MULTIPURPOSE SUPPORT: Family of Medium Tactical Vehicle (FMTV) M1078 2.5 ton cargo vehicles are capable of operating worldwide across various terrains and in extreme weather conditions. (Photo courtesy of PEO CS&CSS)
Lessons learned from applying flexible source selection tools and processes to the procurement of a Commercial Tactical Vehicle hybridization solution.
by Charles Park
The Department of Defense is the largest consumer of fuel in the world. This high consumption is driven in part by the needs of DOD vehicles, which spend 75 percent of their operational time idling in order to power necessary onboard electrical systems (e.g., radios, command-and-control systems, electronic warfare systems, etc.) and help maintain cabin climate control. However, this results in significant fuel consumption while the vehicle is stationary. Estimates indicate that tactical vehicles can burn from 30 percent to 60 percent of their fuel while stationary, during the course of normal use. This reduces vehicles’ range, burdens operational logistics chains and creates significant costs for DOD.
But what if these vehicles could be hybridized? How much fuel could DOD save? How much would that impact the logistics chain? The U.S. Army and the Defense Innovation Unit (DIU) are determined to find out.
LEVERAGING COMMERCIAL TECHNOLOGY
In 2021, the U.S. Army’s Project Manager (PM) for Transportation Systems, part of the Program Executive Office for Combat Support and Combat Service Support (PEO CS&CSS), sought out DIU to pursue tactical vehicle hybridization.
DIU is the only DOD organization dedicated to accelerating the adoption of dual-use technology and it partners with organizations across DOD to rapidly prototype and field advanced commercial solutions that address national security challenges.
Aware of the commercial sector’s effort to convert its fleets of long-haul, emergency and recreational vehicles into hybrids, PM Transportation Systems is focused on bringing hybrid vehicle capability to the U.S. military to improve vehicle fuel economy, increase tactical range and minimize logistical strain.
To get the latest, best-of-breed technology into warfighters’ hands, speed and agility are paramount to maintain a competitive advantage over our adversaries. DIU developed the commercial solutions opening process in 2016, which is based on other-transaction authority, to competitively prototype and acquire dual-use technology from nontraditional vendors faster than the traditional contract process, which can take more than 18 months. The commercial solutions opening process satisfies the competitive requirements for other-transaction agreements while providing maximum flexibility in making initial and follow-on (i.e., scalable) award selections.
Furthermore, the commercial solutions opening intentionally mirrors commercial acquisition methods, as opposed to traditional approaches under the Federal Acquisition Regulation (FAR), to quickly vet and select technologies that provide value to DOD.
There are numerous misconceptions around the other-transaction authority—one of them being that it is not a legal acquisition method. In fact, such transactions have been a statutorily authorized procurement tool since the 1960s. Today, other-transaction agreements come in many “flavors,” as detailed below. DIU primarily awards prototype other-transaction agreements.
10 U.S.C. §4021: Research & Development other transaction
Basic, applied and advanced research projects. Spur development of advanced technologies that may have commercial or military application (usually cost sharing).
10 U.S.C. §4022: Prototype other transaction
Prototype projects that are 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.
10 U.S.C. §4022(f): Production other transaction
Allows for a noncompetitive, follow-on other transaction to a prototype other-transaction agreement that was competitively awarded and successfully completed.
TACTICAL VEHICLE HYBRIDIZATION: A CASE STUDY
To kick off the search for viable, commercial hybridization solutions, DIU posted a solicitation to its website in April 2021. After 115 days and 23 vendor proposals submitted, DIU then issued a prototype other-transaction award to two nontraditional defense contractors—XL Fleet and Volta Power Systems. Six months later and with new funding, DIU awarded two additional prototype other-transaction agreements to nontraditional defense contractors Blackburn Energy and Stealth Power. Not only did DIU exercise flexibility in contracting by issuing multiple awards in a seven-month span, but the awards are also currently meeting all of the technical requirements and all phased milestones. The team estimates that these four solutions can yield approximately 20 percent fuel savings.
But what factors contributed to successfully awarding these prototype contracts? And what lessons can be gleaned for the broader DOD contracting community?
ONGOING AND FREQUENT COMMUNICATION
Ongoing and frequent communication among DIU, PM Transportation Systems and the prospective vendors allowed DIU to issue timely prototype other-transaction agreements for the hybridization project. Specifically, consistent government-vendor syncs helped to ensure that revisions to the statement of work and the terms and conditions did not impact the award schedule. Maintaining open lines of communication enabled the teams to anticipate potential issues and prevent or mitigate them. For example, early integration of legal and policy personnel can help to mitigate potential disagreements. Similarly, opening the line of communication between the DOD prototyping partner, PEO CS&CSS and the prospective vendors allows the team to anticipate high-level interests (e.g., funding sources) and quickly make adjustments, especially if there is personnel turnover, to ensure a smooth execution. In the case of the hybridization commercial solutions opening, the DIU program manager set a manageable but fast-paced timeline. The DIU program manager was involved in each step of the process, scheduling and attending meetings to keep things running smoothly.
FLAT TEAMS FACILITATE COLLABORATION
Contract awards do not flow through a single individual. Rather, they are the result of a dynamic process that spans multiple stakeholders. The government team that executed the hybridization other-transaction agreement included a DIU agreements officer (a contracting officer for other-transaction agreements), an acquisition chief, a DIU program manager, a representative from PM Transportation Systems, an agreement officer representative, legal counsel, policy experts and other supporting personnel. These stakeholders need to work together on all aspects of other-transaction execution. What is noteworthy about the government team is its non-hierarchical nature. Having a flat team helped ensure that all parties had a shared sense of responsibility and were responsive to one another when it came to defining and refining the problem, determining whether the other-transaction authority is the appropriate award instrument, deciding how to publicize and solicit sources and developing the other-transaction agreement itself. Most DOD organizations have a formal legal review process that can take more time. At DIU, the agreements officer is able to contact DIU legal counsel directly and discuss potential legal issues as they occur, limiting potential delays. Moreover, throughout the hybridization commercial solutions opening, the agreements officer worked in parallel with the DIU program manager; the lead DIU program manager focused on technical requirements while the agreements officer concurrently negotiated other transaction terms and conditions and pricing with companies.
“Teamwork has been excellent,” said Jack Johnson, chief technology officer and co-founder of Volta Power Systems. “I’ve been impressed with the team’s ability to work together (and) capture issues, (the) speed of resolution and excellent communication around technical details.”
PRACTICE TRANSPARENCY TO BUILD TRUST
Not all DOD partners are alike when it comes to their level of experience with other-transaction agreements. Some partners are super users while others are new adopters. Similarly, some industry partners, especially non-traditional defense contractors, may not have experience working with DOD. As such, the agreements officer must often act as both an educator and an honest broker by setting realistic expectations around timelines and reaching an agreement around the required level of intellectual property rights.
Under commercial solutions openings and other transactions, the government may often partner with industry to a greater extent than it would under a typical FAR-based source selection, making it an ideal way for small and first-time contractors to get their foot in the door with DOD. During the hybridization commercial solutions opening, the DIU team worked closely with both industry and DOD partners to help educate them on the nuances of the other-transaction contracting process. The DIU team also shared advice on how to achieve equitable intellectual property terms that balance the companies’ need to protect their data rights with the government’s need for essential information that will inform future decisions and save taxpayer dollars in the long run.
LEARN TO SPEAK COMMERCIAL
Traditional contractors that work with DOD on a regular basis are considerably different from those that work primarily in the private sector. Today’s contracting officers are taught about FAR-based contracting principles, policies and procedures, but most have limited experience in commercial contracting and private industry best practices. Defense program and contracting managers must constantly evaluate existing and rapidly changing industry products and services, but this is mostly limited to the government’s traditional contractors. Non-traditional enterprises creating innovative technology for commercial or non-defense markets may be excluded.
DOD program and contract personnel at all levels must learn to apply strategic and tactical market research approaches from private industry on a continual and routine basis. Existing commercial best practices and market research tools must be re-disseminated and re-emphasized to DOD acquisition personnel. We must all learn to value market research in order to accomplish the short-term results as well as the long-term program acquisition plans required by DOD to attain technological and mission superiority. Understanding who they are, where they are and what motivates them, is critical for establishing criteria and acquisition strategies that will attract nontraditional contractors.
DIU’s hybridization program manager—who led the negotiation—had substantial commercial electric vehicle working experience, and the agreements officer has worked on several non-FAR, commercial contracts. The members of the DIU team were also current or former military officers. Collectively, these experiences gave the team unique insights into both sides of the agreement process and helped build an equitable contract for all parties.
PLAN FOR FOLLOW-ON ACTIVITIES
DIU’s acquisition best practices highlight that government teams should plan for follow-on work for prototyping and production contracts from the beginning of prototype projects. This allows for potential scaling of successful efforts to a broader adoption of these emerging technologies. For the hybridization project, follow-on production and scaling were planned early on. Specifically, follow-on production requirements were listed in the original solicitation, as well as the statement of work and the terms and conditions.
In mid-July, the DIU team announced that the first prototype vehicle was delivered for evaluation, just nine months after the first contracts were officially awarded. Other transactions can provide the government with increased flexibility to solicit sources and award agreements in a way that attracts nontraditional sources and leverages commercial capabilities. Good teams resolve conflicts quickly and constructively. Ongoing and frequent communication and collaboration among the government team and contractors will enhance the likelihood of a successful award. DIU has had success these past seven years by helping to grow the national security innovation base, attracting companies that would have otherwise passed on working with DOD. The flexibility, transparency and agility of the commercial solutions opening play an important part.
For more information, go to https://www.diu.mil.
CHARLES PARK is a mobilized DIU Army Reservist and a U. S. Air Force civilian contract and ethics attorney. He holds a Juris Doctor from the University of South Dakota, a Master of Public Administration from the University of South Dakota and a B. A. from the University of California Santa Barbara.