FARA_CP_Industry_Day_Contracting-Legal_Slides.pptx

28 June 2018 Future Attack Reconnaissance Aircraft (FARA) Competitive Prototyping (CP) Program Excerpt – Contracting/Legal Slides Presented by:

U.S. Army Aviation and Missile Research, Development, and Engineering Center

Presented at:

FARA CP Industry Day

OTAP

Cost Share/Non-Traditionals IP & Data Rights (Diedrich/Parker) Agenda

UNCLASSIFIED//PRE DECISIONAL DATA.

Authorized under 10 U.S.C. 2371b:

An agreement that is not a procurement contract, a cooperative agreement, grant, or other transaction agreement for research (OTAR) Requires “The Three Ps”; Purpose, Prototype, Participation Formerly known as a “Section 845” transaction DoD received authorization for use in 1990s RQ-4, Global Hawk, developed under a Defense Advanced Research Project Agency (DARPA) OTAP

Other Transaction Agreement for Prototype

Short overview of JMR AVD then hit points below.

Why OTAP?

Speed - Standard Contract Lead Time for NGCV-EP type Effort is 600 Days. Use of OTA successfully completed the effort in 170 days from concept to award (70% time savings).

Increased Flexibility – Use of OTA allowed for establishment of Public Private Partnership with six awarded industry partners under one Project Agreement.

Efficiency of transition from competitive prototype to program of record using the same agreement.

Increased Transparency – Use of OTA allowed for open communication with proposing teams throughout and after the evaluation, providing for stronger solutions and understanding of the Government’s evaluation process and assessment.

Access to Commercial Technologies – Use of OTA incentivized and realized robust nontraditional defense contractor participation and commercial solutions.

Other Transaction Agreement for Prototype (Con’t)

FAR Contract vs. OTA Generally Required Documents FAR R&D Contract - Document Requirements

Description of the Requirement (Statement of Objectives; or Statement of Work)

Contract Data Requirements List (CDRL)

Acquisition Strategy (for services efforts)

Standard Form 255 (OPSEC / Information Assurance)

Contracting Officer’s Representative (AOR) Appointment Form

Independent Government Cost Estimate (IGCE)

Commerciality Determination

Severability Determination

Service Contract Approval

CAAS Determination

DD 2579 (Small Business Coordination Record)

Quality Assurance Surveillance Plan (QASP)

Evaluation Criteria / Source Selection Plan

OTA Prototype Project - Document Requirements

Description of the Requirement (Problem Statement; Statement of Objectives; or Statement of Work)

Identification of Desired Deliverables (Data Deliverable Descriptions)

Acquisition Approach

Standard Form 255 (OPSEC / Information Assurance)

Agreement’s Officers Representative (AOR) Appointment Form

Synopsis

Contract Type D&F

Subcontracting Plan

Weighted Guidelines

Environmental Check list

Applicability of Statute / Regulation / Guidance Bayh-Dole Act / IP Statutes Competition in Contracting Act (CICA) Truth in Negotiations Act Contract Disputes Act Procurement Protest System Grants and Agreements Reg. (DODGARS) Federal Acquisition Regulation (FAR) Defense Federal Acquisition Regulation Supplement (DFARS) Service Contract Act Fair Labor Standards Act Walsh Healey Act

10 USC 2371b Procurement Integrity (41 USC 21) DPAP OT Guide, January 2017 (Per Delegation of Authority) Federal Fiscal Law Arms Export Control Act (AECA) International Traffic in Arms Regulation (ITAR) Export Administration Regulations (EAR) Laws of General Applicability Applicable

Not Applicable

It Depends…

Buy American Act Berry Amendment

Section 2371b expressly provides that procurement ethics requirements contained in the Procurement Integrity Act (41 U.S.C. §2101-2107) apply as they would to a standard Federal procurement contract. Otherwise, OTs generally are not required to comply with laws that are limited in applicability solely to procurement contracts, such as the Truthful Cost or Pricing Data Act (41 U.S.C. Chapter 35). However, if a particular requirement is not tied to the type of instrument used, it generally would apply to an OT—for example, fiscal and property laws generally would apply to OTs for prototype projects.

Comptroller General Access

Prototype Project Agreements entered into under 10 USC 2371b, which provide for total payments in excess of $5,000,000, shall provide for Comptroller General access to examine the records of any party to the Project Agreement.

But – the access requirement does not apply where an entity has not entered into any other contract, grant, cooperative agreement, or “other transaction” agreement that provides for audit access by a Government entity in the year prior to the date of the Project Agreement.

If an entity participating in the performance of the Project Agreement, has only performed under cooperative agreements or transactions that were entered into under 10 USC 2371 and/or 10 USC 2371b in the year prior to the date of the Project Agreement, then the only records the Comptroller General may examine are records of the same type as the records that the Government has had the right to examine under the audit access clauses of the previous agreements or transactions performed within the prior year.

Comptroller General Access to Information.

(1) Each agreement entered into by an official referred to in subsection (a) to carry out a project under that subsection that provides for payments in a total amount in excess of $5,000,000 shall include a clause that provides for the Comptroller General, in the discretion of the Comptroller General, to examine the records of any party to the agreement or any entity that participates in the performance of the agreement.

(2) The requirement in paragraph (1) shall not apply with respect to a party or entity, or a subordinate element of a party or entity, that has not entered into any other agreement that provides for audit access by a Government entity in the year prior to the date of the agreement.

(3) (A) The right provided to the Comptroller General in a clause of an agreement under paragraph (1) is limited as provided in subparagraph (B) in the case of a party to the agreement, an entity that participates in the performance of the agreement, or a subordinate element of that party or entity if the only agreements or other transactions that the party, entity, or subordinate element entered into with Government entities in the year prior to the date of that agreement are cooperative agreements or transactions that were entered into under this section or section 2371 of this title.

(B) The only records of a party, other entity, or subordinate element referred to in subparagraph (A) that the Comptroller General may examine in the exercise of the right referred to in that subparagraph are records of the same type as the records that the Government has had the right to examine under the audit access clauses of the previous agreements or transactions referred to in such subparagraph that were entered into by that particular party, entity, or subordinate element.

(4) The head of the contracting activity that is carrying out the agreement may waive the applicability of the requirement in paragraph (1) to the agreement if the head of the contracting activity determines that it would not be in the public interest to apply the requirement to the agreement. The waiver shall be effective with respect to the agreement only if the head of the contracting activity transmits a notification of the waiver to Congress and the Comptroller General before entering into the agreement. The notification shall include the rationale for the determination.

(5) The Comptroller General may not examine records pursuant to a clause included in an agreement under paragraph (1) more than three years after the final payment is made by the United States under the agreement.

Cost Sharing

Pursuant to Statute, cost share amounts do not include costs that were incurred before the date on which the transaction becomes effective.

However, where costs were incurred for a prototype project after the beginning of negotiations, but prior to award of the transaction; in anticipation of entering into the transaction; and where it was appropriate for the party to incur the costs before the transaction became effective in order to ensure the successful implementation of the transaction, such costs may be allowed.

10 USC 2371b(d)(2) (A) Except as provided in subparagraph (B), the amounts counted for the purposes of this subsection as being provided, or to be provided, by a party to a transaction with respect to a prototype project that is entered into under this section other than the Federal Government do not include costs that were incurred before the date on which the transaction becomes effective.

(B) Costs that were incurred for a prototype project by a party after the beginning of negotiations resulting in a transaction (other than a contract, grant, or cooperative agreement) with respect to the project before the date on which the transaction becomes effective may be counted for purposes of this subsection as being provided, or to be provided, by the party to the transaction if and to the extent that the official responsible for entering into the transaction determines in writing that:

(i) the party incurred the costs in anticipation of entering into the transaction; and

(ii) it was appropriate for the party to incur the costs before the transaction became effective in order to ensure the successful implementation of the transaction.

Expenditure-Based OTAP Best effort at an estimated cost Payments are based on amounts generated from the awardee’s financial or cost records Includes interim and final milestone payments that may be adjusted for actual costs incurred.

Fixed Amount OTAP Prototype project on an agreed upon total price payable milestones with no adjustments based upon amounts from awardee’s financial or cost records Selection of Type of Business Arrangement OTAP has flexibility of being Expenditure-Based, Fixed Amount, or a Hybrid.

Selection of expenditure-based versus fixed amount is based upon whether a reasonable allocation of cost risk can be made between the parties.

Government is proposing a Fixed Amount OTAP, but soliciting industry views on what represents a balance of risk.

Business Arrangement

Intellectual Property

The Bayh-Dole Act, prescribing Government’s rights in patentable inventions;

10 USC 2320 “Rights in Technical Data”, and 10 USC 2321 “Validation of proprietary data restrictions”, prescribing Government and Contractor rights to technical data do not apply Intellectual Property rights are negotiated on a project by project basis.

Generally, the Government does not seek ownership of IP, only a license for Government use.

FARA IP Strategy will evolve over course of effort with objectives of:

“Doing No Harm” to Government and Industry Interests Addressing Long Term Government Sustainment and Integration Costs

Because certain intellectual property requirements normally imposed by the Bayh-Dole Act (35 U.S.C. §202-204) relating to patent rights and 10 U.S.C. §2320-21 relating to technical data do not apply to OTs, Agreements Officers can negotiate terms and conditions different from those typically used in procurement contracts. However, in negotiating these clauses, the Agreements Officer must consider other laws that affect the Government’s use and handling of intellectual property, such as the Trade Secrets Act (18 U.S.C. §1905); the Economic Espionage Act (18 U.S.C. §1831-39); the Freedom of Information Act (FOIA) (5 U.S.C. §552); the Privacy Act, 5 U.S.C. §552a; 10 U.S.C. §130; 28 U.S.C. §1498; 35 U.S.C. §205 and §207- 209; and the Lanham Act, partially codified at 15 U.S.C. §1114 and §1122.

Project directly relevant to enhancing the mission effectiveness of military personnel and the supporting platforms, systems, components, or materials proposed to be acquired or developed by the Department of Defense, or to improvement of platforms, systems, components, or materials in use by the armed forces.

The Three Ps Purpose

Prototype Preliminary pilot, test, evaluation, demonstration, or agile development activity used to evaluate the technical or manufacturing feasibility or military utility of a particular technology, process, concept, end item, effect, or other discrete feature.

Prototype projects may include systems, subsystems, components, materials, methodology, technology, or processes.

A prototype project may involve: a proof of concept; a pilot; a novel application of commercial technologies for defense purposes; a creation, design, development, demonstration of technical or operational utility; or combinations of the foregoing, related to a prototype.

Prototype

Participants requires one of the following:

There is at least one nontraditional defense contractor or nonprofit research institution participating to a significant extent in the prototype project.

All significant participants in the transaction other than the federal government are small businesses or nontraditional defense contractors.

At least one third of the total cost of the prototype project is to be paid out of funds provided by sources other than the federal government.

The senior procurement executive for the agency determines in writing that exceptional circumstances justify the use of a transaction that provides for innovative business arrangements or structures that would not be feasible or appropriate under a contract, or would provide an opportunity to expand the defense supply base in a manner that would not be practical or feasible under a contract.

Participants

Non-traditional Defense Contractor An entity that is not currently performing and has not performed, for at least the one-year period preceding the solicitation of sources by the Department of Defense for the procurement or transaction, any contract or subcontract for the Department of Defense that is subject to full coverage under the cost accounting standards prescribed pursuant to section 1502 of title 41 and the regulations implementing such section.

Most Entities will find they qualify as Non-traditional Defense Contractors, because:

They are a small business exempt from CAS requirements They exclusively perform contracts under commercial procedures They perform exclusively under FFP contracts with adequate price competition They perform exclusively under FFP contracts with adequate price competition

Participants (Con’t)

What is participating to a significant extent?

10 U.S.C. 2371b does not define DoD Policy Guidance, January 2017:

Examples of what might be considered a significant contribution include, but are not limited to, supplying new key technology or products, accomplishing a significant amount of the effort, or in some other way causing a material reduction in the cost or schedule or increase in the performance.

Soliciting industry participants thoughts and ideas on what constitutes “significant extent” as part of evaluation for FARA

Participants (Con’t)

Change Relevant to FARA Prototype project may provide for the award of a follow-on production contract or transaction to the participants in the transaction, if:

Competitive procedures were used for the selection of parties for participation in the transaction; and the participants in the transaction successfully completed the prototype project provided for in the transaction.

Characteristics of Competitive OT Procedures:

Common Sense Structure Consistent with Industry Practice Fair, Transparent, and Ethical FARA Draft Program Solicitation is intended to solicit industry’s comments on the competitive approach 10 U.S.C. 2371b 2016 Changes

Follow On Production Successful Prototype / Originally Competed FAR Contract Production Transaction FAR Minus Approach Paper Plus Approach

The statute provides for follow-on production contracts or transactions. So your first step is to decide whether your vendor can support all the requirements of a FAR Production Contract. If you are able to use a follow-on FAR Production Contract (because the vendor is a traditional defense contractor and doesn't object to using the FAR), then follow-on is simple. Your Contracting shop can draft up a standard production contract and you will just be negotiating price, delivery, schedule. If you need to go the follow-on transaction route, then you have a difference of philosophy in how to draft the Agreement.

There are currently two schools of thought on follow-on production transactions: (1) The FAR Minus School; and (2) The Paper Plus School.

1. Under the FAR Minus School of thought, you start by building a standard FAR Production Contract, and using that as the Government's opening negotiation position. You then remove provisions through negotiation. What is key to remember here, is that although you are starting with all the FAR Contract language (and may end up with remaining FAR provisions), you are negotiating a follow-on Transaction, which is only required to comply with statutory requirements along with the terms of the resulting agreement.

2. Under the Paper Plus School of thought, you start with a blank piece of paper, negotiating material terms first (Price, Delivery, Schedule, etc..), and then negotiating specialty terms afterward. The Uniform Commercial Code is a good reference point for general commercial transactions drafting. Terms such as termination, liquidated damages, severability, ADR, disputes, and so on will most likely be borrowed from the underlying Prototype Other Transaction Agreement so you don't have to custom build the whole agreement. Again, because you are negotiating a follow-on Transaction, which is only required to comply with statutory requirements along with the terms of the resulting agreement, you do not have the body of FAR contract interpretation to cover you. This shouldn't be an issue, provided that your attorneys are comfortable with drafting commercial transactions, but it does present risk.

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