilateral disarmament.
Unless senior leadership in the Defense Department acts in the next few weeks, this
in favor of Oracle and against the Army and
will ensure that China will dominate the future military application of quantum computing,
and machine learning, data analytics, biotechnology, robotics and
. Even before the recent GAO ruling the odds were daunting that the Pentagon could pursue the right policies to compete and win in what is now the arms race of the 21st century. Unless the Defense Department engages, those odds just got perilously worse.
Why would such a seemingly mundane judgment have such a wide-ranging impact? In one fell swoop, this decision kills DoD’s ability to access Silicon Valley and the rest of leading edge commercial innovators in the US and the free world. While it may not be obvious to many, the only way for the U.S. to compete with China in the next decade will be to harness the engineering talent and the lead that the commercial market currently has in emerging technologies. To understand the significance of this, note that six out of the eight technologies identified in the National Defense Strategy as vital to future national security are being led by the commercial marketplace. To provide for its security the U.S. needs to find a way to partner and contract with commercial companies that until now would not work with the Pentagon because of its massive compliance requirements, its excruciatingly slow acquisition and contracting processes and the way it treats intellectual property.
OTAs (Other Transactions Authority) are currently the only way to remove the barriers necessary to get these non-traditional sources of innovation to do business with the military. Properly constructed,
respect a company’s IP through negotiation rather than regulatory fiat, and result in contracting under commercial terms and conditions. Any CEO of an advanced commercial technology company understands all too clearly that contracting with the U.S. military in any fashion besides an OTA probably jeopardizes his or her company’s culture and technologies. It is no coincidence that Elon Musk’s SpaceX would not exist
embedded in the Space Act of 1958. The expansion of OTA and Experimental Authorities was one of the centerpieces of the recent McCain acquisition reforms designed to explicitly meet the threats posed by China and Russia. By expanding OTAs at the Defense Department to correspond to the authorities of the Space Act, Congress opened the door to the creation of hundreds of new SpaceX’s to disrupt the defense market by bringing in new competition and innovation. This, because of GAO’s intervention, will likely no longer happen.
The implications of the GAO’s ruling are massive. it essentially overturns the benefit of every ongoing OTA conducted to date by declaring all production OTAs based on these efforts cannot move forward. This is outrageous. The law and DoD’s policy are clear that all OTA’s that were awarded under competitive procedures are eligible to continue on to production. The OTA award in question that GAO based its judgment on originally had 21 bidders. If that doesn’t meet the statutory criteria then nothing will.
Even worse, GAO now gives anyone, including parties that have never bid on the original OTA, the ability to slow down and stop future OTAs through the protest process. The protester, Oracle, was not even among the original 21 bidders and yet GAO still decided to rule on the case. Finally, GAO through this decision has inserted itself to be the sole ruler on when a prototype is complete and when, if ever, it can transition to production. Never mind that the warfighter decides as in the case in question that a capability developed under an OTA prototype has proved itself and is worth buying quickly to save lives or provide a military advantage, GAO believes only its lawyers are the ones competent enough to do that.
Without the benefits of OTAs it now makes no sense for a Silicon Valley firm to want to partner with the DOD under current circumstances. The only way forward based on the GAO ruling is to prepare to litigate one’s way through a legal morass and hire an army of Washington consultants and lawyers to navigate through a constantly changing compliance process. Even if OTAs are somehow able to survive in a more limited form, GAO by establishing a newfound protest jurisdiction will ensure that OTAs will become more like the traditional contracting process through a death by a thousand cuts review process. GAO through its protest review of the traditional acquisition system has no shortage of blame for the inadequacies of the current process and the national security risk is it will use the same criteria to judge OTAs as it now does with traditional contracts. This type of review will be the death knell of acquisition reform and the only real winners here are China and Russia.
What can be done to alleviate this catastrophic decision by GAO? The Trump Administration can first of all reject the ruling. GAO’s protest decisions if mandatory would be essentially unconstitutional, as they would constitute a legislative veto over the executive branch. The legal fiction to get around this situation is to make GAO’s decisions advisory and non-legally binding, but with reporting requirements to Congress when a decision is not acted upon. While rarely done, DoD should ignore this decision. This could risk some congressional handwringing and possible intervention — especially if the sponsor of the protest continues to spend millions of dollars on a lobbying and legal effort to eradicate OTAs — but it is better to have that discussion and debate with Congress than to accept this fait accompli. The question of Oracle’s motive in this area is probably the subject of an entirely different column, but as a one-time member of the innovative Silicon Valley club, suffice it to say the company seems to have seriously lost its way. It no longer is acting as the innovator it once was nor is it serving the interests of the United States with its actions.
An even bolder and more highly recommended move by the Trump Administration would be to reject the right of GAO to review any OTA in the future. During debates on expanding OTAs, Congress did not consider nor grant GAO any role in overseeing OTAs, which is why this GAO action is so monumental. GAO has usurped greater power over the acquisition system and the negative consequences of this should be checked.
To address any legitimate concerns that OTAs might be misused, the Pentagon should consider setting up a very streamlined disputes mechanism to review their uses and to listen to contractor concerns about either the process or better alternatives.
Finally, the Defense Department must fix so-called commercial item contracting, dealt with in FAR Part 12. This is something the department should have done long ago. By failing to implement the commercial reform laws passed on the 2016-2018 NDAAs, Pentagon innovators have been forced to use OTAs in cases where a reformed FAR Part 12 contract could work just as well. By not acting on authority given them by Congress to remove the barriers to FAR Part 12 contracting that have arisen in the last decade, the department risks using OTAs in the wrong situation. That could provide openings to roll back reforms by special interests that prefer the status quo.This should be fixed immediately.
Finally at GAO, the Comptroller General should get involved and review the implications of this cloud decision. When the protest division of GAO ignores the law and makes procurement policy with profound national security implications, GAO’s leadership should review it and act. Until America’s national security situation improves, the ability to use OTAs to experiment with new technologies and acquisition approaches and processes to access new sources of innovation should not be limited.
