Other Transaction Authority (OTA) is the term commonly used to refer to the (10 U.S.C. 2371b) authority of the Department of Defense (DoD) to carry out certain prototype projects.  As of the 2016 National Defense Authorization Act (NDAA) Section 845, the DoD currently has permanent authority to award “Other Transactions” (OT) (10 U.S.C. 2371) in certain circumstances for prototype projects that are directly relevant to weapons or weapon systems proposed to be acquired or developed by the DoD. OT may be used for basic, applied, advanced research and prototype projects when it has been determined that it is in the Government’s best interest to enter into an agreement that is not a contract, grant, or cooperative agreement.

The statutory authority provides that OT shall be used to: “carry out prototype projects that are directly relevant to enhancing the mission effectiveness of military personnel and the supporting platforms, systems, components, or materials proposed to be acquired or developed by the Department of Defense, or to improvement of platforms, systems, components, or materials in use by the armed forces.”

OTs are not covered by the Federal Acquisition Regulations (FAR) and are a highly flexible business tool, use of which requires application of astute business acumen to ensure smarter, more efficient acquisition of prototype systems for the DoD. OTs require a minimum of at least one nontraditional Defense Contractor participating to a significant extent in the prototype project or a cost sharing arrangement requiring that at least one-third of the cost of the OTA come from non-Federal sources. [1]

Guide: Other Transaction Authority (OTA) Guide – 17 Jan 2017 

Overview: Other Transaction Authority (OTA)

Each military service has authority to execute OTs up to $250M with authorization by their Service Acquisition Executive (SAE), and there are no limits on how many OTs may be executed by the services or the cumulative value of such awards. Beyond the $250M threshold for individual OTs, USD(A&L) must provide authorization to proceed. There is no limit to the number or dollar value of OTs that the DoD may execute in the aggregate.

In accordance with statute, this authority may be used only when one of the following is met:  [1,2]

  1. The awardee is a non-traditional defense contractor OR a small business:
    • “Non-traditional defense contractor” is defined by statute as “an entity that is not currently performing and has not performed, for at least the one-year period preceding the solicitation sources by the Department of Defense for the procurement or transaction, any contract or subcontract for the Department of Defense 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.”
    • “Small business” is defined under section 3 of the Small Business Act (15 U.S.C. 632).
  2. The awardee is a traditional defense contractor, but at least one of the following applies:
    • At least one non-traditional contractor is participating to a “significant” extent
    • The awardee provides a financial or in-kind cost share – typically, a 1/3 cost share is required. However, the Government should not generally mandate cost-sharing requirements for defense unique items.
    • The Service Acquisition Executive makes a written determination that exceptional circumstances justify use of OTA for the purpose of executing innovative business models or structures that would not be feasible or appropriate with a FAR-based contract.

By definition, a prototype developed through OTA may include “a physical or virtual model used to evaluate the technical or manufacturing feasibility or military utility of a particular technology or process, concept, end item, or system.”

AcqLinks and References:

Updated: 11/06/2017

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