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GAO Says Oracle Protest Did Not Make Policy; Criticizes Greenwalt Op-ed

Posted by Kenneth Patton on

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I’ve been covering Pentagon acquisition policy for more than 15 years and this is a first for me. The Government Accountability Office offers below a critique of Bill Greenwalt’s sharp criticism of a recent GAO protest decision. For those of us who watch Pentagon procurement, most protests are obscure and boring. Then come ones like the airborne tanker decision that led to Northrop Grumman’s loss of the tanker contract. Or this one, that Greenwalt, who was Sen. John McCain’s pick to lead acquisition policy work for the Senate Armed Services Committee, argues could cripple the Pentagon’s fledgling efforts to reach out to Silicon Valley and take advantage of its work on Artificial Intelligence, machine learning and other technologies dominated by the commercial sector. Read on to see GAO’s argument! The Editor.

Bill Greenwalt makes several inaccurate statements about GAO’s decision regarding the Army’s use of Other Transaction Authority (OTA) in his June 25 commentary, GAO Decision Threatens US Military Dominance; Reject It.

He overstates the results of our protest decision, accusing GAO of “establishing a newfound protest jurisdiction,” inserting itself as the “sole ruler” on when a prototype is complete, and ignoring the law to make procurement policy. Simply put, none of those claims are accurate and GAO’s decision in no way interrupts innovations in procurement. It only signifies that Department of Defense (DoD) agencies, to the extent applicable, should follow the conditions of the statute.   

Kenneth Patton of GAO

Other Transactions (OTA) are legally-binding agreements that are generally exempt from federal laws and regulations applicable to procurement contracts. A recent GAO analysis identified statutory grants of OTA to 11 federal agencies, including DoD. Agencies that have been granted statutory authority to use these “other transactions” have been able to flexibly address concerns over applicable requirements in traditional contracting approaches.   

GAO supports such innovations in procurement. To be clear, as part of our bid protest reviews, GAO does not review how agencies use their OTA. GAO only conducts reviews limited to whether agencies follow the statute authorizing an OTA’s use. That was the case in the decision in question (Oracle America, Inc., B-616061; May 31, 2018). 

The OTA at issue in this protest sets out a two-step process for the award of a follow-on production transaction, without further competition. First, the Defense Department has statutory authority to use “other transactions” to develop prototype projects. DoD has developed an expansive definition of a prototype project — it includes “a 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.”

The GAO decision deferred to DoD’s definition of the term, even though the protester criticized the definition as overly broad. Second, the department’s authority permits moving from a prototype project to follow-on production without competition, provided that certain conditions are met. The GAO decision simply concludes that two of the conditions for moving to follow-on production without competition were not met. The conditions not met were that: the prototype project be successfully completed; and the agreement for the prototype project provide for follow-on production without competition.  

Bill Greenwalt

In this case, the record showed that the entirety of the prototype project was not successfully completed prior to award of the follow-on production transaction; the Army wanted to move to follow-on production with completed portions of the prototype project. In addition, the Army itself acknowledged that GAO has jurisdiction to review whether the agency was improperly using a non-procurement agreement and acknowledged that the prototype project transaction itself did not provide for follow-on production without competition. Without satisfying these two statutory requirements, the Army was simply without authority to issue the follow-on production transaction.

The Oracle decision was not the first time that GAO has considered an agency’s use of OTA. GAO has issued at least two other decisions where it considered such authority. In these cases, GAO concluded that Congress had provided these agencies with authority to use other transactions and that the agencies had properly exercised that authority. GAO’s role in these decisions, as in the Oracle decision, is an important one.  If an agency does not satisfy the statutory conditions for the use of this authority, the agency has no authority to avoid the competition laws.

Contrary to Greenwalt’s assertions, GAO did not create new law, or make policy, in the Oracle decision.  Instead, GAO applied the facts to the existing statute and concluded that the Army did not satisfy the statutory conditions for using an OTA to obtain follow-on production of a prototype without competition.  GAO of course fully supports agencies using their OTA as long as they satisfy the statutory conditions granting such authority.

Kenneth Patton is managing associate General Counsel of the Government Accountability Office, the congressional watchdog.

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