WASHINGTON — As part of its ongoing effort to bolster the defense industrial base, the Pentagon has issued two new pieces of guidance — one focused on workers, and one focused on prototype contracts.

Overall, the department has now issued 17 different actions, ranging from basic guidance for industry to memos changing how the department pays contractors, since March 5.

In an April 6 memo, acquisition head Ellen Lord changed the rules for issuing prototype contracts through other transaction authorities.

OTAs are small contracts awarded to companies of any size, in theory targeted at nontraditional defense contractors, with the purpose of conducting research or prototype efforts on a specific project; they are not subject to Federal Acquisition Regulation rules. By comparison, SBIR contracts are targeted at small businesses in order to act as seed money for them to conduct research and development efforts; they are subject to the FAR rules.

According to data gathered by Govini, the Pentagon issued $16.3 billion in OTA contracts between fiscal 2015 to fiscal 2019. Those numbers grew year over year during that time period, from $0.7 billion in FY15 to $7 billion in FY19.

Lord’s memo, which like other Pentagon industrial base guidance will last “for the period covered by the COVID-19 emergency declaration,” includes three pieces of guidance:

  • Prototype project contracts in excess of $100 million can now be issued by the directors of the defense agencies/field activities, commanding officers of combatant command, and the director of the Defense Innovation Unit.
  • Prototype project agreements and any follow-on production contracts in excess of $500 million can be issued by the senior procurement executives of the military departments, the director of DARPA and the director of the Missile Defense Agency. OT prototype actions between $100 and $500 million can be delegated to lower officials as seen fit by the leaders of those organizations.
  • Perhaps most notably, the memo attempts to make it easier to get prototype contracts specifically related to COVID-19 up and running, by relaxing a requirement to give the congressional defense committees a 30-day advance notice before issuing a transaction in excess of $500 million for projects that are tied into the ongoing pandemic. Instead, the goal will be to make a notification “as soon as practicable after the commencement of such a transaction.”

Meanwhile, the department has also given new guidance related to a part of the recent Coronavirus Aid, Relief, and Economic Security (CARES) Act stimulus package, which allows agencies to reimburse contractors for payments to their workforce, should they be prevented from working due to COVID-19 facility closures or other restrictions.

Under the new guidance, contracting officers at the department may decide not to reimburse in situations where employees or subcontractor employees were able to work, including remote or telework options, but choose not to; when the costs seeking reimbursement were not associated with keeping employees in a ready state; when costs were incurred prior to January 31, 2020, or after September 30, 2020; or when the contractor has been or can be reimbursed by other means.

Additionally, the reimbursement is not an option for costs not related to COVID-19 and, notably, is “subject to the availability of funds,” per a department statement. Advance payments are also not an option.

Aaron Mehta was deputy editor and senior Pentagon correspondent for Defense News, covering policy, strategy and acquisition at the highest levels of the Defense Department and its international partners.

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