Other transactions contracts: Poorly understood, little used.

• Author: Dunn, Richard L.
• Position: Viewpoint

First, the good news. Congress has provided the Defense Department with a cluster of legal authorities to conduct experimentation, research, development, prototyping and production that can lead to the fielding of critical defense capabilities in better, quicker and less expensive ways.

The bad news is that the department is unorganized and uneducated in the use of these authorities. They are unknown or poorly understood by most organizations that could greatly benefit from their effective use. This results in their underutilization and a failure to leverage their full potential.

They are generally referred to as "other transactions," that is, contractual actions that are not standard procurement contracts, grants or cooperative agreements and therefore not subject to procurement or assistance law and regulations. Key authorities include those in sections 2371, 2371b and 2373 of Title 10 United States Code.

Section 2373 permits purchase "by contract or otherwise" of certain essential technologies or supplies without being subject to the Armed Services Procurement Act and its implementing regulations when purchased in quantities no greater than those needed for experimentation, technical evaluation, assessment of operational utility, or to maintain a residual operational capability.

These authorities were widely used in the 1990s and early 2000s within the department for science and technology and prototype projects, ranging from small single company transactions, to research joint ventures and consortia, to the development of major air, ground, naval and space systems. After several years of decline, the Pentagon only recently has seen a partial resurgence in their use as renewed emphasis is put on speed and innovation in fielding new capabilities.

Section 2371 was originally enacted in 1989 and Section 2371b prototype authority in 1993. Like 2371, with which it is closely related, it was originally specific to the Defense Advanced Research Projects Agency but later extended to all of the Defense Department. The origins of Section 2373 go back to the Air Corps Act of 1926. Its scope was expanded several times--most recently and importantly in 2015.

The intent behind the enactment of Section 2371 was to spur dual-use research and development. The idea was to create an attractive way for companies to do business with the department while retaining the characteristics of innovative commercial companies. This would grant the Pentagon access to cutting edge technology and allow it to take advantage of economies of scale without burdening the companies with government regulatory overhead, which would make them non-competitive in the commercial sector.

Defense firms were also encouraged to participate especially if they sought to adopt commercial practices, diversify into the commercial sector or partner with commercial firms. Given the emphasis on dual-use, joint funding of projects was baselined, if practicable, but not mandated. Competition in awarding agreements was also baselined but not absolutely mandated. The mode of competition was not specified but could be adapted to whatever technology domain or industry segment was most relevant to a project.

There are other nuances in the statutes that seem challenging to those whose thinking is immersed in a business-as-usual culture, but properly understood do not inhibit broad use of this authority.

Section 2371b states it is "under the authority of Section 2371. As originally enacted, Section 2371b was exempted from the cost sharing feature of 2371. It was aimed specifically at defense...