On February 5, 2015, the U.S. Army Contracting Command issued a special notice announcing that the Office of the Deputy Assistant Secretary of Defense, Emerging Capabilities and Prototyping Office, intends to enter into a section 845 Prototype Other Transaction (“OT”) Agreement with the National Spectrum Consortium (“NSC”). This is the latest development in an initiative of the Department of Defense (“DOD”), first announced in March 2014, to provide government funding to support the research, development and maturation of technologies to enable advanced approaches to electromagnetic spectrum use. This program emerges as the call for significantly more commercial mobile wireless spectrum continues unabated and the pressure increases on DOD and other federal government agencies to make more efficient use of their spectrum. The recent results of the AWS-3 spectrum auction – more than $45 billion raised – leaves no doubt as to the value of additional spectrum access for wireless broadband providers. Yet, increased spectrum requirements is not a problem faced by the commercial mobile industry alone. All aspects of government and industry are feeling the crunch which many believe suppresses U.S. innovation and economic growth and has the potential to adversely impact U.S. military operations both domestically and overseas. The resulting need for more efficient spectrum use and the necessity for more spectrum sharing by government users among themselves and with non-federal government users has created a sense of urgency within DOD to explore, develop and implement solutions.
The 845 Prototype OT Agreement is expected as the first step in a significant funding opportunity. The Assistant Secretary of Defense for Research and Engineering (OASD (R&E)) has budgeted at least $150 million to award to both traditional and non-traditional government contractors for projects to broaden the military and commercial access to, and use of, the electromagnetic spectrum (in addition to Spectrum Relocation Fund monies). DOD has said that specific industry segments of interest will include wireless technologies, radars and signal processing, electronic warfare, spectrum monitoring and sensing, and optical free space communications. The process enabled by the OT Agreement is expected to afford increased visibility into DOD spectrum needs and priorities and offer greater ability to leverage independent R&D investments to meet those needs. DOD officials stated repeatedly at a December 2014 Dynamic Spectrum Access Industry Day that “everything is on the table.”
Only NSC members will be eligible to receive sub-agreements under the OT Agreement awarded to the NSC. Due to the nature of the OT authority granted to the DoD, the focus of the NSC will be, to the maximum extent possible, to encourage the involvement of non-traditional government contractors. However, there will be significant opportunities for traditional government contractors as well. The NSC currently is accepting membership applications from all U.S. companies and universities which are capable of making a technical contribution to the advancement of spectrum–related technologies. As of February 7, 2015, twenty-five (25) members were listed on the NSC website. Membership is open to any company, university, or research organization and is subject to low entry barriers.
The intended OT Agreement with the NSC recently announced will be for a period of five (5) years.
DOD announcements explain that the collaboration envisioned between the government and industry under the OT Agreement, and ancillary agreements between and among the NSC and its members, will focus on four major activities:
(1) Maturing technologies that assist in improved electromagnetic spectrum awareness, sharing, and use;
(2) Experimentation to better inform the optimal allocation of those technologies for both public and private objectives;
(3) Demonstration of new technologies to increase trust among spectrum stakeholders; and
(4) Policy development to ensure technologies don't outpace the appropriate guidance for their best use.
DOD anticipates that the OT Agreement with the NSC will facilitate more focused research agendas coupled with rapid contracting for spectrum-related R&D, generate unprecedented ability to tailor research, support policy consideration simultaneously with technological advances, and eliminate excessive bureaucratic requirements.
OT Agreements and the NSC
An OT agreement is a special type of contract vehicle used by Congressionally authorized government agencies, such as DOD, to identify, develop, and demonstrate emerging technologies. The OT Authority was statutorily created to assist certain government agencies (DOD, NASA, DHS) in quickly obtaining leading-edge R&D and prototypes from commercial sources that are unwilling or unable to comply with the government’s comparably onerous and complex procurement regulations. An OT agreement provides authorized agencies the flexibility necessary to negotiate agreements tailored to a specific transaction. As noted above, DOD intends to award a sole source award of the OT Agreement to NSC, after which there will be consultations between the DOD and NSC members to help DOD identify technology projects meriting R&D funds under the OT Agreement. The NSC, in coordination with DOD, will issue RFPs to which only NSC members may respond. NSC will then award sub-agreements (contracts or grants) under the OT Agreement to NSC members for the specific, approved, electromagnetic spectrum R&D projects. The exact vehicles by which consultations with the governments will occur, the frequency of RFPs, and other details of how the NSC-NSC Member-DOD relationship will play out is still under discussion, but now that the DOD has announced its intent to enter into the OTA with NSC, it is expected that consultation and award activity will occur in the near future.
The NSC is actively seeking membership of traditional and non-traditional government contractors, commercial contractors, small businesses, academic institutions, research organizations, and non-profit organizations that have expertise and experience in electromagnetic spectrum and wireless communications technologies. The NSC is managed by SCRA Applied R&D (“SCRA”), aka Advanced Technology International (the “Consortium Management Firm”). SCRA will be authorized to negotiate, execute and administer the NSC’s efforts under the OT Agreement awarded by the DOD. SCRA will issue RFPs in conjunction with DOD, collect proposals, enter into sub-agreements after award is made by the DOD entity evaluating proposals, and perform cost analysis on proposals submitted by NSC’s members. SCRA will also serve as a third party to help mitigate the risk of potential antitrust violations among the members. Compared to the level of funding available, the cost of membership is low: $1,500 annually for large business, and $500 annually for small business, universities, and non-profits.
Traditional and Non-Traditional Government Contractor Qualifications for Contracts under the OTA
Certain requirements will apply to NSC members interested in competing for a research and development contract under the OT Agreement. Notably, the OT Agreement will require the “participation to a significant extent” of a “non-traditional government (or “defense”) contractor” at any level of the project or, alternatively, a 33% cost share on all projects awarded. The significant participation of a “non-traditional defense contract” could include the “non-traditional defense contractor” supplying key technologies or products, accomplishing a significant part of the effort, causing a material reduction in the cost or schedule, or causing a material increase in performance. A contractor ceases being a “non-traditional” government contractor when it has entered into, or performed an existing government contract worth more than $500,000 or that is subject to full Cost Accounting Standards coverage. A non-traditional defense contractor awarded a contract in excess of $500,000 by the NSC would not lose its classification of “non-traditional.”
The attorneys in Kelley Drye & Warren’s Communications and Government Contracts practice groups are experienced in addressing issues related to spectrum technologies and the OT Authority granted to the DOD for this and other OT agreement opportunities. For more information, please contact: