Military tech incubator updating OTA playbook after production snafu

By Justin Doubleday  / June 26, 2018

The Defense Innovation Unit Experimental is updating its guidebook for using other transaction agreements after the Government Accountability Office upheld a protest against one of the organization’s production agreements.

Capt. Sean Heritage, managing director of DIUx, said today there "was some confusion about the timing" of the production OTA given to REAN Cloud in February. DIUx helped facilitate the agreement through its Commercial Solutions Opening (CSO), which acts as the organization’s contracting mechanism for using prototype OTAs and follow-on production.

However, the Government Accountability Office in May sustained a protest against the nearly $1 billion production OTA awarded to REAN Cloud. GAO concluded the production agreement, which was made non-competitively as a follow-on to a prototype OTA, was awarded improperly because DOD had not provided for the possibility of follow-on production in its initial solicitation for the prototype phase. GAO also argued the prototype work was not yet complete when DOD made the production award.

Lawmakers are now moving to tighten the Pentagon’s OTA production authorities.

DIUx needs to continue to "push the envelope" in contracting with non-traditional defense companies, but needs to do it "in a defensible manner," Heritage told Inside Defense in an interview following a panel discussion at the Defense One Tech Summit in Washington today.

"There are a lot of people at the most senior levels that deserve the awareness to defend and advocate on our behalf and answer questions when given," Heritage said. "One of the things we made a more deliberate effort to do is to announce and socialize what it is we are about to do."

Heritage said DIUx is revising its CSO to implement lessons learned. Army Contracting Command-New Jersey, which acts as DIUx's contracting arm, is expected to deliver the revised CSO to the Silicon Valley organization this week, he said.

To help the department better work with commercial companies, the Fiscal Year 2016 National Defense Authorization Act expanded DOD’s authority to use OTAs for prototype projects. OTAs are not subject to the Federal Acquisition Regulation.

The FY-16 law also gave the department the authority to move successful prototype projects to production without competition, as long as the prototype phase was awarded competitively. 

DIUx was established in 2015 to connect the Pentagon with commercial innovators in places like Silicon Valley, and the organization has exclusively used OTAs to work with companies since 2016.

During the panel discussion today, Heritage reported DIUx has so far taken on "70 problems" that the military services and defense agencies need help solving. Sixty-seven are still in prototype phase, while three have moved onto production, he said. Additionally, the unit has done business with companies in all but eight states across the country, and the latest CSO bid DIUx put out received offers from 40 companies, according to Heritage.