Pentagon’s Fast-Track Funding Lacks Reliable Data, Report Finds

(Bloomberg) -- The Pentagon lacks solid data to determine whether its increasing use of a fast-track method to fund research and prototypes through non-traditional defense firms is effective, according to a new congressional analysis.

Along with potential benefits such as cutting the time and red tape for small contracts, there are “potential risks, including that of diminished oversight and exemptions from laws and regulations” that are “designed to protect government and taxpayer interests,” the Congressional Research Service found in its assessment.

The nonpartisan research office said “the questionable reliability of the available data” on the funding mechanism known as Other Transaction Authority raises “questions that Congress may wish to explore” because use of the agreements is “expected to continue to grow at a rapid pace.”

In fiscal 2017, they totaled $2.1 billion, less than 1 percent of the Defense Department’s roughly $320 billion in contract obligations.

The fast-track agreements are aimed at “attracting companies that would otherwise forgo working with DoD and promoting broader investment in critical defense capabilities,” according to the report.

Supporters say the agreements can be completed in weeks instead of the months or years sometimes required for major deals with mainline defense contractors. But the congressional researchers said the Defense Department “has not tracked data on the relative time it takes to execute” them, “making it impossible to objectively assess these claims.”

The agreements, which aren’t formal contracts, don’t include the oversight and audit provisions of traditional contracts. In the fiscal 2018 defense policy bill, Congress encouraged their use in appropriate circumstances.

Pentagon officials, including chief weapons buyer Ellen Lord, have endorsed wider use of OTAs, and in December published a handbook to clarify how they should be implemented.

Still, the Pentagon “lacks authoritative data that can be used to assess OT effectiveness and better understand broader trends associated with these agreements,” in part because the data is divided between two systems that aren’t fully reliable, analysts Moshe Schwartz and Heidi Peters say in the comprehensive assessment.

According to the research office, the Army has been the most aggressive service -- implementing more than 66 percent of the OTAs from fiscal 2013 through fiscal 2017.

Bloomberg Government analyst Cameron Leuthy wrote in October that the Army wants to use the authority to fund ideas for a prototype predictive maintenance system for tanks, Stryker wheeled vehicles and attack helicopters.

BGOV Analysis: Army Readies Predictive Maintenance OTA Competition

--With assistance from Cameron Leuthy.

To contact the reporter on this story: Tony Capaccio in Washington at acapaccio@bloomberg.net

To contact the editors responsible for this story: Bill Faries at wfaries@bloomberg.net, Larry Liebert, Ros Krasny

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