Breakout Session # 409

2. The Use of Other Transactions and Alternate Ways of Doing Business with the Government Breakout Session # 409 Name, Title, Company: James R. Vickers, Connie L. Cobo, and Ina R. Merson; Advanced Programs; Raytheon Company Date: 16 April 2008 Time: 10:50 A.M. to 11:50 A.M.

3. Purpose of Presentation • Distinguish between the different forms of federal assistance • Determine the limitations and risks to the government and contractors in each case • Learn how to protect the government’s and contractor’s rights • Provide a more detail discussion of CRADAs and Section 845 Prototype Other Transactions

4. Part I – Grants and Federal Assistance

5. Procurement vs. Federal Assistance • The principle purpose of a procurement is to acquire property or services for the direct benefit of the government • The purpose of federal assistance is to support or stimulate activities for the public purpose • Federal Assistance is not: • Subject to FAR/DFARS • Subject to other statutes • To meet an agency’s immediate needs but for the public purpose

6. Major Types • Types of Federal Assistance: • Grants and Cooperative agreements • Cooperative Research and Development Agreements (CRADAs) • Other Transactions • No inherent agency authority • Note: Section 845 Prototype OTs are considered an “Acquisition”

7. History • The Constitution • Homestead Act • Land Grant Act • Hatch Act • WPA

8. History (cont’d) • Grants for basic research • Commission on Government Procurement • Created by Public Law 91-129 • Purpose: to eliminate inconsistencies in use of various instruments • Improve federal government procurement • Expanded into Federal Assistance • Led to Federal Grant and Cooperative Agreement Act of 1977 • Set criteria for Assistance and Procurement

9. Definitions • Federal Assistance is the transfer of money, property, services, or anything of value, the principal purpose of which is to accomplish a public purpose of support or stimulation authorized by Federal statute. • A Grant is an assistance relationship, in which no substantial programmatic involvement is anticipated between the government and a recipient during performance • Government assists, supports, and/or stimulates recipients • Government’s role is that of "patron."

10. Definitions (cont’d) • A Cooperative Agreement (CA) is an assistance instrument in which substantial programmatic involvement is anticipated between the government and a recipient • While projects are similar to those for grants, the government assists, supports, and/or stimulates activities, as well as, is involved substantially with recipients in performance • The government’s role is that of a "partner"

11. Types of Grants • Grants based on purpose • Categorical grants • Formula or block grants • Project grants • Grants based on competition or entitlement • Mandatory/Nondiscretionary • Discretionary • Grants based on funding

12. Grant Opportunities • www.grants.gov provides access to: • Over 1,000 grant programs • Approximately $400 billion in annual awards • 26 Federal grant-making agencies

13. Cooperative Agreements • Statutory Basis - The Federal Grant and Cooperative Agreement Act – Feb. 1977 • Distinguished grants and cooperative agreements from procurement contracts • Established criteria to determine which is most appropriate • Instrument chosen must reflect the basic relationship between the federal and non-federal party.

14. Cooperative Agreements • Discretion in determining the nature and administration of the relationship • Competition is encouraged but CICA “full and open competition” is not required • Cannot be used to avoid procurement rules and regulations • No terms and conditions prescribed • Able to negotiate favorable terms for rights in Intellectual Property

15. Grants and CAs • Both need Independent Statutory Authority • Agencies have inherent authority to award contracts but not for grants or cooperative agreement (CA’s) • Must have specific statutory authority which is usually cited in each grant or CA • The specific authority needs to be reviewed for any procedural or other requirements

16. Grants and CAs • What distinguishes a Grant from a CA? • Similarities • Require statutory authority for the “public purpose” and must transfer a thing of value • Both are contractual agreements but not procurement contracts • Specifies the manner in which funds are to be used • Differences • Major difference is “substantial involvement” • For a cooperative agreement substantial involvement by both parties is required • For a grant substantial involvement by the government is not required

17. Part II – Cooperative Research & Development Agreements (CRADAs)

18. What is the Purpose of a CRADA? • A CRADA promotes transfer of commercial useful technologies from Federal laboratories to the private sector using any type of research, development, test or engineering • Unlike grants, cooperative agreements, and OT, a CRADA is a contract just not a “procurement” contract • Exempt from: • Federal Grant and Cooperative Agreement Act • Agency regulations concerning grants and cooperative agreements • FAR, DFARS, CICA • Cost sharing – usually 50/50 • Non-federal partner provides funds, personnel, services, facilities, equipment or other needed resource • Government provides the same resources but no funding

19. Statutory Authority for CRADAs • Stevenson-Wydler Technology Innovation Act of 1980 • Established the foundation for technology transfer within the Federal government • Provides for large Federal laboratories to establish Offices of Research and Technology Applications • Federal Technology Transfer Act of 1986 (P.L. 99-502) • Required scientists and engineers be responsible for technology transfer and have it as part of their performance evaluations • Required the Federal laboratories to actively seek opportunities to transfer technology • Mandated a preference for U.S.-based business. • Established the Federal Laboratory Consortium (FLC)

20. CRADA Types • Basic types of CRADAs • Spin-off – transfer federally developed technology to the private sector • Spin-off/spin-on –conduct a mutual transfer of technology between the Federal laboratory and the private sector • Extent of competition varies on whether • Laboratory initiated • Industry initiated

21. Variations of CRADAs • Modular – used to speed up the processing time to ensure competitiveness of the technology • Small Business CRADAs • limited to partnerships • not to exceed a combined dollar value total of $150,000 • Group CRADAs – those with organizations, groups of organizations, or consortia

22. Use of CRADAs • Can be used for Basic, Applied, Advanced, and Development research • Four requirements for CRADA funding: • The private sector will benefit • The Federal program will benefit • Financial debt, if any, are indicated • Listed milestones

23. Benefits to Both Parties • Ability to stretch research budgets and optimize resources • Ability to share technical expertise, ideas, and information in a protected environment • Allows the government to protect the information derived from the research from disclosure through FOIA for up to five years • Ability to work closely together and provide an opportunity to the Non-Federal partner to have access to a wide range of expertise in many disciplines within the Federal Government • Permits sharing or agreement for one partner to retain exclusive license to patentable research of intellectual property resulting from the effort • Permits both parties to establish closer contacts and take advantage of unique insights and opportunities

24. Benefits to the Non-Federal Partner • Opportunity to commercialize latest technology and enhance profitability • Opportunity to tap into vast technological resources of the Federal Labs • Utilize proven concepts without the cost of prototyping • Help diversify into new areas • Economic development and increased employment • Increased visibility and development of new niches

25. CRADAs and Intellectual Property • Major Consideration • Flexibility is key to success • Rights must be clearly defined • Capita/IR&D Contributions: • recognize company funded effort as “in kind” contribution • Generally government desires 50/50 split but negotiable

26. CRADA Example • The Navy has a sample CRADA format and handbook (http://www.onr.navy.mil/sci_tech/3t/transition/tech_tran/orta/docs/crada_handbook.doc) • Typical Content: • Article 1. DEFINITIONS • Article 2. OBJECTIVES • Article 3. RESPONSIBILITIES • Article 4. REPRESENTATIONS AND WARRANTIES • Article 5. FUNDING • Article 6. REPORTS AND PUBLICATIONS • Article 7. INTELLECTUAL PROPERTY

27. CRADA Example (cont’d) • Typical Content: • Article 8. TANGIBLE PROPERTY • Article 9. LIABILITY • Article 10. GENERAL PROVISIONS • Article 11. MODIFICATIONS AND NOTICES • Article 12. SURVIVING PROVISIONS • Article 13. DURATION • Article 14. SIGNATURES • Appendix A - Statement of Work • Appendix B - Confirmatory License Agreement

28. Identifing CRADA Opportunities • No master list • http://FEDBIZOPPS.gov can be searched using CRADA as the search term • http://www.federallabs.org lists all federal labs

29. Part III – Other Transactions

30. Definition • “Other Transactions” (OTs) is defined in the negative—as a “transaction” other than a procurement contract, grant, or cooperative agreement. • Authorized by 10 U.S.C. 2371 • Primary purpose to broaden DoD's technology and industrial base • Encourages participation in defense research by commercial firms that traditionally have not done business with the Government • OTs are not subject to statutes or regulations whose applicability is limited to contracts, grants, and/or cooperative agreements

31. History • 1958 – Authority began with NASA and the Advanced Projects Agency (Currently DARPA) • 1989 - Public Law 101-190 authorized DARPA to pursue its advanced research mission through “cooperative agreements and other transactions” • 1990 - Expanded by Sec. 826 of P.L. 102-190 to the Military Departments • 1993 – Provided Prototype authority under Sec. 845 of P.L. 103-160

32. History (cont’d) • 1998 - Transportation Department given authority • 2002 - Department of Homeland Security was granted authority • 2003 - The Services Acquisition Reform Act proposed to extend OT authority to all federal agencies • FY 2004 National Defense Authorization Act (NDAA) • Granted civilian executive agencies authorities to enter other transaction (OT) agreements “to facilitate defense against, or recovery from, terrorism or nuclear, biological, chemical, or radiological attack” • FY 2008 NDAA extended Prototype authority through September 2012

33. Other Transactions • Two basic types • Research • “Original” or Science and Technology (SAT) OTs • Technology Investment Agreements • Prototype OTs • Like Grants and Cooperative Agreements, they are not subject to: • CICA • FAR • DFARS

34. Parties to OTs • Agreement may be with: • a single contractor, a joint venture, a non-profit, educational institution, or a Consortium of contractors • entity must be legally responsible to execute the agreement • Consortium concern – Anti-Trust violations • Register with Dept. of Justice • Get immunity from damages • Minimum terms and conditions for Articles of Collaboration • Management structure • Method of payment to the members • Rights regarding Intellectual Property • Advance agreement on the Consortium relationship desirable

35. Research OTs • DoD Authority 10 U.S.C. 2371(e)(2) • Use of a procurement contract, grant, or cooperative agreement is not feasible or appropriate. • Conditions for use of Research Science and Technology OTs • Cannot duplicate research and development conducted under existing programs • Government funding cannot exceed that provided by the other party

36. Research OTs • Technology Investment Agreements (TIA) • New category of federal assistance • Used for basic, applied, and advanced research projects with for-profit firms or consortia • Can use an OT or “flexible cooperative agreement” format

37. Prototype OTs • DoD has been granted special authority (10 U.S.C. 2371) for prototype projects “directly related to weapons systems.” • Section 845 of NDAA (P.L. 103-160) • “Acquisition” rather than “Assistance” • Prototype projects are defined as: • Risk-reduction activities • Technology demonstrations • Projects that may require additional follow-on development • Purpose is to encourage participation of “non-traditional” defense contractors

38. Non-Traditional Defense Contractor • Must make a significant contribution and participate substantially otherwise: • At least one third of the total cost is to be paid out of funds provided by the parties to the transaction other than the federal government or • The senior procurement executive must determine 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 procurement contract.

39. Prototype OT Authority • Handout provides history details • Significant changes to 845 Authority • Extension of period of authority • Pilot program for commercial items • Changes to patent authority • Changes to thresholds • Follow-on authority • Others

40. Prototype OT Agreements • Develop an Acquisition Strategy • OT may require two written instruments • The OT agreement between the government and the contractor/consortium • Articles of Collaboration • Between members of the consortium • Government not a party but may approve/disapprove • Issue of concern – Anti-trust violations • DoD Guide to 845 Other Transactions (http://www.acq.osd.mil/dpap/Docs/otguide.doc)

41. Acquisition Strategy • Minimum areas to be addressed in an acquisition strategy: • Consistency with Authority • Justification for Other Transaction Authority • Technical description of the Program • Management description of the Program • Risk Assessment • Competition • Nature of the Agreement • Terms and Conditions • Follow-on Activities

42. OT Preparation • Terms and Conditions are generally negotiable but some agencies have a defined “opening position.” • Typical content • Scope • Term and Termination Rights • Management of the Project • Agreement Administration • Obligation and Payment • Disputes

43. OT Preparation • Typical content (cont’d) • Patent Rights • Data Rights • Foreign Access to Technology • Officials Not to Benefit • Civil Rights Act • Audit • Execution

44. OT Agreement Elements • Some clauses for consideration • Property • Warranties • Insurance • Disclosure of Information • Flow-down for Agreements with subcontractors or lower tier contractors

45. OT Agreement Elements • Typical attachments • Statement of Work • Reporting Requirements • Schedule of Payments and Payable Milestones • Funding Schedule • List of Government and Consortium representatives • Contract Security Classification Specification

46. Prototype OT Reporting • Report to Congress • Yearly for the previous FY • Includes all new awards, options, new phases, or additions to existing agreements • Information required to be completed for each new award 10 days prior to award • DD Form 2759 • Completed at time of award for each new OT action • Also completed for any change to the OT which obligates funds • Instructions for completion http://www.acq.osd.mil/dpap/Docs/WorkingOTGuide%2011-04.doc

47. Advantages of OTs • Encourages creativity and team work with the participants • Attracts technology firms that normally avoid government business • Harnesses incentive to develop and commercialize technology • Invokes commercial-like practices • Concentrates effort upon technical results that minimize “contractual” concerns • Leverages research dollars through cost sharing • Flexibility in tailoring of agreement “Best efforts” agreement--everything is negotiable

48. Disadvantages of OTs • Lack of precedents and experience with the process • Lack of regulations and reduced control • May be more time consuming than traditional cost-reimbursable R&D contracts • Administration involves multiple, unique agreements • May require greater participation by program managers • Labor intensive for acquisition personnel

49. OT Challenges • Maintaining the proper balance of risk and risk management between industry and government • Providing for efficient dispute resolution • Maintaining proper oversight without excessive bureaucracy • Intellectual Property

50. Conclusion • Various ways of doing business with the government • Procurements • Grants and Cooperative Agreements • CRADAs • OTs • OTs provide an excellent means of collaboration • Better, faster, cheaper!!!