GW Law Government Contracts Advisory Council member, Richard (“Rick”) Dunn (LL.M. ’76), is the founder of the Strategic Institute for Innovation in Government Contracting. We had the pleasure of speaking with him about his career in government procurement law, his expertise related to Other Transactions (OTs), and his decision to create the Strategic Institute to educate acquisition professionals about OTs. Rick also provided fascinating insight into several key issues impacting the federal government’s ability to successfully utilize OTs and shared resources available to students and practitioners interested in learning more about this unique area of the law.
Thank you for taking the time to talk with us. You have had a distinguished career. Can you tell us about your career path?
I graduated from the University of New Hampshire where I was in Air Force ROTC. I was granted a delay from entering active duty in order to attend law school at the University of Maryland. An internship after my first year of law school brought me into my first direct connection with government procurement. I interned in the Apollo Procurement Office in Houston, Texas, then the NASA Manned Space Center (now called the Johnson Space Center). This was fascinating in a number of ways. It sparked my interest in trying to figure out why the contracting process I observed there seemed so different from the contracting I had just studied for two semesters in law school.
After graduating from law school and passing the bar exam, I entered active duty as an Air Force judge advocate (JAG) and remained on active duty for nearly ten years. I was one of only two Captains in the entire Air Force to serve as a base Staff Judge Advocate. While in the Air Force, I attended both Air Force and Army procurement law courses. I was also selected to attend The George Washington University Law School where I graduated with an LL.M. in labor law with highest honors (1976). After leaving active duty I served in the Air Force Reserve and National Guard before retiring as a Lt. Colonel.
While on active duty, I was recruited by a former Air Force JAG friend to join the law firm of Sullivan and Beauregard in Washington. I was in private practice for about a year and a half engaged in government procurement, construction, asbestos litigation, and a variety of other legal matters. I then sought to return to government and joined the Office of General Counsel at NASA headquarters. At NASA, my initial assignment was to serve as lead counsel for labor law and personnel matters. However, I soon began to receive special assignments. I wrote a lengthy legal opinion establishing that NASA could support a private company in its attempt to demonstrate the feasibility of providing space launch services on a commercial basis. I then negotiated the Space Act (Other Transaction) Agreement providing limited support for the launch which took place in 1982.
Subsequently, I became counsel to NASA’s Space Commercialization Task Force. I was serving as Deputy Associate General Counsel for General Law when the NASA General Counsel informed me that the Defense Advanced Research Projects Agency (DARPA) was seeking a general counsel and he had recommended me. After my government service, I spent a few years as a visiting scholar and senior fellow at the University of Maryland Business School. From 2016-2017, I was an expert-consultant at National Defense University.
In 1987, you were appointed as the first General Counsel of the Defense Advanced Research Projects Agency (DARPA). Can you talk to us about what that agency does and what your role was there?
DARPA was created in 1958 as a result of the Soviet Union’s launch of the Sputnik satellite, which created the impression that the U.S. had fallen behind the Soviet Union in science and technology. DARPA started out as America’s national space agency but transferred that role to NASA once that agency was created and became operational. Interestingly, one of the hallmarks of the Apollo program was the Saturn launch vehicle. That project started at DARPA. DARPA was the first “defense agency” outside a military department of which there are now many. After losing its space mission, DARPA focused on nuclear test detection, missile defense, and materials science. It addressed issues that were more long range or risky than those typically supported by military department science organizations, or those which did not have an obvious home in a military department. DARPA avoided duplication of military service projects and committed to managing projects through contracted efforts rather than building brick and mortar laboratory facilities. DARPA essentially consisted of people (scientists and technologists) and a budget.
Through the late 1980’s, DARPA had no internal contracting capacity. It operated by sending funded work orders (ARPA Orders) to other elements of the DOD, or sometimes civilian agencies, to award contracts for its projects. This allowed DARPA to remain focused on technical aspects of projects rather than administration. It was also a technique for creating a transition pathway for a successful technology project to become a military capability.
A decision was made that DARPA needed the capability to do some of its own contracting. With the creation of a Contracts Management Office, DARPA also needed its own legal counsel. Originally, the job was intended to focus on contract review. However, the concept had broadened into a full service legal counsel position by the time I interviewed for the position. As you can see from the description of my career previously, I was equipped to act as a full service lawyer and not just procurement counsel. I acted as legal counsel and also “wise counsel” to DARPA program managers, office directors, and the DARPA director. For the first few years I was the sole DARPA lawyer. Once Other Transactions were created and became an important part of DARPA’s portfolio, additional attorneys were hired.
What are OTs, and how do they fit within the broader field of federal contracts?
Most federal contracts, for example procurement contracts, are very narrowly focused. A procurement contract under the procurement statutes and Federal Acquisition Regulation (FAR) has the limited purpose of acquiring supplies and services for government use with appropriated funds. Moreover, that purpose is constrained in a highly regulated system that has many rules that have little or no counterpart in commercial practice and have not been subjected to a cost-benefit analysis.
Unlike some other agencies, DOD’s Other Transaction authorities are limited to research and development, prototype projects, and follow-on production after a successful prototype is developed. The primary purpose of contracted R&D programs is to advance scientific and technical knowledge and apply that knowledge to achieve agency and national goals. Most R&D contracts are unlike contracts for supplies or services. Provisions of the FAR that address this are often overlooked by many procurement practitioners.
Other transactions are true contracts. Within their authorized scope (research to follow-on production) they can be highly flexible instruments. They can involve multiple parties and a variety of contract structures. They can be fully funded, partially funded by the government, or unfunded. Funds can flow in either direction. They are not a subset of procurement contracts or a workaround of the FAR. They open up a whole new world and way of thinking about problems the government needs to solve and invite collaboration as well as competition in addressing those problems.
How did you get involved in the field of OTs?
As a result of my internship at NASA Houston, I began thinking about why government contracting is so different from other types of contracting. Years later when I got to NASA headquarters and learned about some of the uses of OTs under the Space Act, I became a student of the subject. I had the opportunity to become directly involved in the negotiation of a number of Space Act OTs.
At DARPA, I wrote a Congressionally directed report on an alternative management system for the agency. This addressed salary issues for world-class scientists and engineers, but I also added a section on DARPA’s need for flexible contracting authority. After the report was cleared through DOD legislative affairs, I had license to advocate for Other Transactions authority to Congress. I was fortunate for the opportunity to do that. I drafted the legislation and negotiated changes with committee staff members. Ultimately, I obtained the support of senior Senators thanks to help from the DARPA director and some distinguished retired officials who were interested in improving DOD’s ability to field new capabilities in a timely fashion.
Can you tell us about the Strategic Institute for Innovation in Government Contracting (SI)? What prompted you to create it and how has it impacted this critical area of the law?
I retired from government in 2000 and thought DOD OTs were pretty well established. Unfortunately, trends soon developed with DOD regulations and legislative changes that were unfriendly to OTs. For a few years I acted as an individual consultant and continued to try to promote OTs and their appropriate use. Meanwhile, I tried to concentrate on my retirement activity of researching and writing military history. Then in 2005, OTs received unwarranted negative publicity due to the Army Future Combat Systems program. Thereafter OTs went into decline.
In 2015, I was called in to consult with the Senate Armed Services Committee staffers and suggested changes to the OT statutes which were subsequently adopted. After a couple years, it appeared that OTs might be on the rebound. But many knowledgeable people had left the government by then. There was a serious dearth of OT knowledge and education. The creation of the Strategic Institute was an attempt to share my knowledge through education of the workforce and leadership. I felt I could not do this effectively as an individual consultant. I needed help and a way to engage other people who could contribute to the effort to provide OT education. SI was the result.
Prior to the retrenchment associated with COVID restrictions, I think SI was having a positive impact in a number of ways. Our conferences created a community of practitioners that wanted to learn about OTs, execute OTs, and share their experiences. We developed resources available on our website—articles, videos, and podcasts. These and our Other Transaction Guide are a continuing resource. We could share the deep background and history of OTs to counter some of the myth and misinformation that seems to abound. However, the impact of COVID and aversion to in-person meetings has reduced demand for our conferences and on-site training sessions. The community of interested practitioners seems to have shrunk due to retirement, job changes, or discouragement at the lack of leadership support. The lack of leadership is symbolized by a failure to seriously implement the Congressional education mandate (10 USC. § 4021(g)); to create a preference for using innovative contracting (sec. 867, NDAA 2018); or to take serious steps to diversify the industrial base (10 USC. §4811(b)).
What are some of the biggest issues you see relating to OTs that practitioners should be aware of?
FAR creep—or the mindless injection of FAR clauses into OT agreements—is one. Often the government proffers a list of FAR clauses before discussing or negotiating a common vision of the project. Developing a common vision will aid in understanding what terms and conditions should be included in the agreement. Plugging in a FAR clause is an “easy button” approach that allows parties to avoid considering the other party’s interests and needs. This is all too common, and often indicates that the government negotiator has been insufficiently educated in OTs. I have seen FAR clauses included in sample OTs that are meaningless in an OT context (i.e. “Contractor shall . . .” language is included where no “contractor” has been named in the agreement).
Another issue is assuming that words in the OT statute are defined by some external DOD regulation. For example, the terms “basic, applied and advanced research” in 10 USC § 4021 are not defined the same as those terms in the Financial Management Regulation. They relate back to the original OT language “advanced research projects,” which refers to the kind of work DARPA does. A study of the origins of the statutes including their original language is missing in most DOD OT training. I suppose both of these are examples of the lack of real OT education.
Basically, the root of these problems and others is the failure of practitioners and government leaders to realize how different OTs are than the limited scope of procurement contracts. The flexibility and potential of OTs (even their past use) has not been explored by much of the workforce that could utilize them. The leaders that could benefit from creating new business approaches continue to see them as “just another tool,” a work around of the FAR.
As an expert in OTs, we would love to hear your thoughts on some emerging issues impacting this area of the law (e.g., consortia).
I think my record as a supporter of true consortia and a variety of multi-party relationships to accomplish critical goals is clear. I will limit my comments to DOD’s currently prevailing use of so-called consortia. My comments relate to the vast majority of the dozens of consortia involving many hundreds of companies and billions of dollars in expenditures with only a few exceptions. I have explained in various articles why “so-called” is the correct term since they are not true consortia. I have also referred to the OTs awarded by the government as “ostensible” OTs because they are not true OTs. They do not comply with the statute. In government lawyer speak, they are “not legally sufficient”; colloquially, they are illegal.
The government typically solicits a “consortium management firm” (CMF) to form and administer a consortium on behalf of the government. The resulting OT agreement is awarded to the CMF; sometimes to the consortium “in care of” the CMF. However, the so-called consortium is not a legal entity and has no power to contract. The only privity is between the government and the CMF. Among other things, this results in opaqueness of individual projects since these are commercial subcontracts (not OTs) between the CMF and the firm awarded the technical project agreement. They are also not reported in the Federal procurement data system.
The CMF does not (1) perform R&D, (2) execute any prototype project, (3) select performers of technical projects, or (4) co-fund technical projects. In short, it merely performs administrative functions on behalf of the government contracting office for which it takes a percentage tax of the government funds flowing to the sub-contracted technical performer. The CMF is a support services contractor administering an ID/IQ (or multiple award task order) contract on behalf of the government contracting office. The CMF also receives payments from the members of the so-called consortium. It is paid by both sides of the negotiation of project agreements in which it is involved, which creates a conflict of interest. I have tried to get government folks to recognize these problems. A few contracting organizations have listened. Senior officials and their lawyers have ignored this problem.
There is much more that could be said about this dysfunctional use of “consortium” OTs, including that they could be easily reformed, but I will desist expecting little to change.
SI hosts a podcast, “Innovation in Government Business.” How did that get started? What are some of your favorite episodes?
We initially added videos to the website with some relatively high quality production which was something of a logistical challenge. We followed up with interviews, basically podcasts, using Zoom. The audio-only version, Innovation in Government Business, is just a practical follow-on to those earlier efforts.
I think the podcast exploring the concept of “institutional corruption” gives acquisition professionals something to think about. Accelerating acquisition with Bill Greenwalt addressed speed to capability as an important discipline. The podcast with Raj Shah, the first successful director of the Defense Innovation Unit, brought out that he had to personally purchase and strap to his thigh a moving map display while flying his F-16 near the Iranian border to keep from creating an international incident (or getting shot down). DOD was years behind the commercial market. I had fun talking about events in the World War II Pacific air war and its lessons for modern acquisition. Also, it is not a podcast but our video on milestone payments is one I particularly like.
Do you have any advice for students and alumni interested in learning more about OTs and potential employment opportunities related to this growing area of the law?
First, I would say be aware that misinformation about OTs is rife. The “frozen middle” bureaucrats and even senior leadership are among the misinformed. OTs are not merely a “work around of the FAR,” “another tool in the tool kit,” or something scary and too hard to use. Rather than compliance with a myriad of rules, OTs start with applying critical thought. Give thought to questions such as what problem we are trying to solve, what potential solutions are out there, and what goals might solve the problem. Break down the paradigm that requirements should always precede and be separate from acquisition, as well as other encumbrances based on traditional government procurement thinking.
The above cryptic comments are easier said than done. Ways to learn what OTs can accomplish include obtaining a good OT education, experience in the private sector outside government’s kept cadre of contractors—especially with companies that are primarily commercial but, out of patriotism, would like to engage at the level of R&D (not just product sales) with the government—and experiential learning in a real life environment at places like the Defense Innovation Unit (DIU), DARPA, and a few other organizations. Caution: even in some of the most advanced government organizations, the full potential of OTs is not currently being realized.
Finally, join or create a community of like-minded individuals prepared to address and confront obstacles that cause new needed defense capabilities to take too long and cost too much. For now, the Strategic Institute is available to help.