Column: OTAs and SBIR/STTR -- Non-Traditional, Innovative Contracting Tools

     INNOVATION!

      Innovation has certainly been the buzz word as of late, especially in and around the Defense Dept. (DOD). In a new era of great power competition, it has become imperative for the military to be able to improve its technological edge more quickly while leveraging the full range of America’s economic might. That means enticing non-traditional contractors (such as tech-sector companies), innovative small business firms, and even large, traditional defense contractors to assist in this effort.

      Unfortunately, doing business with the government can be cumbersome to say the least and there is a particularly negative perception regarding what rights the government may have in any new intellectual property developed during contract performance.

      There are two contracting instruments now available to the government that seek to alleviate these concerns—the Other Transaction Agreement (OTA) and the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs.

What are OTAs

      OTAs have received considerable press over the last few years. However, few understand the ins and outs of OTAs and what exactly makes them different from traditional government contracts.

      In a nutshell, OTAs are agreements entered into by the government for research, prototype or production that are not governed by the Federal Acquisition Regulation (FAR) and do not fall under other types of non-FAR vehicles (such as a Cooperative Research and Development Agreement).

      Agencies must have specific statutory authority to enter into OTAs and several federal departments have such authority. In fact, the OTA has been around for decades—first being used by NASA during the space race.

      The specific OTA authority that has received the most attention in recent years has been the DOD prototype/production OTA authorized at 10 U.S.C. § 2371b, which gives the DOD authority to enter into OTAs for prototype and even follow-on production.

      At the most basic level, OTAs are not subject to the FAR including the FAR’s supplements (i.e. the DFARS). An OTA then will often look vastly different from a traditional government contract.

      OTAs are also specifically exempted from certain statutes such as the Competition in Contracting Act (CICA), the Contract Disputes Act (CDA) and the Buy American Act (BAA).

      On the other hand, OTA contractors should expect similar termination, stop-work and security requirements clauses and many FAR clauses that are still incorporated by reference into the agreements.

      As alluded to above, one area the contractor should realize is open to negotiation is the area of data and patent rights. OTAs are not subject to the Bayh-Dole Act and the typical FAR/DFARS Intellectual Property (IP) clauses, which means that contractors can negotiate more favorable IP terms with the government.

SBIR and STTR

      Like OTAs, the SBIR/STTR programs are not new. In many ways, the programs have been enormously successful, and provide excellent benefits to innovative small business firms.

      There three phases. Research and development funds (subject to certain thresholds) are awarded to small businesses in the first two phases. It is hoped that this funding would bring about successful commercialization in the third phase. Phase III is a real benefit that is often underutilized.

Phase III Awards

      A Phase III award refers to “work that derives from, extends, or completes an effort made under prior funding agreements under the SBIR program [i.e. Phases I and II].” 15 U.S.C. § 638(e)(4)(C).

      Phase III awards are made with non-Research & Development financial resources, and the government even has the authority to sole-source such awards.

      Additionally, Phase III awards are not restricted to small businesses nor are they even required to be awarded to the firm that performed on the original Phase I or II effort.

      Again, though, one of the main benefits is the SBIR/STTR favorable data rights regime. Broadly, this regime allows the SBIR/STTR awardees to retain ownership of data developed under the program and grants the government only certain, limited rights during a specified “protection period” subject to marking requirements. See U.S. Small Business Administration, Office of Investment and Innovation, SBIR-STTR Policy Directive (May 2, 2019), 101-06.

OTA and SBIR/STTR

      These vehicles provide excellent business prospects for the contractor. For instance, OTA purchases surpassed $4 billion government-wide in fiscal year 2018 (an approximately 74% jump from the year before). With some education beforehand and measured expectations regarding these contracting vehicles, contractors can take full advantage of what they uniquely have to offer.

      To learn more about this incredibly important topic, we will be conducting an in-depth webinar on OTAs and SBIR/STTR programs on April 16 at 1 pm EST. Watch your email for more information and a sign-up link. We hope you can join us then for a great training event!

Brad Reaves is a partner in ReavesColey PLLC law firm. He can be reached at brad.reaves@reavescoley.com.

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Column: OTAs and SBIR/STTR-- Non-Traditional, Innovative Contracting Tools

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