United States: Defense Contracting Innovation In State Of Flux

Over the last few years, both the Department of Defense and Congress have been pursuing innovation in defense-related technologies, processes or methods — including research and development — from a variety of sources and through a variety of procurement techniques and strategies.

In the fiscal year 2017 National Defense Authorization Act, signed into law by then-President Barack Obama Dec. 23, Congress continued its expansion of acquisition authorities designed to promote contracting for defense innovation.

At the same time, however, Congress also directed a significant reorganization of the office of the secretary of defense, abolishing the position of undersecretary of defense for acquisition, technology and logistics and creating two new positions, the undersecretary of defense for research and engineering and the undersecretary for acquisition and sustainment, in order to further emphasize the need for defense innovation.

Sen. John McCain, R-Ariz., chairman of the Senate Armed Services Committee, in a Nov. 30 statement declared that the NDAA "firmly establishes innovation as a primary mission of the Department of Defense."

At the same time, however, the NDAA put the brakes on outgoing Defense Secretary Ashton Carter's fledgling Defense Innovation Unit-Experimental, or DIUx, which was created to target innovation efforts with commercial companies in Silicon Valley and elsewhere — pending further review of DIUx's activities in comparison to other organizations that are also pursuing defense innovation technologies.

So while contracting for defense innovation has arrived under the law, it is not yet clear exactly who will be in charge of pursuing and procuring innovation, at least in the near term.

While the outgoing Obama administration objected to the congressionally mandated reorganization and limits on DIUx, Secretary of Defense James Mattis has apparently embraced the reforms called for in the NDAA. In a Feb. 17 memorandum for the acting deputy secretary of defense, Mattis declared that he was "firmly committed" to addressing congressional concerns and "aggressively exploring and implementing reforms" to "improve the department's ability to be innovative and responsive."

Mattis also called for a recommendation on the designation of a chief innovation officer, and options for the treatment of "innovation organizations" within the department. In the coming months the department will reveal how it plans to implement and execute the new innovation authorities granted by Congress, and the organization changes will be effective Feb. 1, 2018.

While DoD's internal structure and senior leadership roles will be changing, the acquisition reforms intended to spur further defense innovation have arrived, and are here to stay.

In Section 213 of the NDAA, Congress made permanent the Defense Research and Development Rapid Innovation Program, which is intended to stimulate innovative technologies and acquisition processes in order to insert rapidly new technologies and capabilities primarily into major defense acquisition programs. The program is directed principally at small businesses participating in the Small Business Innovation Research program, the defense laboratories and other small or large businesses with innovative solutions.

In May 2015, the Government Accountability Office said the program was making slow progress, although there was a high degree of interest from contractors, according to the report, "DoD Rapid Innovation Program: Some Technologies Have Transitioned to Military Users, but Steps Can Be Taken to Improve Program Metrics and Outcomes."

Perhaps the "somewhat lengthy" process noted by the GAO in the RIP program can be attributed to the fact that the program leads to the award of conventional government contracts that require adherence to the notoriously detailed Defense Department procurement regulations and processes. In Section 847 of the NDAA, Congress revised the definition of "major defense acquisition program" to exclude an acquisition program or project that is carried out using the Rapid Innovation Program.

It remains to be seen whether the department can improve the program now that it is permanent and excluded from major defense program requirements.

Meanwhile, a "non-traditional defense contractor" is now defined in the NDAA as an entity that has not, in the year preceding a solicitation, performed any contract or subcontract for the Defense Department that was subject to full coverage under the Cost Accounting Standards, which is often cited by commercial companies as the kind of complex, burdensome, expensive and bureaucratic government contract requirement that prevents commercial companies from wanting to enter into defense contracts in the first place. And while a review of the applicability of the standards is complex and beyond the scope of this article, contracts for "commercial items" are generally exempt.

In the NDAA, Congress has called for the department to implement two different pilot programs for contracting with non-traditional firms and small businesses: one to acquire innovative commercial items, technologies and services using general solicitation competitive procedures, and the other for a program to prototype "disruptive solutions that demonstrate new capabilities that could provide alternatives to existing acquisition programs and assets," according to the conference report accompanying the act.

"Innovation" is defined in Section 879 as any technology process, or method that is new, or any application of the foregoing that is new, as of the date of the submission of the proposal. Contracts resulting from this five-year pilot program are to be fixed-price only, and notwithstanding the detailed and often difficult to apply laws and regulations for identifying items, technologies, and services as "commercial items," the NDAA dictates that solutions acquired under the pilot program shall be treated as commercial items.

Section 884 calls for the innovation prototyping program, with details to be presented in a plan to be submitted with the fiscal year 2018 budget, to be established within the departments of the Army, Navy, Air Force, as well as the Missile Defense Agency and Special Operations Command. Congress called for using broad agency announcements or other merit-based selection procedures and streamlined acquisition procedures leading to fixed-price contracts, and also specified the programs to be included, such as swarming of multiple air or underwater drones, integration of a laser into a weapons platform, and defense against hypersonic weapons.

Despite its support for innovation initiatives in this and earlier NDAAs, Congress apparently disagreed with the pace, direction, success — or lack thereof — of DIUx and its implementation of the "other transaction authority" established permanently under Section 815 of the FY 2016 NDAA to enter into "Other Transaction" agreements for certain prototype projects involving non-traditional contractors and small businesses.

In exercising its authority in the commercial tech sector, particularly in Silicon Valley, DIUx appeared to be making progress in engaging commercial companies with its special authorities, which are exempt from almost all procurement laws and regulations.

In Section 222 of the 2017 act, however, Congress restricted DIUx's operations and maintenance funds, as well as its research, development, test and evaluation funds used to award other transaction authorities, pending a report from the department regarding congressional concerns over DIUx's organization, activities and relationship to other Defense entities involved in similar innovation activities.

The tussle over DIUx shows that while everyone agrees innovation is needed and should be actively pursued, the Defense Department is not the only one in charge when it comes to the specific methods and approaches to be used in pursuing and capturing innovation.

The new secretary and his team face a significant challenge to balance these forces while implementing a new organization and exercising the expanding authorities for contracting for defense innovation.

Originally published by National Defense.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Events from this Firm
14 Aug 2018, Seminar, Los Angeles, United States

August 14, 2018 - Orange County
Embassy Suites Anaheim Hotel - Garden Grove

August 21, 2018 - Pasadena Area
DoubleTree by Hilton Hotel - Monrovia

September 20, 2018 - Los Angeles
Sheraton Gateway Hotel - LAX

15 Aug 2018, Seminar, Los Angeles, United States

August 15, 2018 - Orange County Embassy Suites Anaheim Hotel - Garden Grove

August 22, 2018 - Pasadena Area DoubleTree by Hilton Hotel – Monrovia

16 Aug 2018, Webinar, Los Angeles, United States

Please join Sheppard Mullin for this month's Third Thursday Emerging Company Webinar educating entrepreneurs and emerging companies on the key legal issues they face during the growth of their companies.

 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions