Innovations: No Contract, No Budget, No Protests: Public-Private Collaboration Delivers Contracting Innovation

This month, a team of writers led by the peripatetic Air Force Maj. Dan Finkenstadt, partnered to illuminate a successful innovation partnership that led to a procurement protest tool. That might seem like a lot of partnership, but that’s the point.

Among the many routes for infiltrating commercial innovation into government is the Cooperative Research and Development Agreement (CRADA), which allows federal agencies to enter into agreements with non-federal parties to advance knowledge and transfer technology across public-private boundaries without exchanging money.

Yep, that’s right, no money and no contracts.1

In this case a serendipitous LinkedIn connection between Finkenstadt and Pat Staresina, a principal at MITRE Corp., a federally funded research and development center, led to a CRADA to get a protest prevention tool ready for prime time.

The process included putting the prototype tool in the hands of its intended users, contracting professionals, in an MBA class Finkenstadt was teaching at the Naval Postgraduate School. Let loose on the tool, the MBA students pushed, prodded, tested, and toyed with it to soften its rough edges, expand functionality, and shape a usable product. That should be welcome news to contacting professionals everywhere, who want to make their solicitations and contracts so fair, transparent, and effective that suppliers see no need to protest them.

What’s more the kind of co-creation described here is at the core of the innovation commercial best practices that leading federal organizations are attempting to adopt. Lean startup methodology, for example, as taught by the Hacking for Defense[i] program at many leading universities, puts interviewing, collaborating, and testing with users front and center and prominent throughout the process of developing products and services.

No Contract, No Budget, No Protests: Public-Private Collaboration Delivers Contracting Innovation

Remaining competitive and prevailing internationally in economics, healthcare, telecommunications, education, cyber, and the great power competition require the United States to continuously innovate. In the past, government initiatives primarily drove national innovation. Today, private companies out-invest the government in research and development (R&D), a competitive and entrepreneurial open marketplace that now primarily drives innovation successes.

To compete with our national adversaries, the U.S. government and industry must engage, collaborate, and partner. We need to blur the lines, bridge public-private boundaries, and adopt a whole-of-government/whole-of-nation approach.

A partnership between MITRE, a federally funded R&D center (FFRDC), and the Naval Postgraduate School, a federal academic institution, illustrates one way to bridge the public-private innovation gap by applying automation, machine logic, and case law to reduce procurement protest friction.

Support for public-private partnerships has been growing over the last decade. Many agencies still have trouble crossing federal silos to work with other federal agencies, let alone collaborating with other commercial or private organizations without a traditional contract, but there is much to be gained through these partnerships. We see organizations like AFWERX,[ii] NavalX[iii], and DIU[iv] working to bring commercial innovations to the Department of Defense. However, federal research institutions continue to miss opportunities to collaborate with nonpublic entities without a formal contract and commitment to buy, especially when it comes to acquisition process solutions and culture. Often, acquisition personnel (especially contracting experts) are groomed to be wary of potential conflicts of interest. They also tend to view noncontractual exchanges with private entities as improper. This fear is extensive enough that the Office of Federal Procurement Policy delivered a whole “Myth-Busting” memorandum series, written over several years, designed to combat it.

Bridging the Public-Private Divide

One of the easiest ways organizations can enable public-private partnerships is through the intersection of federal and defense academic research and federally funded research and development centers (FFRDCs).[v] Both groups share a mission of research and fostering innovation and often complement each other in terms of vision, resources, competencies, and capabilities. The instrument that can bridge this barrier, the Cooperative Research and Development Agreement (CRADA), is not a formal contract and does not include the exchange of dollars. CRADAs—covered by U.S.C. Title 15, Chapter 63, section 3710a—allow federal agencies to enter into agreements with nonfederal parties to advance knowledge and transfer technology across public-private boundaries.[vi]

CRADAs are used by multiple agencies to support three types of entities: technology owners, brokers, and receivers. Technology owners seek to develop technologies to a usable point so they can be transferred to receivers. Brokers facilitate the transfer. In most cases, federal labs and research universities act as brokers between industry and operational users. Brokers also help owners and possible receivers design technology to meet user needs and preferences.

This was the case when the Naval Postgraduate School’s (NPS) Graduate School of Defense Management (the broker) aided in user design improvements and technology transfer of an FFRDC’s (the owner) pilot technology to acquisition offices within the federal government (the receivers).

Cocreating Customer Value

CRADAs formalize cocreation and ideation across institutional and market boundaries. Cocreation involves interactions between sellers and customers to create additional value.[vii],[viii] This additional value goes beyond price to benefits such as improved consumption and usage experiences (Gentile et al., 2007;[ix] Payne et al., 2008[x]). Productive innovation, ideation, and collaboration only occur if effective cocreation behaviors are applied.

Extensive research on business-to-business cocreation interactions has revealed common behaviors that increase user perceptions of quality: communication openness, shared problem solving, tolerance, accommodation, advocacy, involvement in project governance, and personal dedication (see Table 1).[xi] These behaviors have been found to increase customer perceptions of quality in business-to-government activities, as well.[xii] Smart cocreation fosters stronger entrepreneurial innovation through coproduction of minimum viable products (MVP), early concept testing for fast feedback, and rapid pivots towards more valuable customer solutions.[xiii],[xiv] These techniques enable developers to better understand the full scope of problems and possible solutions before it is too late or too costly to make modifications to better meet customer or user needs.

Protest Prevention Opportunity

The CRADA between the NPS and MITRE to mature and transfer an automated procurement protest tool began in the summer of 2020 with an informal network interaction. MITRE principal investigator Pat Staresina contacted Major Dan Finkenstadt, Assistant Professor at NPS, to solicit feedback on his prototype application contract protest analytic tool (CPAT).

The tool uses a TurboTax-like interface to guide acquisition professionals through a series of interview questions, leading to a summary report of potential protest risk areas and suggested mitigation measures.

It comprises:

Phased Interviews. A guided comprehensive questionnaire process enables users to identify potential sources of protest friction.[xv] This proactive pathway is applied early and throughout the acquisition process to assist users in complying with protest-related litigation, rulings, and precedent while developing the acquisition strategy and executing in its early stages.

Targeted Interviews. A function allows users to perform a more focused analysis on a single protest issue. These interviews enable users to concentrate their research on a specific protest ground by answering a more targeted questionnaire to evaluate potential protest exposure for that specific issue.

High-Level Summaries. A pathway enables users to explore and research potential protest friction points without completing a questionnaire. This function provides a high-level summary for each potential protest ground and directs the user to other resources and case law for additional research.

Protest Knowledge Center. A center serves as a repository for protest news, policy, training, rulings, research papers, media links, and other resources.

 

After reviewing the tool and discussing his findings with Staresina, Finkenstadt pitched the idea of further developing CPAT as part of his capstone course for graduating MBA students, all of whom were federal contracting professionals. Staresina agreed and MITRE coordinated with the Graduate School of Defense Management and Research and Sponsored Program Office at NPS to draft a CRADA for diagnostic review and technical transfer assistance by Finkenstadt and his students.

 

Protest Fear

Rarely does a seasoned federal contracting officer not experience a contract bid protest during his or her professional career. The bid protest process[xvi] grants interested parties the ability to challenge federal contract solicitation and award decisions and serves to check and balance the acquisition process. Protests help the acquisition process remain fair and transparent. However, they are also costly and can significantly delay and disrupt critical programs and services.

Any contracting officer who has had a protest sustained (i.e., lost a protest) or had to take significant corrective action (e.g., resolicit or re-evaluate proposals) as a result also undoubtedly has suffered associated effects, such as bridge contracts, legal fees, and months (or even years) of delays, all of which affect mission progress and success. As a result, most contracting officers fear protests.[xvii] This fear often leads to poor technical evaluations, which themselves can result in protests. Protest fear also can lead contracting officers to improperly use lowest-price technically acceptable solicitation procedures and can increase transaction costs by an average of 7.7% and planned acquisition lead time by an average of 54 days.

On the other side, vendors unsatisfied with the government’s actions end up resorting to litigation to ensure the fair treatment and transparency required by law. Protesting can be timely, costly, and may not result in the desired outcomes.

Considering the cost of protests to both buyers and sellers, NPS and MITRE formed a public-private partnership to explore the feasibility of applying automation, machine logic, and case law to potentially reduce protest friction.

Delivering a Working Prototype

The public-private partnership between NPS and MITRE has produced dividends in helping to transform CPAT from a rough, immature early prototype with useful but untested capabilities to a dynamic application that has been refined, expanded, matured, and tailored to meet the needs of the federal acquisition professional and community at large.   

The CPAT capstone review was competed in December of 2020, resulting in 15 products, more than 40 student recommendations for improving user experience and content, and technical transfer assistance for possible receivers within nine federal organizations. While R&D is still required, the prototype for this tool is operational and available for limited use.[xviii] The project culminated with a presentation at NCMA’s 2020 Government Contract Management Symposium, “Innovation Alley,” where its results were shared across the federal and industry contracting community.

The public-private partnership tapped technical, academic, research, network capabilities, and reach of both the FFRDC and NPS. Successes include a collaborative, cross-organizational, networking partnership. The project employed multiple cocreation behaviors, most notably open communication, shared problem-solving, and joint project governance. These behaviors led to a collaborative vision and buy-in across the public-private boundary. The partnership helped build a whole-of-government approach to a common acquisition problem: protests. This example can be parlayed throughout the federal government against more challenging, complex, and non-acquisition-related issues.

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Daniel J. Finkenstadt, Major, USAF, PhD

Assistant Professor at the Graduate School of Defense Management, Naval Postgraduate School, CA.

18 years federal acquisition and contracting experience.

Published in Defense Acquisition University Defense Acquisition Review Journal, Harvard Business Review, the Milbank Quarterly, and multiple times in Contract Management. [email protected].

Ryan Novak

MBA, MS Strategic Purchasing, and Master’s in Project Management.

Over 25 years of federal acquisition and contracting experience.

Department Cohead for MITRE’s Acquisition Innovation Center.

          [email protected].

Patrick Staresina

Colonel, Army National Guard (Ret.).

Over 20 years of federal contracting experience.

Acquisition Principal for multiple FFRDCs managed by the MITRE Corporation.

[email protected].

*Disclaimer: The views expressed in this article are those of the authors and do not represent the official position of the US Government, US Air Force, Naval Postgraduate School or MITRE Corporation.

[i] Hacking for Defense, available at https://www.h4d.us/

[ii] https://www.afwerx.af.mil/

[iii] https://www.secnav.navy.mil/agility/Pages/default.aspx

[iv] https://www.diu.mil/

[v] FAR Subpart 35.017: https://www.acquisition.gov/far/part-35#FAR_35_017

[vi] Guillermo L. Ferraris, “Cooperative Research and Development Agreements (CRADA) with Industry as a Value Enhancing Asset in the Academic/Research Environment: A Case Study at the Naval Postgraduate School (NPS),” Thesis, Naval Postgraduate School (2005), https://calhoun.nps.edu/handle/10945/2108.

[vii] Marco Galvagno and Daniele Dalli, “Theory of value co-creation: a systematic literature review,” Managing Service Quality 24, no. 6 (2014), 643-683. https://www.emerald.com/insight/content/doi/10.1108/MSQ-09-2013-0187/full/html#loginreload

[viii] Steven L. Vargo and Robert F. Lusch, “Service-Dominant Logic: Continuing the Evolution,” Journal of the Academy of Marketing Science 36, no. 1 (2008), 1-10. https://link.springer.com/article/10.1007/s11747-007-0069-6

[ix] Chiara Gentile, Nicola Spiller, and Giuliano Noci, “How to Sustain the Customer Experience: An Overview of Experience Components That Co-Create Value with the Customer,” European Management Journal 25, no. 5 (2007), 395-410. https://www.sciencedirect.com/science/article/abs/pii/S0263237307000886

[x] Adrian F. Payne, Kaj Storbacka, and Pennie Frow, “Managing the Co-Creation of Value,” Journal of the Academy of Marketing Science, 36, no. 1 (2008), 83-96. https://link.springer.com/article/10.1007/s11747-007-0070-0

[xi] Valarie A. Zeithaml, Mary Jo Bitner, and Dwayne D. Gremler, Service Marketing: Integrating Customer Focus across the Firm, 7th Ed, McGraw-Hill Education, New York, NY (2017). https://www.mheducation.com/highered/product/services-marketing-integrating-customer-focus-across-firm-zeithaml-bitner/M9780078112102.html

[xii] Daniel J. Finkenstadt, “Essays on Perceived Service Quality And Perceived Value in Business-to-Government Knowledge-Based Services,” Doctoral dissertation, University of North Carolina at Chapel Hill (2020), https://doi.org/10.17615/50cn-4579.

[xiii] Peter Thiel with Blake Masters, Zero to One: Notes on Startups, or How to Build the Future, Penguin Random House, London (2014). https://www.amazon.com/Zero-One-Notes-Startups-Future/dp/0804139296

[xiv] Eric Ries, The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses. Penguin Random House, New York (2011). http://theleanstartup.com/book

[xv] Protest grounds are adapted from content from Patrick Butler, Key Case Law Rules for Government Contract Formation, Management Concepts, Inc., Tysons Corner, VA (2014). https://www.amazon.com/Case-Rules-Government-Contract-Formation/dp/1567264476

[xvi]   Federal Acquisition Regulation (FAR) Subpart 33.2, Disputes and Appeals. https://www.acquisition.gov/far/part-33#FAR_Subpart_33_2.

[xvii] Timothy G. Hawkins, Cory Yoder, Michael J. Gravier, “Federal Bid Protests: Is the Tail Wagging the Dog?” Journal of Public Procurement 16, no. 2 (2016), 152-190. https://www.emerald.com/insight/content/doi/10.1108/JOPP-16-02-2016-B001/full/html

[xviii] If you are interested in learning more about the Contract Protest Analytic Tool, please reach out to Pat Staresina at [email protected] or Dan Finkenstadt at [email protected].