As the Trump administration and Congress continue to battle over the next coronavirus stimulus bill, it is useful to look back at the surprising effectiveness of the initial pandemic response in one particular area—government contracting—with an eye to the future. Congress played a critical role by passing The CARES Act earlier this year, appropriating over $2 trillion in resources and expanding authorities to facilitate the whole-of-government “kitchen sink” response to the coronavirus pandemic. The Department of Defense (DoD), meanwhile, accelerated and expanded its use of quick-turn contracting approaches and powerful authorities such as the Defense Production Act (DPA) to help spur efforts to increase the industrial capacity tackling coronavirus requirements. DoD also expedited awarding contracts and increased payment schedules to help quickly pump billions into the economy. These efforts reinforced and validated many ongoing efforts in defense acquisition reform, but how many will continue beyond the initial pandemic response and help further collaboration between DoD and the broad national security innovation base? Hopefully a lot, but these initiatives need attention so that they can lead to longer-term success.
In addition to appropriating critical resources and relief for individuals, businesses, as well as state and local governments, provisions of the CARES Act expanded the authority and raised the funding caps for Other Transaction (OT) Authority agreements to enable larger scale innovative projects for the coronavirus response. The consequent activity by OTs and other consortia has been robust and efforts have resulted in modest awards in areas such as training for pandemic recovery, additive manufacturing initiatives to increase medical equipment production, and the safe air transport of coronavirus-impacted passengers. Other OT consortia immediately launched competitions for innovative medical treatments, diagnostics, and support tools in the Spring, for instance, but some of these contracts have yet to be awarded. Further analysis in the coming weeks will provide a clearer picture on OTA utilization during the pandemic, but it appears that there is plenty of room for DoD to grow its use of this expanded OT authority in the coming months.
The CARES Act also loosened the limitations and restrictions on Undefinitized Contract Actions (UCAs) to enable the rapid start of work before contract finalization. DoD used a UCA, for instance, in a $138 million DPA Title III award to a small company to develop disposable injection devices for the delivery of vaccines, which should be helpful when coronavirus treatments become available in the coming months. The UCA change reinforced numerous other DoD efforts through memorandums and class deviations to enable cash flow and quicker contracting timelines, both critical to help stabilize industry and respond to the pandemic.
This emphasis on OTs and other acquisition initiatives has created an environment where companies of all sizes and types are working with the government. Let’s build on this. For instance, Congress has previously authorized a middle-tier acquisition approach to spur greater innovation and more prototyping to support the National Defense Strategy (NDS). Creating more opportunities for firms to compete for prototype contracts through Middle-Tier Acquisition efforts or OTs, such as the Army is doing in its revamped approach for the Optionally Manned Fighting Vehicle, could help build industrial capacity to meet NDS objectives.
Similarly, DoD has put together an Adaptive Acquisition Framework (AAF) to outline these and other “pathways” for acquisition professionals “to develop acquisition strategies and employ acquisition processes that match the characteristics of the capability being acquired” to meet the dynamic challenges of today’s security environment. DoD should draw on the all-hands-on-deck experience of the coronavirus response to encourage officials at all levels of the acquisition community to utilize all the AAF authorities and pathways to achieve the most effective and efficient acquisition outcomes.
Another key lesson from the coronavirus response has been the maintenance of critical manufacturing capabilities in the United States and important allied countries. The pandemic has starkly demonstrated that the majority of personal protective equipment and more than 90 percent of the world's antibiotics are produced in China. The 2017 to 2018 whole of government review of the U.S. manufacturing and defense industrial base found similar dependencies in areas such as rare earth elements and specialty chemicals. Like the implementation priorities of that review, Under Secretary of Defense for Acquisition and Sustainment Ms. Ellen Lord recently noted that “one of the silver linings” of the coronavirus pandemic is that it has put a spotlight on the need to address Chinese supply chain dependencies immediately.
DoD has used some of the $1 billion in DPA funds appropriated in the CARES Act to strengthen domestic industrial capacity in areas directly tied to Chinese dependencies. The Senate HEALS Act calls for an additional $8 billion in DPA funds, but these levels are unlikely to prevail in the final stimulus bill because House lawmakers argue that most of those funds have no connection to pandemic relief. While the increased levels of DPA funding brought about by the coronavirus response are welcome, it is best to appropriately divide those funds between the stimulus and appropriations bills. In terms of impact, even half of these DPA funding levels will have a dramatic effect on the overall defense industrial base over time.
Let’s build on the coronavirus response to further defense acquisition reform. The outcome will be a more resilient defense industrial base to face the challenges of tomorrow.
Dr. Jerry McGinn is the Executive Director of the Center for Government Contracting in George Mason University’s School of Business