Other Transaction Authority (OTA)
What is an “Other Transaction”
Other Transactions (OTs) are procurement instruments other than contracts, grants, or cooperative agreements enabling flexible business arrangements to acquire research and development to support technology advancement or to quickly develop a prototype. Many laws and regulations governing federal contracts do not apply to OTs (i.e., Federal Acquisition Regulation (FAR) and the Competition in Contracting Act (CICA)), however, the Procurement Integrity Act applies and competitive practices are applicable. OTs may be protested to the U.S. Court of Federal Claims, and GAO has limited jurisdiction to review OT decisions. GAO ruled on proper use of an OT in these cases: GAO B-416061 and GAO B-416752.
OTs are a mechanism to access innovative research and development, especially from *non-traditional contractors who may be challenged by requirements of traditional contracts, grants, or cooperative research and development agreements. OTs can be used with traditional contractors when statutory requirements are met. OTs provide flexibility that allows for increased speed, flexibility, and accessibility for research and prototyping activities than permitted under statutes and regulations that apply to traditional FAR-based contracts. OT agreements may be fixed-price, expenditure based, or hybrid.
*32 CFR §3.4 defines a non-traditional defense contractor as a business unit that has not, for a period of at least one year prior to the date of the OT agreement, entered into or performed on (1) any contract that is subject to full coverage under the cost accounting standards prescribed pursuant to section 26 of the Office of Federal Procurement Policy Act (41 U.S.C. 422) and the regulations implementing such section; or (2) any other contract in excess of $500,000 to carry out prototype projects or to perform basic, applied, or advanced research projects for a Federal agency, that is subject to the Federal Acquisition Regulation.
The White House Office of Science & Technology Policy (OSTP) stated in a 2014 publication that “OTs allow agencies and their contracting partners to enter into flexible arrangements tailored to the particular projects and needs of the participants.” Section 867 of the FY18 NDAA requires the Secretary of Defense to establish preference for use of OTs and experimental authority in execution of S&T and prototype programs.
Federal Agencies with Congressional OT Authorization
|Agency||OT Authority||Agency Specific OT Requirements, Limitations, and Restrictions|
|NASA||51 U.S.C. § 20113(e)||No limitations or restrictions.|
|DOD*||10 U.S.C. § 4021||Authorizes Research OTs and Prototype OTs. See DoD Other Transactions for detailed requirements, limitations, and restrictions.|
|10 U.S.C. § 4022|
|DOE||42 U.S.C. § 7256||Limited to RD&D projects. Cost sharing agreement required.
Authorized for RD&D and prototype projects.
|HHS||42 U.S.C. § 247-7e||Limited to RD&D projects. Cost sharing agreement required.
Authorized for RD&D and prototype projects.
|DHS||6 U.S.C. § 391||Prototype projects require a non-traditional contractor and cost sharing agreement.|
|DOT||49 U.S.C. § 5312||Limited to RD&D focused on public transportation.|
|FAA||49 U.S.C. § 106(l)||No limitations or restrictions.|
|TSA||49 U.S.C. § 114(m)||No limitations or restrictions.|
|DNDO||6 U.S.C. § 596||No limitations or restrictions.|
|ARPA-E||42 U.S.C. § 16538||No limitations or restrictions.|
|NIH||42 U.S.C. § 285b-3||Limitations and restrictions differ based on specific research programs.|
|42 U.S.C. § 284n|
|42 U.S.C. § 287a|
* Section 815 of the FY 2016 NDAA defines a non-traditional defense contractor as an entity that is not currently performing and has not performed, for at least the one-year period preceding the solicitation of sources by the DoD for the procurement or transaction, any contract or subcontract for the DoD that is subject to the full coverage under the cost accounting standards prescribed pursuant to Section 1502 of title 41 and the regulations implementing such section.
* Section 815 of the FY 2016 NDAA replaced section 845 of the FY 1994 NDAA (repealed) and provided DoD with permanent authority for prototypes, as well as increased dollar threshold approval levels for prototype projects, amended criterion for OTA eligibility, and allows a prototype project to transition to award of a follow-on production contract.
When to Use an Other Transaction
OTs are well suited:
- For Research & Development activities to advance new technologies and processes and prototyping or models to evaluate feasibility or utility of a technology.
- To address barriers to entry and perceived obstacles to doing business with the government by non-traditional vendors to include intellectual property rights and compliance with cost accounting standards.
- For flexibility to tailor agreements leveraging commercial terms & conditions to reach non-traditional vendors with innovation Research & Development solutions
- For negotiable funding arrangements, payment milestones, length of agreement to achieve research and prototype projects, and flexible approach to managing intellectual property
Although OTs may be appealing due to perceived speed to award OT agreements, the primary goal of OTs is to encourage innovation and technological advances, NOT to award fast or avoid FAR competitive processes.
OTs are not an appropriate solution for all requirements!
Two types of Other Transaction Authority are available to the Department of Defense (DoD). The revised USD A&S Other Transactions Guide provides conditions for use as well as guidance for planning and executing Research and Prototype OTs as well as follow-on Production OTs.
Research OTs (10 U.S.C. §4021 – formerly 2371) are applicable for basic, applied, and advanced research projects to pursue development and application of dual-use technology. Unlike Prototype OTs, Research OTs do not include authority for transition to follow-on production contracts or transactions. Research OTs require cost sharing arrangements between the government and the other party/parties, typically split 50/50, although the ratio is negotiable based on resources, previous technological investments, commercial vs. government applicability, performance risk, and nature of a project. Although the Competition in Contracting Act (CICA) is not applicable, competition should be pursued to the maximum extent practicable to incentivize high quality and competitive pricing.
Prototype OTs (10 U.S.C. §4022– formerly 2371b) are appropriate for research and development and prototyping activities to enhance mission effectiveness of military personnel and supporting platforms, systems, components, or materials. Prototype OTs may only be used to develop limited quantities of prototypes, however, they can provide a path to directly award a follow-on Production OT or contract without having to re-compete the effort. This is an important benefit of the Prototype OT approach, but programs must develop acquisition approaches for prototype projects that address anticipated follow-on activities to properly take advantage of this authorization and also ensure the organization is prepared and resourced to move forward with a successful prototype OT.
Using Prototype OTs
For OTs, prototype projects are defined as “a prototype project addressing a proof of concept, model, reverse engineering to address obsolescence, pilot, novel application of commercial technologies for defense purposes, agile development activity, creation, design, development, demonstration of technical or operational utility, or combinations of the foregoing. A process, including a business process, may be the subject of a prototype project.” (source: USD A&S and USD R&E Memorandum, Definitions and Requirements for Other Transactions Under Title 10, United States Code, Section 2371b):
One of the following conditions must be met to award a Prototype OT
- At least one non-traditional defense contractor participates to significant extent or
- All significant participants are small or non-traditional defense contractors or
- One third of total cost provided by sources other than gov (if no non-traditional defense contractor participation) or
- The Agency Senior Procurement Executive determines circumstances justify use of a transaction that provides for:
- Innovative business arrangements not feasible or appropriate under a contract
- Opportunity to expand defense supply base not practical or feasible under a contract
Conditions for Follow-on Production OT or Contract
Prototype OTs must specifically state the possibility for a follow-on production OT or contract in both the Prototype OT solicitation and the Prototype OT agreement. Non-competitive follow-on awards are limited to the participants in the OT prototype project and the following criteria must be satisfied (source: USD A&S and USD R&E Memorandum, Definitions and Requirements for Other Transactions Under Title 10, United States Code, Section 2371b):
- Competitive procedures were used to select the parties to participate in the prototype project; and
- Participants in the transaction successfully completed the prototype project provided for in the transaction
Prototype OTs must include defined conditions for the prototype agreement to be determined successfully completed and thereby eligible for a follow-on production award. Successful completion of a prototype project requires written determination by the responsible approving official stating the efforts under a Prototype OT satisfy the following criteria (source: USD A&S and USD R&E Memorandum, Definitions and Requirements for Other Transactions Under Title 10, United States Code, Section 2371b):
- Met the key technical goals of a project;
- Satisfied success metrics incorporated into the Prototype OT; or
- Accomplished a particularly favorable or unexpected result that justifies the transition to production
Approvals and Thresholds
Approval authorities and thresholds for individual OT awards are as follows. Prototype OTs and follow-on Production OTs require separate approval (source: USD A&S Memorandum Authority for Use of Other Transactions for Prototype Projects Under 10, United States Code, Section 2371b)
|Value of Individual OT Transaction|
|Organization||Up to $100M||$100M to $500M||Over $500M|
|Commanding Officers of Combatant Commands (CCMD)||Commanding Officer||USD (R&D) or
|USD (R&D) or USD (A&S)*|
|Defense Agencies (DA) and Field Activities (FA) with contracting authority; Defense Innovation Unit (DIU)||Director||USD (R&D) or
|USD (R&D) or USD (A&S)*|
|Military Departments||Senior Procurement Executive||Senior Procurement Executive||USD (R&D) or USD (A&S)*|
|DARPA and Missile Defense Agency||Director||Director||USD (R&D) or USD (A&S)*|
|* An Under Secretary must also make a written determination in accordance with section 2371 b. Additionally, the Congress shall be notified at least 30 days before this authority is exercised The Office of the Under Secretary making the written determination is responsible for Congressional notification.|
Direct OT Awards
Agencies with Other Transaction authority and Contracting Officers with Agreement Officer Authority can execute OTs, but must establish processes to solicit, evaluate, negotiate, and award OT agreements. It is not advised to leverage FAR processes to execute OTs. There is not a single established process for executing OTs. Projects or programs seeking to use OTs may desire white papers, demonstrations, competitive prototyping, phased down-selects, or any combination thereof to construct a strategy to achieve objectives.
An OT Consortium is a relationship between a government sponsor and a collection of traditional and non-traditional vendors, non-profit organizations, and academia aligned to a technology domain area (i.e., cyber, space, undersea, propulsion) that are managed by a single entity, and focused on innovative solutions to government technology challenges that meet the intended scope and purpose of other transactions.
OT Consortium Model
OT Consortia generally have 3 components, although some government sponsors opt to manage a consortium in-house rather than hire an industry Consortium Manager or Consortium Management Firm. The Consortium Manager is awarded an OT agreement by the government (base OT agreement) and manages OTs awarded to its consortium member organizations (project OT agreements) under the base agreement.
Consortium Sponsor (Government Sponsor and Contracting Office)
- Awards Other Transaction agreement to a Consortium Manager to execute administrative processes and workload (base OT agreement) for a specific technology domain area
- Establishes consortium objectives and overarching guidelines to execute the consortium
- Selects projects to be awarded to the consortium based on compatability with consortium objectives and appropriateness of project for an OT award
- Approves evaluation selection criteria and project OT award selection/s
Consortium Manager (specifics will vary among consortia)
- Establishes processes for consortium application, membership terms, collects membership fees/dues*
- Executes consortium member agreements with each member organization
- Collects a % of fee for each project OT awarded under the base OT agreement*
- In collaboration with the government sponsor, supports government customers to: develop problem statements, requests for white papers, requests for prototype proposals (RFPPs), determine whether demos will be requested, develop phased selection processes, develop criteria to evaluate proposals, etc.
- Communicates requests for white papers/RFPPs to consortium members, usually via internal website or portal (some announcements may be public, but the details are usually available only to consortium members)
- Facilitates demos and other communication between consortium members and government customer; support demo evaluation and determinations to advance to next phase of selection process
- Manages proposal evaluations and project OT agreement award selection/s, negotiations, and cost analysis (gov sponsor ultimately approves)
- Manages post project OT agreement award administrative activities on behalf of government customer such as monitoring deliverables, invoice/payment tracking, and reporting (gov customer is responsible for day to day activities with contractor/s)
- Maintains “library” of proposals not selected/not funded for potential future use for current gov customer or new gov customer
*membership fees/dues and % of fee for award vary among consortia. See Existing OT Consortia page for individual consortium information.
- A consortium is established to support a specific technology domain area (i.e., cyber, space, undersea, propulsion)
- Consortium membership is open to qualifying US entities (varies by consortium):
- Traditional/non-traditional contractors
- Non-profit organizations
- Academic institutions
- Some consortia open to foreign entities
- Qualifying entities may join one or multiple consortia
- Consortium members are subject to terms of membership, which may include an annual membership fee and a fixed-percentage fee applied to each project OT agreement awarded
- Members typically have access to requests for white papers, requests for prototype proposals(RFPPs), etc. from government customers specific to the consortium
- Some consortia managers may facilitate partnering opportunities among members
- Members may be able to partner with other members to propose solutions
- Traditional contractors must be prepared to meet cost-sharing requirements of other transaction authorities
- Members may negotiate unique terms and conditions for individual projects
- Members that receive project OT awards will be assessed a % of fee by the consortium manager in accordance with consortium terms and conditions
Pros and Cons of Consortia
- A pool of vendors aligned to consortium focus area (i.e., cyber, space, undersea, propulsion) promotes an environment for collaboration with the government and with other consortium members.
- Consortia execute OT agreements which allow for a more collaborative process than traditional FAR processes that are bound by rigid source selection statutes and regulations.
- Consortia have established streamlined processes that quickly move through white papers, demos, proposals, evaluations, and selections and often execute awards more quickly than traditional government acquisition programs.
- Non-traditional vendors, non-profit organizations, and academic organizations may be challenged by the financial considerations of consortia membership due to fees and % of award fees charged by consortia.
- Some consortia are in high demand by government customers and are thereby resource constrained. This can due to volume of work for the consortium or by the availability of the assigned government contracting office.
- Many consortia do not award follow-on production activities.
Sample organizations in each component of the OT Consortium Model
for illustrative purposes only | all organizations not represented
Questions to Ask when Shaping an OT Strategy
- Does my organization currently have Congressional authorization for OTs?
- What is the timeline for using an OT mechanism? How soon can the program office begin and how well does the OT timeline align with existing schedule plans?
- How will the funding arrangements work (timing, amounts, color of money, etc.)? When are funds available?
- Will the organization’s approval authorities grant permission to use an OT? What additional information is necessary to gain their approval?
- Do our Contracting Officers have experience with OTs and Agreement Officer authority?
- DoD Authority for Use of Other Transactions for Prototype Projects Under 10 USC 2371b, USD A&S
- DoD Definitions and Requirements for Other Transactions Under Title 10, United States Code, Section 2371 b, USD A&S/USD R&E
- DoD Other Transactions Guide, USD (A&S)
- Other Transaction Agreements for Prototype Projects under 10 U.S.C. §2371b, Defense Pricing and Contracting
- Evaluating Price; Other Transactions (OTs), DCMA Commercial Item Pricing Group
- Pricing Other Transactions: Striking the Balance Between Speed and Price (video), DAU/DCMA, Jan 2021
- OTA Best Practices for Industry and Government, ACT-IAC, Jul 2020
- Continuous Learning Training Module, CLC 066 Other Transactions, DAU, Oct 2019
- Defense Commercial Solutions Opening Pilot Program, DPAP, Jun 2018
- Other Transaction Authority, Air Force Transformational Innovation
- Acquisition Innovation/OT Resources, DARPA, June 2019
- Other Transactions Simulation, Diane Sidebottom, DAU, Apr 2019
- DISA OTA Process Guide, DITCO, Jun 2018 (CAC Enabled)
- Defense Innovation Unit: Pathways to Commercial Innovation and OTAs, DAU, Apr 2018
- Using Other Transactions – The Good, Bad, and the Uncertain, Diane M. Sidebottom, DAU, Apr 2018 (video)
- OTA Basics Video, Diane Sidebottom, DAU, Apr 2018
- Other Transaction Authority and the Consortia-Based Acquisition Model: A Valuable Tool for Rapid Defense Innovation, The Chertoff Group
- Audit of Other Transactions Awarded to Consortiums, DoDIG, Apr 2021
- DOD’s Use of Other Transactions for Prototype Projects Has Increased, GAO, Nov 2019
- GAO Decision B-416752, Blade Strategies, LLC Protest of Army’s Use of OTA, GAO, September 2018
- GAO Decision B-416061, Oracle America Inc., Protest of Production OTA to REAN Cloud LLC, GAO, May 2018
- DoD Use of OTA: Background, Analysis, and Issues for Congress, CRS, Feb 2018
- Use of Other Transaction Agreements (OTAs) Limited and Mostly for R&D Activities GAO, Jan 2016
- Other Transactions – Best Practices to Enable Success, National Defense, April 2020
- OTA Prototyping Nearly Triples To $3.7B: GAO, Breaking Defense, Nov 2019
- OTA: Saint or Sinner for Defense Acquisition, Acquisition Research Journal, Apr 2019
- Debunking the Hype Involving OTAs, Contract Management Magazine, Mar 2019
- Defense industrial bases’ perspective on Other Transaction Authority, Gov’t Matters TV, Oct 2018
- Navy Leverages OTA with New $100M Consortium, Gov’t Matters TV, Jul 2018
- DISA Sees OTAs as Step Toward Implementing New Technology Faster, Jun 2018
- GOVCON Mythbusters: Other Transactions in FedGov, The Pulse, Jun 2018
- The Use of Other Transaction, Frank Kendall on Gov’t Matters TV, Jun 2018
- Lawmakers move to tighten OTA production authorities after REAN Cloud controversy, Inside Defense, Jun 2018
- The Scary New Contracting Model That Isn’t Scary or New, NextGov, Mar 2018
- The Gatekeepers of the Government’s Other Transaction Deals, NextGov, Apr 2018
- The case for innovation: Let’s broaden Other Transaction Authority, Rich Beutel, Mar 2018
- Pentagon’s $1 Billion Cloud Deal May Signal New Era in Government Buying, NextGov, Feb 2018
- Use of “Other Transaction Authority” in DoD acquisition shop, GovMattersTV, Feb 2018
- Is DISA getting innovation by using OTA for new background investigation system?, FedNewsRadio, Feb 2018
- Air Force launches new project to update missile-warning ground software, SpaceNews, Jan 2018