Other Transaction Authority (OTA)

What is an “Other Transaction?” 

A flexible business arrangement with a non-traditional supplier to quickly develop a prototype system with significantly less administrative overhead.

Other Transactions (OTs) (sometimes referred to as Other Transaction Authority (OTA)) provide flexibility that allows for much greater speed, flexibility, and accessibility for research and prototyping activities than permitted under statutes and regulations that apply to traditional Federal Acquisition Regulation (FAR) contract instruments. Although OTs are not subject to the FAR, these arrangements provide suitable guardrails and formalized procedures to ensure fairness, transparency, and appropriate controls.

OTs are a mechanism to access innovative research and development from non-traditional vendors. 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. who are challenged by the standard requirements of traditional contracts, grants, or cooperative research and development agreements. 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.

When and Why Use An OTA?

OTs are best suited:

  • For RD&D activities to advance new technologies and processes and prototyping or models to evaluate feasibility or utility of a technology
  • To address 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 to reach non-traditional vendors with innovation research development and demonstration (RD&D) solutions
  • For negotiable funding arrangements, payment milestones, and length of agreement to achieve research and prototype projects

Why Use An OT?

An OT is a transaction (other than a contract, grant, or cooperative agreement) to which most of the laws and regulations governing federal contracts – including the FAR – do not apply.” – DIUx guide

  • Deliver capability faster
  • Reduce administrative overhead and bureaucratic delay
  • Simplify the contracting procedures
  • Reduce barriers to entry for non-traditional vendors
  • Negotiable funding arrangements and payment milestones
  • Provide a flexible approach to managing intellectual property
  • Establish a streamlined path to a full production contract
Agency Specific OTA Requirements, Limitations, and Restrictions

While OTs provide significant flexibility, there are also some limitations. OTs are exempt from FAR and are not required to follow a standard format or include standard terms and conditions, but Agencies must be explicitly authorized by Congress to use them. Eleven federal agencies currently have Congressional authorization for OTs:

Agency OTA Authority Agency Specific OTA Requirements, Limitations, and Restrictions
NASA 51 U.S.C. § 20113(e) No limitations or restrictions.
DOD 10 U.S.C. § 2371 Authorized for prototype projects directly relevant to enhancing mission effectiveness of military personnel and the supporting platforms, systems, components, or materials in use by the Armed Services.

Meet one of the following conditions:

  • At least one non-traditional defense contractor participating to a significant extent
  • All significant participants in the transaction other than the Fed Gov are small businesses OR non-traditional defense contractors
  • At least 1/3 of total cost of prototype project paid out of funds provided by parties to the transaction other than the Fed Gov

The agency senior procurement executive determines that exceptional circumstances justify use of a transaction not feasible or appropriate under a contract or provides opportunity to expand the defense supply base in a manner not practical or feasible under a contract

DOE 42 U.S.C. § 7256 Limited to RD&D projects. Cost sharing agreement required.
HHS 42 U.S.C. § 247-7e Limited to RD&D projects. Cost sharing agreement required.
DHS 6 U.S.C. § 391 Authorized for RD&D and prototype projects.

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; 42 U.S.C. § 284n; 42 U.S.C. § 287a Limitations and restrictions differ based on specific research programs.

Additional OSD approvals and references per DPAP OTA Guide

Prototype Project Cost (Including Options) Non-delegable Approval Authority for Military Departments/ Defense Agencies with OT Authority Approval Authority Source
Over $100 Million and Up to $500 Million Senior Procurement Executives (SPE) of the Military Departments – the Service Acquisition Executives (SAEs) for Army, Navy and Air Force Senior Procurement Executive for the Fourth Estate – USD(AT&L) Director of DARPA Director of the Missile Defense Agency (MDA) 10 U.S.C. §2371b(a)(2)(A)
Over $500 Million USD(AT&L) 10 U.S.C. §2371b(a)(2)(B)(1)

[1] 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.

[2] 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.

Another restriction is that OTs can only deliver limited quantities of prototypes rather than full-scale production arrangements. The term prototype is not fully defined in federal law, so most agencies have relatively broad, flexible definitions of the term. The DIUx guide defines it as “A prototype project can generally be described as a preliminary pilot, test, evaluation, or agile development activity used to test the viability, technical feasibility, or military utility of a technology, process, concept, end item, system, methodology, or other discrete feature.”

However, if an OT is used in combination with a prototype and/or minimum viable product (MVP) that has been demonstrated and the “military utility” confirmed, the OT mechanism allows a program office to directly award a full production contract to the vendor, without having to recompete the work. This is an important benefit of the OT approach.  Section 815 of the FY2016 NDAA specifically allows follow-on production contracts resulting from an OT, limited to the participants in the OT prototype project. This may be done without the use of competitive procedures if the following criteria are satisfied:

  1. Competitive procedures were used to select the parties to participate in the prototype project; and
  2. The participants in the transaction successfully completed the prototype project provided for in the transaction

To take advantage of this authorization, programs should develop acquisition approaches for prototype projects that address anticipated follow-on activities.

Existing OTA Consortia

DIUx established a mechanism called a Commercial Solutions Opening (CSO) to solicit solutions to warfighter needs under an OT. The CSO mechanism is available for any DoD entity to use, and the process begins by visiting the Work With Us page on the DIUx website. A detailed explanation of the process is provided in the CSO How To guide quoted on the first page of this document. One benefit of the DIUx CSO is the wide scope of technology that can be developed using this vehicle. However, the color of money is limited to R&D funds. For examples of current projects being supported by this mechanism, download the 2017 DIUx Annual Report, where they awarded 48 prototype projects, leveraged approximately $84 million in DoD with partner funding from more than 30 different DoD entities.

The Air Force Research Laboratory site in Rome, NY, runs an OT vehicle similar to DIUx’s and has run 20+ projects. This vehicle is managed by an entity named the System of Systems Consortium. AFRL published a 10 Step Guide which walks the reader through the process of using their OT. The AFRL approach is slightly faster than DIUx because rather than issuing an entirely new OT for each customer (as DIUx does), AFRL simply issues a Task Order under their existing OT.

In addition to DIUx and AFRL, there are a growing number of consortia to help agencies draw innovators who were not traditional federal contractors, as well as companies with long government service, to tackle tough, intractable challenges.

Consortium Sponsor Management Firm
DoD Sponsored
National Spectrum Consortium (NSC)  Office of the Deputy Assistant Secretary of Defense, Emerging Capabilities and Prototyping (ODASD, EC&P) Advanced Technology International (ATI)
Medical Chemical Biological Radiological Nuclear (CBRN) Defense Consortium (MCDC)  Department of Defense Joint Program Executive Office for Chemical and Biological Defense (JPEO-CBD) ATI
Countering Weapons of Mass Destruction (CWMD) Department of Defence Joint Program Executive Office for Chemical and Biological Defense (JPEO-CBD) ATI
DoD Ordnance Technology Consortium (DOTC) Under Secretary of Defense for Acquisition, Technology, and Logistics (AT&L) ATI
Vertical Lift Consortium (VLC) Under Secretary of Defense for Acquisition, Technology, and Logistics (AT&L) ATI
National Advanced Mobility Consortium (NAMC) Under Secretary of Defense for Acquisition, Technology and Logistics (AT&L) National Center for Manufacturing Sciences
Propulsion Consortium Initiative (PCI) US Air Force Lifecycle Management Center (AFLCMC) Propulsion Acquisition Directorate SOSSEC Inc.
Open Systems Architecture Initiative (OSAI) US Air Force Research Laboratory (AFRL) SOSSEC Inc.
Space Enterprise Consortium (SpEC) US Air Force Space and Missile Systems Center (SMC), Advanced Systems and Development Directorate ATI
System of Systems Enterprise Consortium (SOSSEC) US Army Research, Development and Engineering Center (ARDEC) SOSSEC Inc.
Consortium for Energy, Environment and Demilitarization (CEED) US Army Research, Development and Engineering Center (ARDEC) Consortium Management Group (CMG)
Consortium for Command, Control, and Communications in Cyberspace (C5) US Army Research, Development and Engineering Center (ARDEC) Consortium Management Group (CMG)
Medical Technologies Enterprise Consortium (MTEC) US Army Medical Research and Materiel Command (USAMRMC) ATI
Training and Readiness Accelerator (TreX) US Army Program Executive Office for Simulation, Training and Instrumentation (PEO STRI) National Security Technology Accelerator (NSTXL)
Defense Automotive Technologies Consortium (DATC) US Army Tank Automotive Research, Development, and Engineering Center (TARDEC) SAE Industry Technologies Consortia
National Shipbuilding Research Program (NSRP) US Naval Sea Systems Commend (NAVSEA) ATI
Center for Naval Metal Working (CNM) Office of Naval Research (ONR) ManTech Program ATI
Composites Manufacturing Technology Center Office of Naval Research (ONR) ATI
Undersea Technology Innovation Consortium (UTIC) US Naval Undersea Warfare Center (NUWC) ATI
Information Warfare Research Project (IWRP) US Naval Space and Warfare Systems Command (SPAWAR) ATI
American Metal Casting Consortium Defense Logistics Agency (DLA) ATI
Forging Defense Manufacturing Consortium (FDMC) Defense Logistics Agency (DLA) ATI
Non-DoD Sponsored
Border Security Technology Consortium (BSTC) Department of Homeland Security (DHS) Customs and Border Patrol (CBP) ATI
In Progress
Natick Soldier Research, Development, and Engineering Center (NSRDEC) BOTAA US Army Contracting Command – Aberdeen Proving Grounds (Natick Contracting Division) Under Solicitation
Sensors, Communications and Electronics Consortium (SCEC) US Army-Aberdeen Proving Ground Seeking letters of support for consortium
Guidance Weapons Systems, and Aviation Missile Manufacturing Technologies US Army Aviation and Missile Research, Development and Engineering Center (AMRDEC) Under Solicitation
Cornerstone US Army Edgewood Chemical and Biological Center (ECBC) Under Solicitation
Cyberspace Real-time Acquisition Prototyping
Innovation Development (C-RAPID)
US Army Defense Cyber Operations (PEO EIS) Under Solicitation
Internal OTA Vehicle

A program office could establish it’s own OT vehicle, following a consortium model. This is the most flexible approach in terms of technical scope and also takes the longest (potentially 6 months). For further guidance about how to do this, refer to the OSTP Innovative Contracting Case Studies guide) or the Jan 2017 Other Transaction Guide, published by the Director of Defense Procurement and Acquisition Policy. Under current policy, a Senior Procurement Executive has authority to approve an OT up to $500M. Note that personnel at DIUx and AFRL alike have publicly expressed a willingness to help government entities develop their own OT’s. DIUx in particular has a strong emphasis on scaling the OT practice by “sharing guidance… with organizations across the DoD.”

Questions to Ask in Shaping 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?

While using an OT is not exactly unchartered territory, the number of relevant precedents is admittedly limited. There is thus a certain amount of unpredictability inherent in this option. However, the number of OTs currently in use is increasing and the community of acquisition professionals who are familiar with OTs continues to expand. This risk should be assessed in comparison with the risk of using standard procedures.

FY19 NDAA Language on OTA

SEC. 873. DATA, POLICY, AND REPORTING ON THE USE OF OTHER TRANSACTIONS.

(a) COLLECTION AND STORAGE.—The Service Acquisition Executives of the military departments shall collect data on the use of other transactions by their respective departments, and the Under Secretary of Defense for Research and Engineering and the Under Secretary of Defense for Acquisition and Sustainment shall collect data on all other use by the Department of Defense of other transactions, including use by the Defense Agencies. The data shall be stored in a manner that allows the Assistant Secretary of Defense for Acquisition and other appropriate officials access at any time.

(b) USE OF DATA.—The Assistant Secretary of Defense for Acquisition shall analyze and leverage the data collected under subsection (a) to update policy and guidance related to the use of other transactions.

(c) REPORT REQUIRED.—Not later than December 31, 2018, and each December 31 thereafter through December 31, 2021, the Secretary of Defense shall submit to the congressional defense committees a report covering the preceding fiscal year on the Department’s use of other transaction authority. Each report shall summarize and display the data collected under subsection (a) on the nature and extent of the use of the authority, including a summary and detail showing—

(1) organizations involved, quantities, amounts of payments, and purpose, description, and status of projects; and

(2) highlights of successes and challenges using the authority, including case examples.

References

Articles

0 Comments

Submit a Comment

Your email address will not be published. Required fields are marked *

Share This