The speed of technology innovation has always been at odds with the methodical drag of the federal contracting process, and the chasm between the two has only become more pronounced in the wake of the pandemic.
But key government and industry leaders are pushing ways to close that gap, as some of them outlined Wednesday at the George Mason University- Defense Acquisition University-hosted Government Contracting Conference.
The challenge for government remains an aversion to risk in its contracting programs at a time in which information technology is moving too fast to procure through traditional means, noted a group of panelists including ManTech Chairman, President and CEO Kevin Phillips; former administrator of the General Services Administration Emily Murphy; and GMU School of Business professor Richard Klimoski.
Phillips said that there was “a palpable urgency” to bring innovation from the commercial sector into the federal government, but the challenge remains guiding it through an acquisition system still dependent on setting agency requirements rather than outcome-based contracts.
OTA flexibility at scale
Phillips pointed to the Other Transaction Authorities (OTAs) route as an acquisition tool that continues to show promise. These contracts allow agencies to leave out or amend some things required by federal acquisition laws — such as termination clauses, cost accounting standards or audit requirements — in order to secure a prototype.
OTAs have become increasingly popular within the Department of Defense to develop and procure new vehicles, weapons systems and other technologies, and they exploded during the pandemic.
Take the Covid-19 vaccine as an example. By March 2021, the departments of Defense, Health and Human Services, and Homeland Security obligated at least $12.5 billion through OTAs for vaccine development and manufacturing, the Government Accountability Office (GAO) reported — illustrating the speed in which innovation can happen through that contract vehicle.
The challenge lies after the prototype phase, Phillips said. While OTAs are great for bringing in new technologies, scaling that tech into programs of record, which abide by the stricter Federal Acquisition Regulation (FAR), is difficult.
The government has to continue to use OTAs as a way to shift contract acquisition towards an outcomes-based approach, rather than one focused on contract requirements, Phillips said. "I think it is getting closer, but it’s not happening at scale,” he added.
Another option, he said, is leveraging the use of indefinite delivery/indefinite quantity (IDIQ) contracts. Agencies could write task orders within an IDIQ contract in such a way that would allow contractors to develop more innovative technology tools. This would be similar to the fixed-price agility sprints used in some software design contracts, where the contractor is tasked with developing a tool that achieves a certain outcome within a defined timeframe.
“The need for technology is going to be moving every three to six months,” Phillips said. “Allow the program to have a [research, testing development and evaluation] fixed-price contract line item that they can develop, and if it needs to move out, they can expand it.”
Overcoming fear of failure in contract vehicles
The length of the traditional acquisition process remains a barrier to innovation, as agencies are often budgeting to buy technology that may be outdated by the time an award comes around. Further, the nature of the federal budget planning process makes it so agency leaders are often working with funding for their predecessor’s priorities well before they can establish their own, Murphy said.
“When you come in as the political leader of an agency, you are executing on a budget that someone developed two years before you got there,” she said. “So trying to bring in innovative technology is hard even from a leadership standpoint, when you are trying to direct it and guide that.”
When agencies do want to pursue innovation tools, they face the potential for contract protests from incumbent contractors, congressional scrutiny and other holdups — cons for risk-averse acquisition staffs. Agency leaders need to be able to establish more of a reasonable risk tolerance in acquisition and be ready to provide cover for their staff to support those efforts, Murphy said.
“When you think of the rapid rate of innovation, contracts that are 10 years in length, most of your [government-wide acquisition contracts (GWACs)] at this point, the technologies you are buying in Year Eight aren’t technologies that you conceived of in Year One,” she said. “So you are building the contract with the intention of innovating for a technology that you haven’t even conceived of yet, which means you better have some good risk tolerance going on.”
Murphy said that risk tolerance includes not being afraid of the possibility that some contractors could fail in their efforts to innovate.
“It is a failure allowance of some sort,” she said. “There needs to be tolerance for it. And it’s not just at the contract officer level, but throughout the organization. There has to be the idea that you want to fail early and publicly so you can figure out how you can improve.”
