Department of Homeland Security: Improvements Could Further Enhance Ability to Acquire Innovative Technologies Using Other Transaction Authority
Published: 2008-09-23T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: When the Department of Homeland Security (DHS) was created in 2002, it was granted "other transaction" authority--a special authority used to meet mission needs. While the authority provides greater flexibility to attract and work with nontraditional contractors to research, develop, and test innovative technologies, other transactions carry the risk of reduced accountability and transparency--in part because they are exempt from certain federal acquisition regulations and cost accounting standards. In 2004, GAO reported on DHS's early use of this authority. This follow-up report determines the extent to which nontraditional contractors have been involved in DHS's other transactions, and assesses DHS's management of the acquisition process when using this authority to identify additional safeguards. To conduct its work, GAO reviewed relevant statutes, guidance, and prior GAO reports on other transactions, and interviewed contracting and program management officials, as well as contractors. GAO also reviewed 53 files for agreements entered into from fiscal years 2004 through 2008 and identified those involving nontraditional contractors.
section_title: What GAO Found
paragraphs: DHS's other transactions documentation indicates that nontraditional contractors played a significant role in over 80 percent of the Science and Technology directorate's other transaction agreements. GAO identified 50 nontraditional contractors who participated in 44 agreements--one-third of them were prime contractors and about half of them were small businesses. These contractors provided a variety of technologies and services that DHS described as critical--including technology designed to detect chemical warfare agents after a suspected or known chemical attack. The proportion of dollars obligated for nontraditional contractors on an agreement did not necessarily indicate the importance of their contributions. For example, only 1 percent of total agreement obligations were allocated to a nontraditional subcontractor that, according to the prime contractor, was specially qualified for developing tests for a hazardous substance detection system. While DHS has continued to develop policies and procedures for other transactions, including some to mitigate financial and program risks for prototype projects, the department faces challenges in systematically assessing its use of other transactions and maintaining a skilled contracting workforce. DHS issued guidance in 2008 and continued to provide training to contracting staff on the use of other transactions. However, DHS does not track information on the amount of funds paid to nontraditional contractors or the nature of the work they performed, which could help the department assess whether it is obtaining the full benefits of other transaction authority. DHS recently updated its procurement database to capture information on other transaction agreements, but the database does not include all of the data DHS would need to assess nontraditional contractor involvement. Further, DHS's ability to maintain a stable and capable contracting workforce remains uncertain due to high staff turnover and the lack of a staff planning method.

section_title: Letter
paragraphs: The Department of Homeland Security’s (DHS) Science and Technology  directorate (S&T) is responsible for providing state-of-the-art technology  to federal, state, and local governments to improve homeland security. To  help accomplish this mission, Congress granted DHS special acquisition  authority, known as “other transaction” authority for prototype and  research and development projects. S&T has used this authority to  increase flexibility in attracting and working with contractors to research,  develop, and test innovative technologies. However, other transactions  carry the risk of reduced accountability and transparency in part because  they are exempt from the Federal Acquisition Regulation (FAR) and the  government’s cost accounting standards. DHS has maintained that this  authority is a critical tool in attracting contractors that have not  traditionally done business with the government and that the authority has  enhanced its ability to share the costs of developing certain technologies  with industry. The authority, initially granted for 5 years, was extended  through September 2008 in the Fiscal Year 2008 Appropriations Act.  Section 391(b) of title 6 of the U.S. Code requires that we report on DHS’s  use of this authority.
In 2004, we reported on S&T’s use of other transaction authority and made  recommendations to improve its use. At the time that work was  conducted, S&T was in the early stages of establishing these agreements,  and we have not since assessed the extent of the involvement of  nontraditional contractors or the portion of the funding they receive. For  this follow-up report, also in response to the 2002 statute, and to inform  Congress’s decision on whether to further extend this authority, we  (1) determined the extent to which nontraditional contractors have been  involved in other transactions with DHS to fulfill technology and mission  needs, and (2) assessed DHS’s management of the acquisition process  when using other transactions to determine if additional safeguards are  needed should the authority be made permanent.
To conduct our work, we reviewed relevant statutes, directives, guidance,  and our prior reports on other transactions and interviewed S&T’s  contracting and program representatives, as well as contractors. We  reviewed 53 other transaction agreements entered into from fiscal years  2004 through 2008 and related documents and identified those involving  nontraditional contractors. While we conducted a search of the Federal  Procurement Data System-Next Generation (FPDS-NG) to determine  whether these contractors had prior government work, we did not  independently verify contractors’ self-certification as nontraditional,  which occurs during agreement negotiation. We conducted this  performance audit from April through September 2008, in accordance with  generally accepted government auditing standards. Those standards  require that we plan and perform the audit to obtain sufficient, appropriate  evidence to provide a reasonable basis for our findings and conclusions  based on our audit objectives. We believe that the evidence obtained  provides a reasonable basis for our findings and conclusions based on our  audit objectives. For more information on our scope and methodology, see  appendix I.
subsections: section_title: Background
paragraphs: Other transaction authority was created to enhance the government’s  ability to acquire cutting-edge science and technology in part through  attracting contractors that typically have not pursued government  contracts because of the cost and impact of complying with government  procurement requirements. Because other transactions are exempt from  certain statutes, they permit considerable latitude by agencies and  contractors in negotiating agreement terms. For example, other  transactions allow the federal government flexibility in negotiating  intellectual property and data rights, which generally stipulate each party’s  rights to technology developed under the agreement. Because these  agreements do not have a standard structure based on regulatory  guidelines, they can be challenging to create and administer.
The Homeland Security Act of 2002 authorizes two types of other  transactions: (1) prototype and (2) research and development. Other  transactions for prototypes are used to carry out projects to develop  prototypes used to evaluate the technical or manufacturing feasibility of a  particular technology, process, or system. To use other transactions for  prototypes, federal statute requires that one of three conditions be met:  (1) significant participation by a nontraditional contractor, (2) parties to  the transaction other than the federal government will pay at least one- third of the total project cost, or (3) the Chief Procurement Officer  determines that exceptional circumstances justify the use of an other  transaction agreement. Other transactions for research and development  are used to perform basic, applied, or advanced research and do not  require the involvement of nontraditional contractors. Almost all of S&T’s  other transaction agreements have been for prototype projects and  justified based on the involvement of nontraditional contractors.
From fiscal years 2004 through 2008, S&T entered into at least 55 other  transaction agreements to support 17 different projects. (For a  description of the projects see app. II.) DHS entered into 45 agreements in  fiscal years 2004 and 2005, when it first began using other transactions to  support prototype development projects, based on the Department of  Defense’s (DOD) guidance and, in some cases, with assistance from DOD  contracting officers. Currently, DHS’s Office of Procurement Operations  provides all contracting support, including that for other transactions, to  S&T. S&T contracting officers explained that they have been more  selective in choosing to use other transaction agreements in recent years.  Since 2006, DHS has entered into fewer new agreements each year, while  continuing to fund work under the initial agreements entered into in 2004  and 2005. (See fig. 1.) As of April 2008, according to DHS data,  21 agreements were active—including 1 agreement entered into in fiscal  year 2008—and 33 agreements were closed.
In fiscal year 2007, other transactions accounted for about $124 million  (about 17 percent) of the S&T’s total acquisition activity of $748 million to  fund and develop technology in support of homeland security missions. A  small proportion of projects account for the vast majority of the funding  for other transactions; in February 2008, we reported that the seven largest  agreements accounted for over three-quarters of all obligations.
section_title: Most Agreements Involved Nontraditional Contractors to Provide Key Technologies and Services
paragraphs: DHS has used its other transaction authority to leverage the capabilities of  nontraditional contractors in prototyping and research and development  efforts. Most of S&T’s agreements have involved nontraditional  contractors, including small businesses, at the prime or subcontractor  level. The majority of the nontraditional contractors provided technologies  or services that DHS described as significant to the efforts under S&T  projects. S&T program managers stated that without the involvement of  nontraditional contractors, some of the research efforts may not have  been able to advance.
We identified a total of 50 nontraditional contractors who participated in  44 (83 percent) of the agreements we examined, with multiple  nontraditional contractors involved on 8 agreements. Half of these  contractors had not recently worked for the government. Sixteen  nontraditional contractors were prime contractors on agreements, while  the other 34 were subcontractors. Nearly half of the nontraditional  contractors were classified as small businesses. According to some S&T  program managers, using the agreements reduced the administrative  burden of working with the federal government and encouraged small  businesses, in particular, to participate. Figure 2 shows the proportion of  prime contractors and subcontractors by business size.
Small business, subcontractor (12)
Large business, subcontractor (12)
Large business, prime contractor (5)
Planned obligations for 25 of the 44 agreements involving nontraditional  contractors total $117 million, which is 40 percent of the total dollars  obligated through these agreements.
In describing the roles of the nontraditional contractors, the agreements  and supporting documentation we reviewed identified the majority of  these roles as significant to the project’s successful completion. Program  staff, contracting officers, and contractor representatives also highlighted  several technologies and services that nontraditional contractors provided  to S&T through the use of other transaction authority.
Several agreements that we reviewed identified significant technologies  and services provided by nontraditional contractors. For example, one  agreement with a nontraditional contractor—the sole participant on the  project—noted that the contractor’s sensor technology would be used to  develop prototypes designed to detect chemical warfare agents. The  agreement stated that the resulting prototype would help first responders  assess and monitor the risks in an area after a suspected or known  chemical attack. Similarly, one nontraditional subcontractor was involved  under an agreement to develop a prototype for delivering robust detection  and geographic information about bioterror attacks. The agreement stated  this subcontractor would have a significant level of participation and a  substantial role in the project, and possessed unique skills and expertise in  the area of DNA microarrays, which was identified as a core technology  for the system. In addition, the subcontractor was identified as the leader  for all bioagent detection laboratory testing for the project, as well as for  designing and performing the lab tests for all critical items in the  development of the system.
Program managers said some of the projects pursued under the  agreements could not have advanced without the contributions of  nontraditional contractors. For example, S&T staff told us that one  project, the development and testing of a prototype device to counter the  threat of shoulder-fired missiles to commercial aircraft, required the  participation of nontraditional contractors. They said that the involvement  of major commercial airlines and transport companies allowed S&T to test  whether a certain military technology was suitable for a commercial  application. In another case, the project manager said that the  nontraditional contractor was the only company that held patent rights for  the unique technology needed to develop a type of foot and mouth disease  vaccine. According to the nontraditional contractor’s representative, the  company would not have participated in the project under a FAR-based  contract due to concerns about retaining intellectual property rights.
The proportion of dollars obligated on each agreement for nontraditional  contractors—which ranged from less than 1 percent to 100 percent—did  not necessarily indicate the importance of the contractors’ contributions.  For example, only 1 percent of one agreement’s obligations was allocated  for work by a nontraditional subcontractor to develop chemical tests for a  hazardous substance detection system. However, the prime contractor  told us that this nontraditional contractor was the leading expert in the  field and uniquely qualified to contribute to the project. In a similar  example, only 3 percent of an agreement’s obligations were allocated for  work by a nontraditional contractor to manufacture devices necessary for  a mobile laboratory prototype. However, DHS considered these devices  the heart of the project, and thus a significant contribution.
section_title: Policies and Practices Are in Place to Manage Agreements, but Assessment and Staffing Needs Have Not Been Fully Addressed
paragraphs: Since we reported in 2004, DHS has continued to develop policies and  practices for managing other transactions, issuing an operating procedure  and a guidebook in May 2008, but has not fully addressed the need to  assess its use of these agreements and maintain a contracting workforce.  DHS has developed guidance and practices to minimize financial and  program risks. However, DHS does not have information to systematically  assess whether it is obtaining the full benefits of its other transaction  authority. Finally, contracting officers with business acumen and training  are critical to entering into and administering other transactions; however,  it is unclear whether the present workforce is sufficient to support S&T’s  operation.
subsections: section_title: DHS Has Adopted Policies and Practices for Managing the Risks of Other Transactions
paragraphs: In 2004, we reviewed DHS policies and procedures and found they  provided a foundation for using its other transaction authority, though  refinements were needed. We reported that since the beginning of its use  of other transactions, DHS has applied commonly accepted acquisition  practices, such as using contractor payable milestone evaluations to  manage other transaction agreements. Aspects of DHS’s review process  for other transaction agreements are similar to those for contracts subject  to the FAR. For example, DHS’s proposed sole source agreements must be  explained and approved, and program and contracting offices, as well as  its office of general counsel, review all proposed agreements.
DHS’s guidance for prototype projects also encourages the use of fixed  price agreements with fixed payable milestones to minimize financial and  performance risks. We found that DHS has established fixed price  agreements with fixed payable milestones in 44 of the 53 agreements we  reviewed. Fixed price acquisitions generally transfer most of the financial  risk to the contractor. The financial risk for both parties may be further  limited in other transaction agreements by a provision that allows either  the government or contractor to leave the program without penalty. In  addition, the use of fixed price agreements mitigates concerns regarding  cost controls, as the costs are fixed at the time the agreements are  established. Payable milestones mark observable technical achievements  or events that assist program management and focus on the end goal of  the agreement. DHS guidance states that it is based on commercial best  practices, in which the use of payable milestones gives industry  opportunities to provide major input into milestone descriptions as well as  the option to leave the program. One S&T program manager told us that a  contractor opted to cancel an agreement at a payable milestone after  determining it could no longer meet the goals of the program.
DHS’s recent guidance also calls for considering when to include financial  audit provisions in the agreements. Our 2004 report noted that the  department lacked guidance on when to include such provisions—other  than providing for access to GAO when the agreement is over $5 million.  In May 2008, DHS issued a guidebook for the use of other transactions for  prototypes, which now includes additional information on when audits  should be conducted. Specifically, it states that audit provisions should be  included when the payment amounts in the agreement are based on the  awardee’s financial or cost records, or when parties other than the  government are required to provide at least one-third of the total costs.  The guidebook contains sample audit clauses that contracting officers  should use or tailor to an individual agreement. The guidance also  describes when these requirements apply to key participants other than  the prime contractor.
section_title: DHS Lacks Information Needed to Assess Whether It Is Obtaining Full Benefits of Other Transaction Authority
paragraphs: Two key benefits of using other transactions are to provide greater  latitude in negotiating the allocation of intellectual property and data  rights and to leverage the cutting-edge technology developed by  nontraditional contractors. Knowledge gained from past projects  supported by other transaction agreements could allow DHS to assess the  extent to which these benefits are being obtained and inform planning to  maximize benefits for future projects. Performance information can help  agency managers to ensure that programs meet intended goals, assess the  efficiency of processes, and promote continuous improvement. We have  previously reported on the benefits of agencies using systematic methods  to collect, verify, store, and disseminate information on acquisitions for  use by their current and future employees. However, DHS does not have  the data it needs to make such assessments and ensure that, in using other  transactions, the benefits outweigh the additional risks.
In our 2004 review, we found that S&T lacked the capacity to  systematically assess its other transactions, and we recommended that  DHS capture knowledge obtained during the acquisition process to  facilitate planning and implementing future projects. While the S&T  directorate now shares knowledge about the benefits derived from  completed projects on an informal basis, DHS does not formally collect or  share information about whether other transactions have been successful  in supporting projects or what factors led to success or failure. In 2005,  DHS hired a consultant to develop a “lessons learned” document based on  the DOD’s experience using other transactions, and DHS has incorporated  this into its other transactions training. S&T program representatives told  us that their programs undergo regular management reviews; however,  these reviews are not documented. DHS has not developed a system for  capturing knowledge from its own projects, which may limit its ability to  learn from experience and adapt approaches going forward.
DHS also lacks the information needed to assess whether it is using other  transaction authority to effectively negotiate intellectual property and data  rights. While some agreements tailored the language on intellectual  property and data rights to the particular needs of the project, we found  that the language in most agreements was similar and that some of this  language is generally applied to FAR-based contracts. For example, most  agreements included    standard FAR clauses for allocating intellectual property rights, such as  giving all ownership of an invention to the contractor while  maintaining a paid-up license that allows the government to use the  invention;    standard FAR language that gives the government the right to require a  contractor to grant a license to responsible applicants or grant the  license itself if the contractor refuses to do so;  requirements for the contractor to submit a final report on the use of  the inventions or on efforts at obtaining such use; and    a standard data rights clause with an added provision that extends  rights to state and local governments.
Incorporating these clauses enables DHS to protect the government’s  interest, however, the extent to which DHS needed these rights is unclear  because the rationale for using these provisions and the anticipated  benefits were not documented. Concerned that rights may be  overestimated—and ultimately result in the government paying for unused  rights and discouraging new businesses from entering into other  transaction agreements—DOD issued guidance on intellectual property  rights negotiations. We reported that DOD’s guidance called for  consideration of factors such as the costs associated with the inability to  obtain competition for future production, maintenance, upgrade, and  modification of prototype technology, or the inability of the government to  adapt the developed technology for use outside the initial scope of the  prototype project. DHS’s May 2008 guidance for prototype projects  includes similar areas of consideration to assist contracting officers in  negotiating these rights, which could help to address this concern if  implemented as intended. This guidance also provides that contracting  officers, in conjunction with program managers, should obtain the  assistance of the DHS Intellectual Property Counsel in assessing  intellectual property needs.
To better track procurement data from other transaction agreements, DHS  has modified its procurement database to capture additional information.  For example, DHS recently made changes to its database to allow the user,  in part, to identify a prime contractor’s nontraditional status. However, the  capacity of the database is limited as it is not designed to capture data to  assess DHS’s use of other transactions—particularly on the extent of  nontraditional contractors’ contributions. The procurement database is  also limited to including information on new and active agreements, so  DHS may have missed an opportunity to gather data on experiences from  any inactive agreements not included in the database. As of April 2008, at  least 10 agreements—almost 20 percent of all the agreements we  reviewed—were not in the database. In addition, the database does not  contain information on the nature of the work performed by  nontraditional contractors—either prime or subcontractors—or the  funding allocated to nontraditional contractors. DHS’s guidance only  recommends reporting expenditures of government funds if a cost  reimbursement agreement is involved or the agreement involves cost- sharing. Most available data on the contributions of nontraditional  contractors are maintained in hard copy files, but documentation on 19 of  44 agreements did not contain sufficient information for us to determine  the planned obligations for nontraditional contractors.
section_title: DHS Has Taken Steps to Develop Staff Skills but Has Been Challenged to Maintain Its Contracting Workforce
paragraphs: The unique nature of other transaction agreements requires staff with  experience in planning and conducting research and development  acquisitions, strong business acumen, and sound judgment to enable them  to operate in a relatively unstructured business environment. DHS requires  its other transaction contracting officers to hold a certification for the  most sophisticated and complex contracting activities and to take training  on the use of this authority.
DHS has created training courses that provide instruction in the use of  both FAR-based research and development contracting and other  transaction agreements. The topics covered include intellectual property,  foreign access to technology created under other transactions, and  program solicitations. According to DHS representatives, between January  2005 and March 2008, approximately 80 contracting staff, including  contracting officers, had been trained. DHS representatives also said they  are developing a refresher course for staff who have already completed  the initial training. DHS’s recently issued guidance also requires program  staff to take training on other transactions.
When DHS first began entering into other transaction agreements in fiscal  year 2004, it relied upon contracting services from other agencies, such as  the U.S. Army Medical Research Acquisition Activity, including staff who  were experienced in executing other transaction agreements. Since fiscal  year 2005, DHS has been granting warrants to permit its own contracting  officers to enter into other transaction agreements and has issued these  warrants to 17 contracting officers. Nine of these contracting officers have  been assigned to support S&T; however, DHS has experienced turnover  and 4 of these S&T contracting officers have left DHS since February 2008.  The Office of Procurement Operations does not have a staffing model to  estimate how many contracting officers are needed to support S&T’s  workload on an ongoing basis. Two S&T program managers, who each  manage one agreement, told us that they had difficultly obtaining  assistance from the procurement office for other transactions, and  attributed this to inadequate staffing levels and turnover. Our prior work  has noted ongoing concerns with regard to the sufficiency of DHS’s  acquisition workforce to ensure successful outcomes. In 2003, we  recommended that DHS develop a data-driven assessment of the  department’s acquisition personnel resulting in a workforce plan that  would identify the number, skills, location, and competencies of the  workforce. In 2005, we reported on disparities in the staffing levels and  workload imbalances among component procurement offices and  recommended that DHS conduct a departmentwide assessment of the  number of contracting staff. This recommendation has not been  implemented. As of February 2008, DHS reported that approximately  61 percent of the minimum required level and 38 percent of the optimal  level of contract specialists were in place, departmentwide. We have  ongoing work on acquisition workforce issues and initiatives at DHS and  plan to report on the results of these efforts in the final product for that  engagement.
section_title: Conclusion
paragraphs: While other transaction agreements can carry the benefit of tapping into  innovative homeland security technologies through nontraditional  contractors, as they are exempt from federal procurement regulations,  they also carry the risk of reduced accountability and transparency if not  properly managed. DHS has successfully used its other transaction  authority to attract nontraditional contractors to develop innovative  technologies to address homeland security needs, and it continues to  implement the policies and procedures needed to manage the inherent  risks of these agreements. However, DHS continues to lack the  resources—in terms of knowledge and workforce capacity—to ensure that  its agreements are transparent and maximize their potential benefits. If  other transaction authority is made permanent, it will be important for  DHS to take a systematic approach to assessing its experience with other  transaction authority and identifying and addressing contracting  workforce needs. These steps would not only enable DHS to more  strategically manage its agreements in the future, they also would provide  Congress with useful information on the benefits of the authority.
section_title: Recommendations for Executive Action
paragraphs: To promote the efficient and effective use by DHS of its other transactions  authority to meet its mission needs, we recommend that the Secretary of  Homeland Security direct the Under Secretary for Management and the  Under Secretary for Science and Technology to take the following two  actions:    Collect relevant data on other transaction agreements, including the  roles of and funding to nontraditional contractors and intellectual  property rights, and systematically assess and report to Congress on  the use of these agreements to ensure that the intended benefits of the  authority are achieved.
Direct the Office of Procurement Operations to work with the Science  and Technology directorate to determine the number of contracting  officers needed to help ensure a sufficient contracting workforce to  execute other transaction authority.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to DHS for review and comment.  In  written comments, DHS concurred with our recommendations and  provided some information on efforts under way to improve information  on its use of other transaction authority. DHS’s comments are reprinted in  their entirety in appendix III. DHS also provided technical comments that  were incorporated where appropriate.
In response to our first recommendation, that DHS collect relevant data on  other transactions agreements, including the roles of and funding to  nontraditional contractors and intellectual property rights, and  systematically assess and report to Congress on the use of these  agreements to ensure that the intended benefits of the authority are  achieved, DHS stated that the Chief Procurement Officer is taking steps to  improve the information DHS has on its other transactions. DHS reiterated  changes it has made to its procurement data system which are described  in our report. DHS also noted the information included in its annual report  to Congress on S&T’s other transactions. For example, the report details  the technical objectives of each other transaction including the technology  areas in which the project is conducted. DHS also stated that it plans to  revise its guidance to specify that the Office of Procurement Operations  and S&T program management should formally collaborate in preparing  its annual report to Congress, noting that this process can serve as a  means of sharing “lessons learned” on the benefits of other transaction  authority. While DHS stated that its report to Congress includes  overarching assessment information, DHS does not systematically  evaluate whether it is obtaining the full benefits of other transaction  authority. For example, DHS did not specify how it will improve the  availability of and systematically assess information related to the nature  of the work being performed by nontraditional contractors, the funding  allocated to nontraditional contractors, or areas considered in the  negotiation of intellectual property rights. We continue to believe that  these are key areas in which DHS should collect and evaluate data to  determine whether the intended benefits of the authority are achieved.
In response to our second recommendation, that the Office of  Procurement Operations work with S&T to determine the number of  contracting officers needed to help ensure a sufficient contracting  workforce to execute other transaction authority, DHS stated that this  issue can only be addressed as part of broader departmentwide acquisition  workforce initiatives. DHS recognized the need to have contracting  personnel, certified in the use of other transactions, in sufficient numbers  to handle S&T’s workload as it arises, but noted that the workload does  not lend itself to a static number of personnel. While we recognize that the  workload for other transactions fluctuates, the Office of Procurement  Operations does not have a staffing model that incorporates workload to  estimate what level of contracting support is needed for other transactions  on an ongoing basis. We continue to believe that this would help DHS  managers ensure a sufficient contracting workforce to execute S&T’s  other transaction authority.
We are sending copies of this report to interested congressional  committees and the Secretary of Homeland Security. We will also make  copies available to others upon request. In addition, the report will be  available at no charge on GAO’s web site at http://www.gao.gov.
If you or your staff have questions regarding this report or need additional  information, please contact me at (202) 512-4841 or needhamjk1@gao.gov.  Contact points for our offices of Congressional Relations and Public  Affairs may be found on the last page of this report. Principal contributors  to this report were Amelia Shachoy, Assistant Director; Alexandra Dew;  Russ Reiter; Matthew Voit; Tracey Graham; John Krump; and Karen Sloan.
section_title: Appendix I: Scope and Methodology
paragraphs: To determine the extent to which nontraditional contractors have been  involved in other transactions with the Department of Homeland Security  (DHS) to fulfill technology and mission needs, we obtained an initial list of  agreements from DHS’s Office of Procurement Operations, the contracting  office responsible for entering into these agreements; conducted a file  review; and interviewed DHS’s Science and Technology (S&T)  directorate’s program managers. As shown in table 1, we identified 53 of  55 agreements that we could review.
Nontraditional contractors were identified in 44 agreement files, although  not all had complete information. For example, 19 of these files did not  include sufficient information to determine how much of the contract  value was proposed to go to nontraditional contractors. We analyzed all  available agreements and the contractors’ proposals to identify the  nontraditional contractors, the contribution they plan to bring to the  project, and the nontraditional contractors’ shares as identified in  contractors’ proposals. However, DHS relies on contractors to self-certify  their status as a nontraditional government contractor during agreement  negotiation. In analyzing DHS’s agreements, we did not independently  verify a contractor’s reported status as a nontraditional contractor other  than to conduct a search of the Federal Procurement Data System-Next  Generation (FPDS-NG) to determine whether these contractors had prior  government work. Our limited review of FPDS-NG identified  25 contractors who had worked with the government in the previous year  but found no contract actions that appeared to be subject to the cost  accounting standards or that were for prototype or research projects in  excess of $500,000. We also did not independently verify the share of costs  allocated to nontraditional contractors or their contributions under the  agreements. We determined nontraditional contractors’ business size by  reviewing data from the Central Contractor Registration. With these data,  we identified the business size of 39 of 50 nontraditional contractors. Of  the remaining 11 firms, 1 firm did not have a business size identified and  10 were not listed in the database. In addition, we interviewed DHS  contracting officers and S&T program managers to obtain their views on  the contributions that the nontraditional contractors provided to the  project. In addition, we also interviewed two prime contractors, one  traditional and one nontraditional, to understand their experiences with  entering into other transactions with DHS.
To assess DHS’s management of the acquisition process when using other  transactions, we reviewed and analyzed each available agreement file to  assess the process and procedures used to negotiate and enter into the  agreement. We reviewed DHS’s Management Directive 0771.1, Other  Transaction Authority, dated July 8, 2005, and Procurement Operating  Procedure 311, Other Transactions for Prototypes and the attached Other  Transaction for Prototype Guidebook, dated May 22, 2008. We also  interviewed contracting officers and program managers as well as a  representative from DHS’s legal counsel to obtain an understanding of the  review process. We reviewed each available agreement analysis to  determine how the intellectual property and data rights were negotiated.  We discussed with contracting and program representatives whether  information is collected to assess the effectiveness and benefits of the use  of other transaction authority or what lessons are learned from its use. We  also reviewed DHS’s June 30, 2008, report to Congress on its use of other  transaction authority, which includes information on 38 agreements.  During the course of our audit work, we reviewed 15 additional  agreements, including 1 agreement entered into after DHS’s reporting  period. We reviewed DHS’s training material provided to contracting  officers on the use of the other transaction authority. We also obtained  information on the number of contracting representatives that have  received this training and the number of those that have left DHS since  2005. We also reviewed our prior reports on the use of other transaction  authority at the Departments of Defense and Homeland Security.
We conducted this performance audit from April through September 2008,  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.
section_title: Appendix II: Description of DHS Projects Supported by Other Transaction Agreements
subsections: section_title: Agriculture Biosecurity Thrust Area Veterinary Countermeasures Development of a Foot and Mouth Disease vaccine that allows for
paragraphs: Autonomous Rapid Facility Chemical Agent Monitor (ARFCAM)
BioAgent Autonomous Network Detector (BAND)
Food Biological Agent Detection Sensor (FBADS)
Instantaneous Bio-Aerosol Detection Systems (IBADS)
Lightweight Autonomous Chemical Identification System (LACIS)  Hand-held chemical agent detectors  Low-Cost Bio-Aerosol Detection System (LBADS)
Portable High-through-put Integrated Laboratory Identification  System (PHILIS)
Rapid Automated Biological Identification System (RABIS)
Counter Man-Portable Air Defense Systems (CMANPADS)
S&T Infrastructure Protection & Geophysical Science Division  Kentucky Critical Infrastructure Protection Institute (KCI)
S&T Homeland Security Advanced Research Projects Agency  Prototypes and Technology for Improvised Explosives Device  Detection (PTIEDD)
section_title: Appendix III: Comments from the Department of Homeland Security