Stepping Outside of the Matrix with Other Transactions

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Spend enough time in federal acquisition and contracting circles you will hear ‘experts’ and apologists of the traditional system bemoan the lack of competition in awarding government contracts.  The prevalence of ID/IQ contracts and other transaction consortia structured like multiple award task order contracts given as examples. Their language often suggests that there are hordes of available and wanting companies ready to engage the DoD and other agencies but haven’t scored the magic ticket to do so.  They are correct that the government is limiting competition, but not because of some sort of imaginary gate keeper; more often it is the system itself that prevents competition.  Those who live within the Matrix of the system seem to have little if any understanding of this.

An e-mail from one of America’s most innovative and recognizable companies, a Fortune 100 with $30+ billion in annual revenue and more than 90,000 employees, came across my desk recently that illustrates this point. (made anonymous for this purpose)

“When I came to XYZ sometime ago, XYZ was in the process of developing the internal capability to perform a significant amount of Government R&D business. For example, at its peak, XYZ had:

  1. Over 20 highly trained and experienced contract administrators to negotiate and administer traditional Government R&D contracts and other types of Government R&D agreements.
  2. Over 20 employees in its Government Controllers Department who were experts in the FAR Part 15, cost principles, CAS, etc.
  3. About 15 business development employees for Government R&D contracts.
  4. Over 20 employees in its Security Department to handle classified Government contracts.
  5. Over 20 employees in its Government Purchasing Department to negotiate and administer Government subcontracts issued under its Government R&D contracts.
  6. Two in-house attorneys who specialized in Government contracts.

Now:

  1. One contract administrator to negotiate and administer Government R&D contracts.
  2. One full time employee and one ½ time employee in its Government Controllers Department.
  3. No business development employees for Government R&D contracts.
  4. One employee in its Security Department to handle classified Government contracts.
  5. One employee in its Government Purchasing Department to negotiate and administer Government subcontracts issued under its Government R&D contracts.
  6. One in-house attorney who works part time and who specialized in Government contracts who is set to retire shortly with no plans to hire.

I believe the principal reasons why XYZ has such little interest in performing Government R&D (and Government contracts in general) are: (1) the Government procurement process is too complex, lengthy, and high risk when compared to commercial business, and (2) the rewards resulting from Government business for commercial companies are too small when compared to commercial business.

This marquee company is not alone.  The list of companies that have tried to do business with the federal government but have grown weary and distrustful reads like a who’s who of American industry.  The acquisition system has left much of American industry out in the cold, missing opportunities for greater R&D, innovation and industrial-base expansion.

If this can be said about large industry players, what about the start-ups and small companies that are pushing the envelope with few resources and blazing fast timelines?  While they may be the next big thing commercially or tech hub darling, they exist in an incompatible ecosystem.  Venture capital tends to shy away from companies seeking to do business with the DoD or federal government due to these pitfalls.  Few in government understand or care about these additional complications and excess burdens, and it shows!  Potential and former partners increasingly view federal contracts as unattractive, and more than a few tweaks are needed to be appealing. 

For many indoctrinated in the current Federal acquisition system or looking in with little understanding, Other Transaction Authorities are thought of as a “work around” or a way to “circumvent” and “evade” the arcane, byzantine system in place.  This thinking fails to see and/or ignores a bigger picture.  A better term, sometimes used, is “commercial-like” with an appreciation that OTAs are simply contracts that allow the freedom to think; prioritizing goals rather than rules in business relationships.  Furthermore, these authorities can serve as the core of an alternative acquisition system if better understood.  Think of OTAs as laying the foundation for tomorrow’s innovation and fruitful partnerships; but first one must step outside of the Matrix.

 

 

 

 

 

 

 

 

 

 

written by Strategic Institute staff

 

*Don’t miss your chance to attend: Pathways to Alternative Acquisition: Igniting Synergy between Government & Industry using Other Transactions, July 18-19, Arlington VA

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