Podcast: A Deep Dive into Consortia with Dan Sennott and Stephanie Halcrow

Dan Sennott: Hello, I'm Dan Sennott, partner at Holland & Knight's National Security Group. We're excited to have with us today Stephanie Halcrow, senior fellow at George Mason University Center for Government Contracting. She's here today to talk with us about a report she co-authored on consortia titled "The Power of Many: Leveraging Consortia to Promote Innovation, Expand the Defense Industrial Base and Accelerate Acquisition." Stephanie, welcome.

Stephanie Halcrow: Thanks so much, Dan. It's great to see you.

Dan Sennott: Why don't you tell our listeners a little bit about your background?

Stephanie Halcrow: Well, first, as you know, since you were my boss on the House Armed Services Committee, most recently, I was a professional staff member on the House Armed Services Committee. I handled the acquisition policy and industrial base policy for the committee, and during that time I actually interacted with this issue about consortia. There wasn't anything written about consortia and I didn't know a lot. So, fast forward to a few months ago, I was presented with the opportunity to write this report and I thought to myself, "I'm going to write the report that I always wanted to read when I was on the committee." And so this is the result.

I was presented with the opportunity to write this report and I thought to myself, 'I'm going to write the report that I always wanted to read when I was on the committee.'

Down to the Basics of Consortia

Dan Sennott: Great. And just at the outset, can you for our listeners say what is a consortium or consortia being the plural of consortium?

Stephanie Halcrow: Yeah, absolutely. So we actually, in the report, talk about the consortium model because there's typically three active participants in the consortium model. The first is the government sponsor. They're the individuals that have a requirement for a prototype or some sort of research that needs to be done. Then the second is the consortia. They are the organization that gathers the industry, the academia, the nonprofits that might be in a particular technical space. They gather them together in a membership type of organization. Now, there's also a third organization called a consortium management firm. That consortium management firm often acts as an intermediary between the government and the consortia and provides administrative support, contracting reports, and there are several other activities that they provide, to not only the government, but also to the consortium members. Those are all listed in the report. Every consortia model is a little bit different, but those are typically the three entities that participate in a consortium.

Dan Sennott: So essentially, a consortium would be we're going to get together industry, government, universities, nonprofits to kind of solve any issue that the government is currently facing.

So essentially, a consortium would be we're going to get together industry, government, universities, nonprofits to kind of solve any issue that the government is currently facing.

Consortium's Value Proposition to the Government

Stephanie Halcrow: Yeah, absolutely. So the value proposition that the consortium model brings to the government is this idea of collaboration, and there's a couple of different ways that the collaboration happens. So first, the collaboration happens between government and industry and academia. So the government has a requirement and the consortium of leaders will organize events that will bring the government participants together and will bring the industry participants. The government will present their problem. They'll actually have conversations like, "this is our problem." Industry will say, "Well, did you know we have this capability?" Government will say, "We did not know that." And so they will inform the requirement, improve the requirement and that collaboration between government and industry is one of the value propositions. And I'll just touch on another value proposition with regards to collaboration, and that's industry to industry. So at these collaboration events, you have nontraditional defense contractors. Oftentimes they're small businesses, not always. But then you have contractors that are already in the defense industrial base. And that communication coming together in leveraging the capabilities that each other has is also a benefit to the government.

So the value proposition that the consortium model brings to the government is this idea of collaboration, and there's a couple of different ways that the collaboration happens.

Finding the Right Consortium for a Company

Dan Sennott: So it sounds like if you're a nontraditional defense company looking to get in, we have clients who are always seeking assistance. "And how do I get into the United States Department of Defense (DOD)?" "How do I meet with the right people in DOD?" "How do I make my presence known in the industry?" And it sounds like a consortium is one way to do that. Both get exposure to DOD, get exposure maybe to universities if you're in emerging tech, and then also get exposure to the big prime defense companies as well.

Stephanie Halcrow: Yeah, absolutely. So at the time that we published our report we had found 42 consortia that do business with the government. That number actually is greater than that because as we were publishing the record, I found another one. But in the appendix there's that list. So if a company is interested in getting involved in the defense industrial base, that list will be or the consortia will be organized around different technology areas. And so they'll find a consortia that kind of matches up with the services or products that they're offering. And so that's a great place to start. Sometimes there's been criticism that even though nontraditional defense contractors are participants and members of these consortia, they really don't win awards. Well, we were really fortunate of the 42 consortia that we found and identified, 12 of them agreed to provide data for the report. And so of those 12 consortia, we found across the board that 67% of the awards made were led by nontraditional defense contractors. So they're not all going to the Proms. Nontraditional defense contractors, more often than not are lead of winning the awards.

Dan Sennott: I just want to clarify, the first sentence of this report says this is not another report on other transaction authorities. We know there is a lot out there on OTAs, other transactional authorities. So it's not about that, right? But it is adjacent to that subject. So what's new in this report that we don't have in all of those OT reports from the past several years?

So if a company is interested in getting involved in the defense industrial base, that list will be or the consortia will be organized around different technology areas. And so they'll find a consortia that kind of matches up with the services or products that they're offering. And so that's a great place to start.

This is Not an OT Report

Stephanie Halcrow: Yeah, so the OT Reports never talk about the value proposition that the consortium model brings to the government. And we talked about a couple of those, the collaboration between government and industry and academia, the collaboration between industry and industry. We also found a couple really, really amazing aspects that consortia brings, and they're identified in case studies also in the report. And so I can describe those case studies. So first, it is the very essence of attracting nontraditional defense contractors. So we interviewed an executive director of a company, nontraditional defense contractor, and he found that the process of working with the government through the consortia allowed for his nontraditional company, which is also a small business, to get an award for a prototype, prove to the government that they could perform on this contract and then were transitioned to production. And he said, and we've put it in the report, he never could have done that without the consortia. He never could have won the big production contracts because the government would never have had confidence or had seen the technology that it could provide. Another value proposition that consortia brings is a ready access to the surge of capacity and a ready access to a technology group that's already put together. In the summer of 2020, there existed a consortia that the technology was medical issues. And so, as we all know, in the summer of 2020 we are facing the response to COVID-19 and we needed a vaccine. So Operation Warp Speed said, "Wow, we have a consortia that's organized around this medical technology. What if we leverage them to find out what the capacity is in our country to develop and manufacture a vaccine?" And so that consortia's, Marketing Communications (MC) sends out a request for information to all of their members, about 300 members, and they said "Oh, by the way, will you send this also to your members? Will you forward this to your networks?" And said "We are going to need to have a vaccine developed and manufactured." And so they sent out the requirement for a prototype to develop a vaccine that could be approved by the FDA and manufacture 100 million doses and four companies responded. Interestingly enough, none of them were members of the consortia, but the government made them pay the $500 to become members of the consortia, and then they were awarded the prototype and these are the names they are familiar with: Johnson & Johnson, Pfizer or Moderna. This was only possible because there was a network that was standing ready to handle that surge capacity that not only the DOD needed, but the government and our country needed.

This was only possible because there was a network that was standing ready to handle that surge capacity that not only the DOD needed, but the government and our country needed.

Small Businesses and Consortia

Dan Sennott: And so let's take it back to the first example that you gave where you have a nontraditional defense company that is a small business. And I think one of the things that's in there, and I'm looking at is like case study B, it says in here and this is quoting the small business owner, "Consortia provided immediate value to the company by being able to collaborate with the government." "A small business would never be able to walk into the program manager's office and have an open conversation about requirements, but the consortium model allows for this and this is huge for small business." And that's kind of what you've seen throughout your research and prepping this report.

Stephanie Halcrow: Yeah, absolutely. So one of the things that whenever you talk to a consortia they highlight is, they have actual events where they bring the government sponsors together in the same room with industry, with academia, and they actually sit down and talk. Imagine that. You know, but it's only through the consortia that this happens. The conversation never happens in this open manner anywhere else. And so really it's very powerful for nontraditional defense contractors that want to break into the defense space to start this way.

So one of the things that whenever you talk to a consortia they highlight is, they have actual events where they bring the government sponsors together in the same room with industry, with academia, and they actually sit down and talk. Imagine that. You know, but it's only through the consortia that this happens. The conversation never happens in this open manner anywhere else.

Do Prime Defense Contractors Benefit from Consortia?

Dan Sennott: Okay, so now let's talk about the primes. What benefit? It sounds like it's pretty clear it helps raise the profile of nontraditional defense companies. What motivation would a big prime defense contractor have for participating in a consortium?

Stephanie Halcrow: Yeah, we interviewed a couple primes and I asked them that question because I was like, "why are you a member?" "What benefit does this have to you?" And they very quickly both answered separately and said, "we find great value with talking with the nontraditional defense contractors and potentially using them as our supplier base." That's another benefit to nontraditional defense contractors, you can start partnering with primes to be their suppliers or their partners on contracts.

That's another benefit to nontraditional defense contractors, you can start partnering with primes to be their suppliers or their partners on contracts.

Consortia Lends a Hand to DOD

Dan Sennott: You talk a lot in this report about how the number of government sponsored consortia has grown. Final component, we've talked about, nontraditional, we've talked about traditional defense companies. What's the benefits of DOD?

Stephanie Halcrow: So DOD right now doesn't have the capacity to do all the administrative and contracting activities that are typically now done through the consortium management firms or the training for the companies and the mentoring for the companies that oftentimes the consortia does for the companies. The DOD just doesn't have that capacity. And so the consortia model brings that additional capacity to the government. Also, I think it's hard to ask the government to be part of a collaborative conversation if there isn't some sort of facilitator that's organizing the event and bringing those folks together and actively encouraging that conversation. So I think that's hard for the government to do it. And that's why you really see these consortia being used across all different technology areas. You see a number of them at the joint level, you see a number of them at the services level. In this research for this report, I heard a number of program offices say, "Oh yeah, we're interested in getting our own consortium as well because this is working so well for these other people down the hall that we see."

 So DOD right now doesn't have the capacity to do all the administrative and contracting activities that are typically now done through the consortium management firms or the training for the companies and the mentoring for the companies that oftentimes the consortia does for the companies. The DOD just doesn't have that capacity. And so the consortia model brings that additional capacity to the government.

Key Takeaways and Recommendations

Dan Sennott: In the last couple of minutes that we have, I have two questions. The first one is several recommendations in the report, can you give us kind of some highlights of the major ones that you want to highlight?

Stephanie Halcrow: The first thing is visibility and transparency of the activities that the government is using consortium for and where it is. Let's say data. We were really fortunate that out of the 42 consortia that we identified, 12 were willing to give us the data. The data exists, but the government isn't collecting it and consolidating it and evaluating it, and it's not easily, publicly accessible. And so Congress actually over the years, and they get stronger language and stronger language each year, has directed the department in Fiscal Year (FY) 22 very specifically on what to collect and has directed the United States General Services Administration (GSA) to track that information in Federal Procurement Data System (FPDS). So we encourage that. We've found in the 12 consortia that the data we collected supported all of these value propositions. And we think as more data is collected it will be true. We also recommend to avoid additional regulatory burdens. This is not a report about OTs, but consortia. The majority of them definitely use the flexibility that is provided in statute with OTs. Oftentimes we hear people saying, "Oh, wouldn't. It be a good idea if we added that there's a clause about epidemics to an OT." Well, no. We went through the epidemic, we didn't find any problems with the OTs, we need to preserve the flexibility in the OTs and not add the regulatory burden. Finally, I think DOD should concentrate on not only transitioning the prototypes to production, but tracking that. We found it very difficult, even with the consortia that provided the data, to find that link to the transition, because typically the prototype was done with the consortia and with the consortia management firm. But the production follow on activity was done directly with the government and industry. And so there was a broken link there of understanding. We were able to find some anecdotal information like through press releases and things like that. We think if the government collects the data. They're going to find that's probably happening and they probably can find ways to do it more and that will just continue to improve the value proposition of consortia.

We think if the government collects the data. They're going to find that's probably happening and they probably can find ways to do it more and that will just continue to improve the value proposition of consortia.

Acquisition Reform Measures Currently Underway

Dan Sennott: And then the final question, which I'm going to veer off of the report for just a minute. Any thoughts on acquisition reform measures that are currently underway or what we might see in the FY 23 National Defense Authorization Act (NDAA)?

Stephanie Halcrow: So I was surprised by the Senate version of the NDAA. I found that there was a large number of provisions that return to adding additional regulations and burdens to the acquisition system. So we'll see how that all fleshes out in conference. But as we talked about, one of the recommendations in this report is to avoid adding regulatory burdens to consortia, to OTs and my position is we need to avoid that across the board.

Dan Sennott: It sounds like if you are a nontraditional defense company or if you are a traditional defense company, you should probably take a look at consortium and how they might be able to benefit you and your business.

Stephanie Halcrow: Yeah, absolutely.

It sounds like if you are a nontraditional defense company or if you are a traditional defense company, you should probably take a look at consortium and how they might be able to benefit you and your business.

Closing

Dan Sennott: All right, great. So where can people once again, the report is "The Power of Many: Leveraging Consortia to Promote Innovation, Expand the Defense Industrial Base, and Accelerate Acquisition." Where can we find that on the Internet?

Stephanie Halcrow: The report is on the Center for Government Contracting at George Mason University's website, but I'm sure we can also provide you guys a link and you can send it out with this podcast.

Dan Sennott: Perfect, and we will do that. Stephanie, thanks so much for taking the time and we really appreciate you being here.

Stephanie Halcrow: Thank you, Dan. Great to see you.

Dan Sennott: Alright, thanks very much.