Update on Other Transactions (OTs)

1. Update on Other Transactions (OTs) for National Contract Management Association, Cape Canaveral Chapter

2. Agenda • LMI Overview • OT Overview • How OT’s Might Help You

3. LMI Overview Distinguishing Characteristics • Not-for-profit consulting organization • Serves government • Independent—avoids conflict of interest • Powerful blend of technical and functional experts • Repeatedly asked to handle tough assignments • Located in McLean, VA • 500+ professional staff • 70% with advanced degrees • Areas of expertise • Acquisition • Financial management • Logistics • Information Technology • Organizations and Human Capital • Facilities and Asset Management

4. Survey Work Metrics andBalanced Scorecard Outsourcing InformationTechnology LMI Offers Diversity of Capability Supporting All Aspects of Acquisition 3

5. Agenda • LMI Overview • OT Overview • Brief definition • Agency and Program Availability • Limitations • How OT’s Might Help You

6. Defining Other Transactions • “Transactions other than procurement contracts, grant and cooperative agreements” • Two types have been generally defined and used • Other Transactions for Research ( DoD’s TIA’s) • Assistance instrument • Other Transactions for Prototypes • Acquisition instrument

7. OTs Exempt from Laws/Regulations • Generally not subject to federal laws and regulations governing procurement contracts, grants and cooperative agreements • Specifically, acquisition OTs do not have to comply with the FAR, its supplements, or laws that apply to procurement contracts • Allows for flexibility in accounting practices and auditing procedures • Can result in commercially friendly intellectual property provisions

8. Value of OTA Varies Over Time High value Progression of Program Phase I

9. Agency and Program Availability • Existing: DoD, FAA, FHWA • New: DHS and Bio-Chemical Defense Programs regardless of agencies, i.e. HHS and NIH • New Authorities tied to DoD’s limitations • DHS’s Scope (when the authority can be used) is explicitly broader.

10. DHS OT Authority (a) Authority.--During the 5-year period following the effective date of this Act, the Secretary may carry out a pilot program under which the Secretary may exercise the following authorities:             (1) In general.--When the Secretary carries out basic, applied, and advanced research and development projects, including the expenditure of funds for such projects, the Secretary may exercise the same authority (subject to the same limitations and conditions) with respect to such research and projects as the Secretary of Defense may exercise under section 2371 of title 10, United States Code (except for subsections (b) and (f)), after making a determination that the use of contract, grant, or cooperative agreement for such project is not feasible or appropriate.

11. Section 1441 of the 2004 Defense Authorization • Civilian Agencies may enter into transactions (other than contracts, cooperative agreements, and grants) to carry out basic, applied and advanced research, and development projects, and prototype projects that are otherwise authorized and necessary to the responsibilities of the agency, and have the potential to facilitate defense against, or recovery from, terrorism or nuclear, biological, chemical, or radiological, attack. • This authority is similar to that exercised by the Secretary of Defense under section 2317 of title 10, United States Code, with certain exceptions, as well as section 845 of the National Defense Authorization Act for Fiscal Year 1994 (Public Law 103-160; 10 U.S.C. 2371 note).  • For prototype projects, in applying the requirements and conditions of Section 845 of the National Defense Authorization Act for Fiscal Year 1994, the Director of the Office of Management and Budget shall perform the functions of the Secretary of Defense. 

12. Other Transactions for Prototypes- Limitations • At least one nontraditional defense contractor participating to a significant extent in the prototype project; or • If not, at least one of the following circumstances exists: • At least 1/3 of the total cost of the prototype project is to be paid by industry, or • The senior procurement executive for the agency determines that the use of the OT provides for innovative business arrangements or structures that would not be feasible or appropriate under a contract. • Example of “to a significant extent” are: • Supplying new key technology or products that impact costs/ schedule/ performance • Significant amounts of efforts

13. Other Transactions for PrototypesLimitations - Non-traditional defense contractor (business entity): • Can be primes, subs, lower tier vendors, intra-company business units or teammates • Have not entered into or performed under: • any contract that is subject to full coverage under the cost accounting standards, or • any other contract in excess of $500,000 to carry out prototype projects or basic, applied, or advanced research projects for a Federal agency, that is subject to the Federal Acquisition Regulation.

14. Other Transactions for PrototypesLimitations • Full cost accounting standards (CAS) coverage is: • Total contracts (other than awarded under adequate price competition) over $50M or $7.5 M individual contract. • Modified CAS applies if contractor has Cost Reimbursement contract. This means Unallowable costs must be reduced from costs.

15. Agenda • LMI Overview • OT Overview • How OT’s Might Help You • Benefits

16. Overall Benefits of OT Authority • Management flexibility • Take advantage of commercial technology • Supply chain relationships • Long-term strategic relationships with key suppliers • Payment methods focused on technical accomplishments • Permit use of contractor’s IR&D as investment funds (cost share) • Flexibility in intellectual property coverage • Flexibility in socio-economic provisions

17. Exploit Technology Trends • Advanced technologies represent a “multiplier” for Government Agencies • Commercial technology funding far outpaces government’s • Reduced cycle times and costs • Government is looking at mature technologies to get away from specifying requirements and capabilities • New contractual vehicles offered to commercial companies as attractions for doing business

18. Use of Contractor Funds OT authority allows Government contractors to use their IR&D funds, to use the funds set aside for investments in new technology, to expand their technology alternatives or concepts in early phases of a program

19. How OT’s Might Help You • LMI developing and will offer in the near future, hands on, practical application training for OT practitioners