The Office of the Inspector General (OIG) within the Department of Homeland Security (DHS) has investigated the Department’s management of other transaction agreements (OTAs) involving consortium activities.
DHS retains authority to enter into other transaction agreements (OTA) to meet research or prototype project requirements and mission needs. OTAs are not subject to the Federal Acquisition Regulation, increasing DHS flexibility but also increasing risk. In consortia OTAs, DHS uses consortium leaders as its lead point of contact and third-party intermediary between the Department and consortium members.
In July 2018, DHS issued a revised OTA policy, but it included the same minimal guidance specific to consortia OTAs that was included in the previous 2013 policy. Prior to the issuance of the updated policy in July 2018, DHS draft policy included a definition defining a consortium as an association of two or more individuals, companies, organizations, or governments (or any combination of these entities), with the objective of participating in a common activity or pooling their resources to achieve a common goal. DHS policy requires consortia to have the legal capacity to enter into binding agreements.
The OIG review focused on those OTAs involving consortium activities that had procurement actions between fiscal years 2014 and 2017. As of fiscal year 2017, DHS maintained three consortia OTAs for research in critical infrastructure protection and development of prototypes for border and cyber security:
National Institute of Hometown Security – To support existing work in research, development, and application of technology for community-based critical infrastructure protection efforts. The original estimated value of the OTA, awarded in June 2007, was $36.5 million. With subsequent modifications to the agreement, it is now valued at more than $87 million.
Border Security Technology Consortium – To establish an environment of innovation that provides opportunities to improve border security; improve the DHS Science and Technology Directorate’s ability to engage industry, especially small business and non-traditional suppliers; rapidly develop pilots and prototypes in response to emerging and evolving border security threats; and exploit technology breakthroughs that can enhance border security. Awarded in September 2015, this OTA has an estimated value of $125 million.
Cyber Apex Solutions – To provide the Nation’s financial sector with the tools and technologies to meet its cyber security requirements and needs. The OTA, awarded in March 2017, has an estimated value of $70 million.
OIG found that DHS had controls in place when it issued, solicited, selected, and mitigated risks for these three OTAs, to research critical infrastructure protection and develop prototypes for border and cyber security. However, the OIG said the Department could better manage consortia OTAs by periodically reassessing the need for them.
Regarding the National Institute of Hometown Security OTA, DHS has not determined whether the research under this agreement could be done at lower cost. DHS has modified the agreement 28 times without an assessment, increasing its value from an initial estimated value of $36.5 million in 2007 to more than $87 million. As of August 2018, data showed that DHS had expended the majority of the OTA’s estimated value, with only $68,000 remaining.
Federal regulations do not restrict OTAs involving consortium activities from remaining open indefinitely. At the time of the OIG audit, DHS continued to use this more than 10-year-old OTA. At each new phase of an OTA, DHS requires an agreement analysis to determine continued use of its other transaction authority. However, DHS does not require an assessment of an OTA’s effectiveness in meeting research requirements and needs. To date, DHS has not reassessed the OTA’s effectiveness.
DHS had controls in place when it issued, solicited, selected, and mitigated risks for the Border Security Technology Consortium OTA. However, the agreement has had minimal activity, border security prototypes have yet to be developed, and DHS has not reassessed the OTA’s effectiveness. The OTA was awarded in September 2015 without identifying specific prototype technologies that were to be developed. Instead, DHS awarded the OTA, with an estimated value of $125 million, to provide a mechanism for DHS to fund future prototype work with the consortium. DHS envisioned developing border security-related OTA prototypes if it eventually had a need for them.
In March 2017, DHS attempted to initiate its first project under the OTA, in the amount of $1.9 million, for a prototype to demonstrate the mission utility of small unmanned aircraft systems. The Department used its staff resources to evaluate proposals submitted by members of the Border Security Technology Consortium.
DHS staff reported eventually canceling the project because U.S. Customs and Border Protection determined the consortium’s proposals displayed a weak understanding of Border Patrol challenges and field activities and did not offer groundbreaking solutions or sought-after technology improvements. Nonetheless, DHS still retains a Program Manager assigned to the OTA.
As of March 2018, the Department had only incurred approximately $15,000 in agreement costs. DHS had already dedicated program management, procurement, and legal counsel resources to develop, initiate, and award the OTA. Specifically, the agreement required multiple Office of Procurement Operations and legal counsel reviews because, in part, DHS initially awarded the OTA before completion of all agreement requirements. The agreement requirements were not completed until 10 months after the OTA award. At the time of our audit, no prototype projects were completed, but two additional proposed projects were under review. To date, DHS has not reassessed the OTA’s effectiveness.
Regarding Cyber Apex Solutions, DHS had controls in place when it issued, solicited, selected, and mitigated risks for its most recent consortium OTA, which was awarded in 2017 for cyber security prototypes. Because the OTA was awarded less than a year prior to the OIG audit, the watchdog could not determine whether this OTA had met its goals or whether it should be reassessed.
The Department’s current OTA policy, last updated in July 2018, contains minimal guidance addressing controls and oversight of consortia OTAs. OIG recommends that DHS update its OTA policy to include periodically documenting its reassessment of ongoing other transaction agreements to ensure those agreements remain effective vehicles for achieving the goals of research or prototype projects. DHS concurs and says the DHS Office of Chief Procurement Officer will update the DHS Other Transaction for Research and Prototype Projects Guide to require that the program office document its assessment of consortium OTAs for inclusion in corresponding OTA contract files. The estimated completion date for this work is September 30, 2019.