Why the Pentagon needs to bolster its network of corporate consortiums

For decades, the Defense department has used organized consortia of companies to acquire advanced technologies. The Center for Government Contracting at George ...

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For decades, the government — mainly the Defense department — has used organized consortia of companies to acquire advanced technologies. Now the Center for Government Contracting at George Mason University has urged the Pentagon to consider a list of ways to improve the consortium model. The find out more about this, Stephanie Halcrow, senior fellow at George Mason University’s Center for Government Contracting, joined the Federal Drive with Tom Temin.

Interview transcript:

Tom Temin  So my first questions are why a monograph that you have published on consortia now? You begin by explaining that this paper is not about other transaction authorities. So maybe tie together some dots for us. Why is consortia important at this time? And what’s the relationship between consortia and the use of other transaction authorities?

Stephanie Halcrow  Thanks, the idea of consortia and other transaction authorities is often conflated. People think that they’re the same thing and that consortia have to use Other Transaction Agreements (OTAs) to do their business. And what we found in this report is that, actually, the first consortia did not use OTs and there are consortia out there today who don’t use OTs. In the past year, two years, there’s been a lot of reports written on OTs, and we wanted to make sure that we differentiated that we are going to be looking at consortia, specifically the consortia model and not at the use of OTs.

Tom Temin  Alright, let’s talk about the consortia model, then the consortium model. As you point out, it’s goes back almost 40 years and the National Armaments Consortium, which has been a guest on this show, is kind of the granddaddy of them. Just briefly explained to us what they are and what the government tends to buy from them and maybe just a quick survey of the consortia out there that you tallied up?

Stephanie Halcrow  Yeah, absolutely. At the time that we published a report, we found that there’s 42 consortia out there doing business with the government. And I say at the time that we’ve published this report because there are new consortia being organized around different technology areas all the time to meet government needs. A consortia model consists of three entities and every consortia model is unique, but typically there’s a government sponsor; there is a consortia, which organizes the members around a certain technology and then sometimes, most often, there’s what we call a consortium management firm, who provides a lot of the administrative support for the consortia, for the government in doing that. Sometimes the consortia provide those services as well. But over time, we’ve seen the consortia management firm become one of those three pillars of the consortia model.

Tom Temin  Got it. And the consortiums, the consortia, are generally composed of well-known companies, the ones I’ve looked at lists of. So what is the advantage to the government of having companies that it’s already doing business with elsewhere in a consortium?

Stephanie Halcrow  Yeah. It’s interesting, when I started writing this report, and had the opportunity to work on this, I did not know a lot of about consortia. And I’d worked on the Hill. And when I approached this report, I said, you know, I want to write the report that I always wanted to read when I was working on the Armed Services Committee. And one of those questions was who are the members and what is the makeup? And we got 12 consortia out of the 42 to provide us data on their membership. We found that about 77% of the members across the board are non-traditional defense contractors, specifically, according to the definition that is in statute. That was pleasantly surprising to me to find that over 3/4 of the members of these consortia were companies you had not heard of. And so that’s why the title of the report we say the consortium model expands the defense industrial base.

Tom Temin  Got it. So it’s a place to get innovation. And let me just ask you this. When a requirement is put to the consortium through the consortium management firm, typically, and the consortium does something that results in a bid for that requirement, does the government end up buying from a single member of the consortium or a couple of companies, because you can’t really buy from the consortium itself? Because it’s just an idea that is behind the management company. So you have to buy from a company ultimately.

Stephanie Halcrow  Yeah, so the contract is usually awarded to the consortia, which then passes it on to the industry. The consortia doesn’t do much work. So this is why we sometimes see in the roll up of data where a consortium management firm specifically seem like they’re getting a lot of money, but that money is typically being flowed to the industry that is a member of that consortia.

Tom Temin  Interesting. We’re speaking with Stephanie Halcrow. She’s senior fellow at the Center for Government Contracting at George Mason University. And does the government have any say over the flow down of that money? Or is it up to the consortia management firm to decide the best company to fulfill that requirement?

Stephanie Halcrow  The government chooses who gets that award. What the consortia provide, and somewhat the consortium management firm, is the collaboration opportunity between the industry and the government to talk about what is the requirements the government’s looking for, what are the products and services that the industry can bring and that informs oftentimes the government requirements and enhances them. So that collaboration between industry in the members of the consortia that the consortia put together and allow to happen is really one of the value propositions that we highlight as why government benefits from consortia.

Tom Temin  Right. And as your report describes, it’s a unique form. It’s not exactly a government acquisition contract (GWAC), although it has elements of that. It’s not exactly a multiple award contract with task orders. Although, it has elements of that. It’s not exactly the GSA schedules and it even has elements of that. It’s unique and what it pulls together. Therefore, you have thought that maybe the Pentagon needs to look at some recommendations for preserving and strengthening the consortium model, assuming that it has the value that you don’t get from GWACs and schedules and the rest of it. So let’s go over what the chief recommendations are, that you feel would strengthen the consortia model.

Stephanie Halcrow  One of the things that we tried to do in this report is focus on the data and look at what the value proposition was from the data. Frankly, the data was hard to find. It’s not publicly, easily accessible. We had to go out to individual consortia by individual consortia and ask them to provide certain data. We were able to get 12 of the 42 to participate. That’s great. The data was very positive. We recommend the Department of Defense embrace transparency and visibility with the data in a publicly available format. Congress over the last several years, has been upping the requirements on the Department of Defense each year on what they have to provide with regards to OT specifically. We think that that is good, we support that and we think it’ll support the value proposition. In the same conversation, people will say, “Well, you know what, maybe we need to like float down some of the federal acquisition regulation (FAR) requirements to the OTs” and we recommend that we avoid any additional regulatory burden, because the flexibility that is provided through OT contract vehicle that the consortium leverage is really foundational to the benefits.

Tom Temin  Right, sometimes Congress can hug something a little too closely in other words.

Stephanie Halcrow  Congress and DoD, you know, there’s a lot of people that can add regulatory burden and have that input. So avoid that at all cost.

Tom Temin  All right. So some transparency, maybe the federal procurement database would be the place that that information could be shared with an asterisk, this was a consortium for example.

Stephanie Halcrow  Yeah, absolutely. And the fiscal year 22 National Defense Authorization Act (NDAA) provided some very specific direction, not only to DoD to collect the data, but also for [the] General Services Administration (GSA) to track and publish the data publicly. And we applaud that.

Tom Temin  All right. Any other main recommendations?

Stephanie Halcrow  Well, I think the other unique opportunity that’s provided in statute is the ability to transition a prototype that is typically the type of activity that is done in consortia to production. The information linking prototypes to production is very difficult to find, because typically, the prototype is done in the consortia, but the production contract is done directly with the government. So linking those two together and taking that opportunity to transition things from prototype to production. We also recommend the government do that more.

Tom Temin  Right. The big danger is a small innovative company gets a challenge grant or a OTA contract to build a prototype and then Northrop Grumman gets to build 100,000. Not what we shouldn’t be seeing, in other words.

Stephanie Halcrow  Well, I’d say one of the key studies in the report actually highlights the ability through the consortia model, a non-traditional defense contractor — a small company potentially or a company that doesn’t do business with the government — to be tested by the Department of Defense on a prototype and when there’s successful completion of that, then the government has confidence in the company that they can actually go to production. So exactly. So you continue to expand the defense industrial base by leveraging this ability to transition efforts from prototype to production.

Tom Temin  Alright, some interesting thoughts. Stephanie Halcrow is senior fellow with the Center for Government Contracting at George Mason University. Thanks so much for joining me.

Stephanie Halcrow  Thanks, Tom. Sure, appreciate being here this morning.

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