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.

Agencies Authorized to Use OTs

Agencies must be explicitly authorized by Congress to use OTs and Government Contracting Officers must have Agreement Officer authority to award OTs. The following federal agencies currently have Congressional authorization for OTs:

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.

DoD Other Transactions

Two types of Other Transaction Authority are available to the Department of Defense (DoD). The 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.

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.

For further guidance about how to plan and execute OT agreements, refer to the OSTP Innovative Contracting Case Studies guide or the OUSD A&S Other Transactions Guide.

OT Consortia

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.

The Consortium

• 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

Cons

• 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?

Resources