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. Most 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.

OTs are a mechanism to access innovative research and development from non-traditional contractors who are challenged by the standard 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.

48 CFR §212.001 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 Department of Defense (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 41 USC §1502 and the regulations implementing such section.

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.

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 commercial-like agreements to reach non-traditional vendors with innovation Research Development and Demonstration (RD&D) 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/engage non-traditional performers to support government needs, NOT to award agreements quickly or avoid FAR competitive processes.

Agency Specific OT Authorizations, 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 and Contracting Officers must have Agreement Officer authority to execute OTs. Eleven federal agencies currently have Congressional authorization for OTs:

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. § 2371 Authorizes Research OTs and Prototype OTs. See DoD Other Transactions for detailed requirements, limitations, and restrictions.
10 U.S.C. § 2371b
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

 

[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.

DoD Other Transactions

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. §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. §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 recompete 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.

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 (A&S)
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 (A&S)
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.

 

Existing Consortia

There are a growing number of consortia to help agencies draw innovators who are not traditional federal contractors, as well as companies with long government service, to tackle tough, intractable challenges.

List of current consortia.

Internal OT Vehicle

A program office could establish its own OT vehicle, following a consortium model. This is the most flexible approach in terms of technical scope, but also may take longer than leveraging an established OT through a consortium (potentially 6 months or more). For further guidance about how to do this, refer to the OSTP Innovative Contracting Case Studies guide or the Dec 2018 OUSD A&S Other Transactions Guide.

Questions to Ask in Shaping 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?

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/News Clips

2 Comments

  1. Jan Kinner

    Latest policy and guide available….I can’t upload to site. Please email me to receive.

    Reply
    • cmmurphy@mitre.org

      Hi Jan, new policy and guide added today. Thank you!

      Reply

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