Interview transcript:
Terry Gerton You’ve been reporting on some interesting developments in defense procurement. Let’s start with the review of 72 major acquisition programs for potential cuts. What are you seeing happening there?
Barbara Kinosky Well, this is pursuant to one of the many executive orders that have come out of this administration. And they have been reviewing contracts that are either 15% behind schedule or 15% over cost for elimination. They’re also looking at some of the major contractors that are supplying anything with the word consulting in it to the Pentagon. And that is right now a worse word, as I understand it, than DEI. So if you have consulting anywhere in the title, you should ask for an amendment to your contract.
Terry Gerton That’s following from GSA’s letters to the first group of 10 and the second group of 10 major consultant contracts, I suppose.
Barbara Kinosky That is absolutely correct that they’ve already made significant cuts. And there was an act called the WARN Act, W-A-R-N in all caps, that says that you have to file notices if you’re laying off employees, a significant number of them, and we’re starting to see that now. There are IT contracts that have already been terminated with companies such as Accenture, Deloitte, and Booz Allen Hamilton. These contracts were deemed non-essential. And they could be managed, in the words of the Pentagon, by Pentagon personnel.
Terry Gerton Of course, the Pentagon is reducing its own personnel, so it’s not clear who’s going to be left to manage these kinds of functions.
Barbara Kinosky I am very curious about that myself, because I’m seeing that at GSA too, as GSA is going to want to take over all the IT contracts, the other GWACs, and then the Pentagon is going to takeover all IT. I think we’ve seen this cycle before.
Terry Gerton And it doesn’t always turn out well.
Barbara Kinosky I think in the case of IT, it’s not going to turn out very well at all.
Terry Gerton Well, let’s circle back to those 72 major procurement programs. Do those include weapons systems? And just because a weapons system may be behind or over budget doesn’t always mean it’s not going to be delivered.
Barbara Kinosky That is absolutely correct, and that is not unique in the procurement of weapons systems, particularly if it’s in the R&D. As we know, there are changes — you’ve been in the Pentagon, and we both understand this process, that there are always changes. It’s an evolving dynamic in the production of anything of that magnitude.
Terry Gerton As requirements change, warfighting environment changes, the needs of the weapons system may change and the cost estimates from the beginning are going to change in the process.
Barbara Kinosky Absolutely. What I found out that DOGE does not have any understanding of is the termination for convenience costs of all these terminated contracts. If they waited — and I hope I’m not helping out DOGE here because Centre Law has had one of its own contracts terminated on a Friday night, yes, for convenience — that if you wanted to terminate these contractors, wait until the option year is up for renewal. Unfortunately, there’s nothing the contractor can do about that. But all these terminations are going to result in a heck of a lot of cost to the Pentagon.
Terry Gerton And litigation.
Barbara Kinosky Massive amounts of litigation. And I shouldn’t smile since I’m a lawyer, but I am smiling.
Terry Gerton Well, let’s turn our attention to another form of procurement, the OTAs. They’re looking to change the provision for OTA. How is that playing out?
Barbara Kinosky What’s the interesting fact is that OTAs, for those of you who are a procurement geek like me — I will never get invited anywhere else now by admitting this — but OTA’s actually started with President Eisenhower when the legislation for NASA was enacted and they wanted a quick way to procure things to go in space, you know, in a fast acquisition method. And then it has spread over to DoD. So OTAs were originally designed to procure things like research and development or prototypes. What I’m seeing now is clients getting OTAs that are not in those categories at all. The caps at the Pentagon have been raised for OTA on the dollar amount. Prototype OTAs are $100 million and require senior approval.
Terry Gerton $100 million is not a small procurement process.
Barbara Kinosky No, it’s not. And there’s not a whole lot of regulations out there on OTAs, and that’s the reason we’re seeing them used a lot more than they have in the past. In my opinion, the way things are going right now, if you want to get back to one of those fired IT contractors when you discover that you either want to reinstate their contract or you need some IT services, what I’m seeing right now is, “use an OTA!”
Terry Gerton I’m speaking with Barbara Kinosky. She’s the managing partner of Centre Law and Consulting. So Barbara, what’s the practical implication of this massive increase in the use of OTAs? What is it going to mean for procurement programs in the long run?
Barbara Kinosky Well, I don’t think anybody has a handle on the complete use of OTAs because there is an annual report that is supposed to be filed to Congress, pursuant to one of the National Defense Authorization Acts, but I’m not sure it’s being done or anybody really has a handle on the spend of OTAs. You know, on a typical procurement vehicle…for example, for open competition, it would be posted on SAM.gov. For a GSA schedule buy, it would be on eBuy. And there would be dollar amounts associated with that on awards. And you could find them. These OTAs, these mysterious vehicles, don’t seem to have any visibility in the marketplace.
Terry Gerton Isn’t DOD supposed to be establishing a process to track the number and value of the awards?
Barbara Kinosky Yes, you’re absolutely right, but the reality of the situation, and particularly with a — let’s say a leaner Pentagon and a less experienced Pentagon on top of the new appointees to the Pentagon — I suspect this is not going to be a priority right now of getting a handle on OTAs.
Terry Gerton Well, which agency or legislative body would have the oversight responsibility for that? Would that be GSA that would be tracking that? Would it be Congress who should be keeping an eye on how DoD is coming on this?
Barbara Kinosky That’s an excellent question. I would say it would be each agency that has the authority to issue an OTA. And as we know, DoD has to file an annual report to Congress on that. But I don’t know, particularly with the lower level of approvals, too, for OTAs at the Pentagon, I don’t know who’s got the Excel spreadsheet up detailing all of this.
Terry Gerton Perhaps they could let an IT contract for it.
Barbara Kinosky Oh, that’s brilliant!
Terry Gerton Let’s switch gears a bit. You’re hearing that there’s new conversation about base realignments and closures in DoD. Tell us what you’re hearing there.
Barbara Kinosky We’re hearing right now that the Army is going to have significant budget reductions and that was actually published too. But they’re talking about base closures or base realignments. I think that’s the politically correct word, you know, “we’re not going to close your base, we’re going to realign the base.” I’m not quite sure what a realignment means, but it definitely means they’re going to probably close the base or make it a joint base. In the budget bill, the winners are the Air Force and the Navy. But the Army, not so much.
Terry Gerton So would this require the establishment of another BRAC commission?
Barbara Kinosky Oh, I don’t think they’ve thought about that all the way down. I don’t mean to insult anybody that’s working, all the hard-working people that have not been laid off in the government that are still there. But I’m not sure with, and I mean it sincerely, that you haven’t thought about it because there is so much else going on in the environment right now that I think thinking about closing a base when you’re trying to figure out who you have supporting you for IT is more of a priority than going down and establishing a BRAC commission.
Terry Gerton Well, there’s so many reports and studies underway on so many topics in DoD that this is probably just one more on their long list, but I would imagine that they’re preparing it for ’26 or ’27 budget submissions.
Barbara Kinosky Yes, I expect you’re absolutely right there because there’s so much stuff going on right now with contractors being terminated and I’ve seen contractors being reinstated two weeks later because they didn’t mean to terminate them or they discovered no one’s IT is working or you can’t connect to secure networks. All of those things are going on, so I suspect you’re actually right that these reviews and these commissions and things like that that are going to be set up will be in the future years.
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