Contracts for Innovation: What, Which, and Why?

The US Department of Defense (DoD) employs various FAR (Federal Acquisition Regulation) based and Non-FAR based contract types to foster military innovation and maintain a competitive edge. This article delves into the advantages, best use cases, and potential disadvantages of four such contract types: Other Transaction Authority (OTA), Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) Programs, Cooperative Research and Development Agreements (CRADAs), Prize Competitions, Partnership Intermediary Agreement (PIA), and Technology Investment Agreement (TIA).

1. Other Transaction Authority (OTA): Fast-Tracking Procurement

OTAs expedite procurement by bypassing FAR requirements, offering enhanced flexibility, quicker execution, and attracting non-traditional partners. Ideal for prototyping and bridging the "Valley of Death," OTAs do face potential drawbacks, such as limited oversight and a risk of misuse.

Hypothetical Use Case: A start-up company has developed a cutting-edge drone technology that could greatly enhance military reconnaissance capabilities. To quickly acquire and test this technology, the DoD utilizes an OTA to bypass the traditional procurement process, allowing the start-up to deliver prototypes for rapid field testing and potential deployment.

Less Ideal Contract Types:

• SBIR/STTR: This approach may not provide the necessary speed for procurement and is restricted to small businesses, potentially excluding the start-up if it doesn't meet size criteria.

• CRADA: A CRADA would require collaboration with multiple entities, which might be unnecessary and slow down the process.

• Prize Competition: A competition wouldn't guarantee that the desired drone technology would be submitted or win, making it an uncertain option.

• PIA: A PIA could involve unnecessary coordination and might not be ideal for rapid procurement.

• TIA: A TIA may not be suitable for early-stage research and development projects or those lacking a strong private sector partner.

2. SBIR and STTR Programs: Empowering Small Businesses

SBIR and STTR programs encourage small businesses to participate in federal research and development, stimulating innovation and diversifying the DoD's supplier base. Best suited for early-stage research and technology commercialization, these programs' limitations include a narrow scope and funding constraints.

Hypothetical Use Case: A small business has developed an innovative energy storage solution that could revolutionize military vehicle power systems. Through an SBIR contract, the DoD provides funding for further research and development, allowing the company to refine its technology and eventually commercialize it for broader military and civilian applications.

Less Ideal Contract Types:

• OTA: Although it could expedite the process, an OTA may not provide the necessary funding and support for early-stage research and development that the SBIR program offers.

• CRADA: A CRADA would require collaboration with other entities, which might be unnecessary for the small business's research and development process.

• Prize Competition: The small business might not be guaranteed funding for their specific project, as competitions involve multiple participants and uncertain outcomes.

• PIA: A PIA may not be suitable for small businesses focused on research and development, as it primarily aims to facilitate public-private partnerships.

• TIA: A TIA might not be appropriate for early-stage research or projects without a strong private sector partner.

3. Cooperative Research and Development Agreements (CRADAs): Promoting Collaboration

CRADAs foster collaboration between government agencies, industry, and academia by sharing resources, expertise, and intellectual property. While ideal for joint research and technology transfer, CRADAs may involve complex negotiations and have limited applicability in certain cases.

Hypothetical Use Case: A university research lab has expertise in advanced materials, while a private defense contractor has experience in manufacturing military armor. Through a CRADA, the DoD facilitates a partnership between the two entities, combining their respective expertise to develop a new, lightweight armor material for soldiers, increasing their mobility and protection.

Less Ideal Contract Types:

• OTA: An OTA might not promote the necessary collaboration between the university research lab and the private defense contractor, as it primarily aims to expedite procurement.

• SBIR/STTR: These programs are limited to small businesses, excluding the private defense contractor and university from participation.

• Prize Competition: While it could attract innovative ideas, a competition may not guarantee the desired collaboration between the university research lab and the private defense contractor, making it a less suitable option.

• PIA: A PIA could be less effective in fostering direct collaboration between the university and the defense contractor, as it primarily focuses on facilitating partnerships between government agencies and intermediaries.

• TIA: A TIA may not be appropriate for joint research projects that don't involve significant financial support or risk-sharing.

4. Prize Competitions: Tapping into Diverse Innovators

Prize competitions offer cash rewards for solving specific military challenges, promoting cost-effective innovation, broad participation, and encouraging risk-taking. Ideal for addressing discrete problems and crowd-sourcing ideas, competitions may not be suitable for complex, long-term projects or those with intellectual property concerns.

Hypothetical Use Case: The DoD faces challenges in enhancing the durability of military boots in harsh environments. By organizing a prize competition, the department attracts a diverse pool of participants, including individuals, small businesses, and academic institutions. An innovative sole design submitted by an individual inventor wins the competition, providing a cost-effective solution for more durable boots that withstand extreme conditions.

Less Ideal Contract Types:

• OTA: The flexibility of an OTA may not be necessary for a well-defined problem like improving boot durability, and it might not attract the same level of diverse participation as a competition.

• SBIR/STTR: These programs focus on small businesses and may not engage individual inventors or academic institutions, limiting the potential for innovative solutions.

• CRADA: Establishing a CRADA may require more time, resources, and negotiations than a prize competition, potentially making it less efficient for addressing a specific, well-defined challenge.

• PIA: A PIA may not be suitable for addressing a specific problem, as it primarily aims to facilitate public-private partnerships.

• TIA: A TIA might not be appropriate for projects with well-defined challenges and no need for risk-sharing or significant financial support.

5. Partnership Intermediary Agreement (PIA): Facilitating Public-Private Partnerships

Facilitating Public-Private Partnerships PIAs enable government agencies to work with partnership intermediaries, such as universities or nonprofit organizations, to engage with the private sector, particularly small businesses and startups. PIAs can help bridge the gap between the government and the private sector, fostering collaboration and knowledge exchange. However, they may require significant coordination and may not be suitable for projects that demand rapid procurement.

Hypothetical Use Case: The DoD wants to engage with innovative startups in the cybersecurity sector but faces challenges in reaching out to these companies. By entering into a PIA with a university-based technology transfer office, the DoD can leverage the office's expertise and connections to identify and collaborate with promising cybersecurity startups.

Less Ideal Contract Types:

• OTA: An OTA may not focus on building long-term relationships and knowledge exchange with the private sector, instead aiming for quicker procurement.

• SBIR/STTR: These programs target small businesses specifically, but may not provide the necessary collaboration with academia or other intermediaries that a PIA can offer.

• CRADA: While CRADAs promote collaboration, they may be more appropriate for joint research projects rather than facilitating broader engagement with the private sector.

• Prize Competition: Competitions may not foster long-term partnerships with private sector entities, as they focus on solving specific problems.

• TIA: TIAs are better suited for projects that require significant financial support and risk-sharing, which may not be necessary for fostering partnerships through a PIA.

6. Technology Investment Agreement (TIA): Promoting Advanced Technology Development

Promoting Advanced Technology Development TIAs are flexible, non-FAR agreements that support the development of advanced technologies by sharing risks and rewards between the government and the private sector. Ideal for projects with high potential for commercialization and military application, TIAs may not be well-suited for early-stage research or projects without a strong private sector partner.

Hypothetical Use Case: A private company is developing a next-generation satellite communication system that has both commercial and military applications. However, the technology is expensive and risky to develop. The DoD enters into a TIA with the company, providing financial support and sharing risks, which helps the company overcome funding challenges and bring the technology to market.

Less Ideal Contract Types:

• OTA: While OTAs offer flexibility, they may not provide the risk-sharing and long-term commitment needed for high-risk, high-reward technology development.

• SBIR/STTR: These programs are focused on small businesses and may not provide the level of funding or risk-sharing required for advanced technology development.

• CRADA: A CRADA may not offer the necessary financial support or risk-sharing mechanisms, as it primarily focuses on collaboration and joint research.

• Prize Competition: Competitions may not provide the long-term commitment or risk-sharing needed for developing advanced technologies with significant commercial potential.

• PIA: PIAs are designed to facilitate public-private partnerships and may not be appropriate for projects that require substantial financial support and risk-sharing.

These contract types offer valuable mechanisms for fostering military innovation. By carefully considering the specific needs and objectives of each innovation project and selecting the most appropriate contract type, the DoD can leverage the strengths of diverse contracting tools to drive innovation and maintain its military advantage. With OTAs enabling rapid procurement, SBIR and STTR programs stimulating small business innovation, CRADAs fostering collaboration, prize competitions attracting diverse participants, PIAs facilitating public-private partnerships, and TIAs promoting advanced Technology development, the DoD has a robust toolbox for promoting military innovation.