Contracts & Legal

Other Transaction Authority (OTA)

Other Transaction Authority (OTA) is the term commonly used to refer to the (10 U.S.C. 4021) authority of the Department of Defense (DoD) to carry out certain prototypes, research, and production projects. Other Transaction (OT) authorities were created to give DoD the flexibility necessary to adopt and incorporate business practices that reflect commercial industry standards and best practices into its award instruments. As of the 2016 National Defense Authorization Act (NDAA) Section 845, the DoD currently has permanent authority to award OT under (10 U.S.C. 4021) for (1) Research, (2) Prototype, and (3) Production Purposes.

(1) Research Purpose (10 U.S.C 4021) allows for basic, applied, and advanced research projects. These OTs are intended to spur dual-use research and development (R&D), taking advantage of economies of scale without burdening companies with Government regulatory overhead, which would make them non-competitive in the commercial (non-defense) sector. Traditional defense contractors are encouraged to engage in Research OTs, particularly if they seek to adopt commercial practices or standards, diversify into the commercial sector, or partner with Non-Traditional Defense Contractors.

(2) Prototype Purpose (10 U.S.C. 4022) allows for projects directly relevant to weapons or weapon systems proposed to be acquired or developed by the DoD.

The statutory authority provides that Other Transaction (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 the improvement of platforms, systems, components, or materials in use by the armed forces.”

(3) Production Purpose allows for a non-competitive, follow-on OTs to a Prototype OT agreement that was competitively awarded and successfully completed. This statute requires that advanced consideration be given and notice be made of the potential for a follow-on OT; this is a necessary precondition for a follow-on Production OT. As such, solicitation documents and the Prototype OT agreement shall include a notice that a follow-on Production OT is possible.

What is an “Other Transaction” (OT)?

Definition: A Other Transaction (OT) is an legal instrument issued by the federal government that is not a contract, cooperative agreement or grant. 

An OT is a common term that refers to any kind of transaction other than a contract, grant, or cooperative agreement that is authorized by 10 U.S.C. 4021.  Transactions pursuant to this authority can take many forms and generally are not required to comply with Federal laws and regulations that apply to procurement contracts, grants, and/or cooperative agreements.   To the extent that a particular law or regulation is not tied to the type of instrument used (e.g., fiscal and property laws), it would generally apply to an OT.

What is the Purpose of Other Transaction (OT)?

The Purpose of OTs authorities was to give DoD the flexibility necessary to adopt and incorporate business practices that reflect commercial industry standards and best practices into its award instruments. When leveraged appropriately, OTs provide the Government with access to state-of-the-art technology solutions from traditional and non-traditional defense contractors (NDCs), through a multitude of potential teaming arrangements tailored to the particular project and the needs of the participants. [3]

Top 5 Takeaways for Using Other Transaction Authority (OTA)

The key takeaways for understanding, developing, and utilizing OTA are listed below.

  1. An OTA is a procurement authority that allows federal agencies to enter into agreements with non-traditional defense contractors, such as small businesses, research institutions, and nonprofit organizations.
  2. They allow agencies to bypass certain Federal Acquisition Regulation (FAR) requirements, which can speed up the acquisition process and make it more flexible.
  3. Can be used for a variety of purposes, including prototyping, research and development, and follow-on production.
  4. Agreements are typically used for projects that are innovative, Medium to high risk, or have a short timeline.
  5. Agreements can be beneficial for both the government and contractors, as they can provide a faster and more flexible way to develop and acquire new technologies and capabilities. However, they may also be subject to greater scrutiny and oversight due to the unique nature of the agreements.

What are the Other Transaction (OT) Authorities?

OTs are not covered by the Federal Acquisition Regulations (FAR) and are a highly flexible business tool, the use of which requires the application of astute business acumen to ensure the 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 project or a cost-sharing arrangement requiring that at least one-third of the cost of the OTA come from non-Federal sources. [1]

Each military service has the authority to execute OTs up to $500M 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 $5000M 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. Agencies must be explicitly authorized by Congress to use Other Transactions.

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
    • All significant participants in the transaction other than the Federal Government are small businesses (including those participants in the Small Business Innovation Research (SBIRS) or Small Business Technology Transfer (STTR) program or nontraditional contractors.
    • 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 the 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.

What Constitutes a Prototype Project?

The terms “prototype” and “prototype project” are not defined in statutes or regulations. However, in 2002, the Under Secretary of Defense for Acquisition, Technology, and Logistics stated:

“With regard to section 845 authority, a prototype can generally be described as 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. The quantity developed should be limited to that needed to prove technical or manufacturing feasibility or evaluate military utility. In general, Research, Development, Test & Evaluation (RDT&E) appropriations will be appropriate for OT prototype projects.”

When to Use the Other Transaction (OT)?

Other Transactions are a great tool that should be utilized to the fullest extent possible but may not be the best option. The following is a list of where using an OT is best.

  • For advancing new technologies and processes through prototyping or models to evaluate the feasibility of a new technology satisfying a need.
  • To promote and utilize non-traditional vendors
  • Need the flexibility of tailored agreements to leverage commercial capabilities and items.
  • Need the flexibility of funding and payment arrangements.

DoD Instruction (DoDI) 5000.02 determines whether or not OTs are subject to it based on the acquisition plan chosen by the program office. OTs are neither automatically subject to DoDI 5000.02 nor free from it. Instead, choosing the award instrument should be seen as a different but related, choice. As a result, any program executed under the DoDI 5000.02 pathway is subject to DoDI 5000.02 policy, regardless of whether an OT or traditional contract is used, once this pathway is selected.

Other Transaction (OT) Consortiums

OT consortiums are business structures put in place by the government to execute OT more effectively. OSD guidance states that contracting officers should not use specific templates for designing such structures. The intent, rather, is for the government to structure business arrangements that are most appropriate for each specific scenario.

Once a consortium is established, government customers may issue calls for whitepapers to the consortium. The government may then select a small number of companies to submit a more formal proposal. Ultimately, the government selects one or more awardees and delivers funding to the selected consortium member(s) – typically through the consortium management organization. The government may also propose new relationships between consortium members without re-soliciting white papers or proposals from the entire consortium.

Other Transaction (OT) Consortium Setup

The majority of OT Consortia have 3 components. These three components form the foundation in the execution of the consortia, and each is a key player in its success. Normally a consortia is built around a common area of interest (cyber, space, software…). The three components are:

  • Government Sponsor: Develops the consortia and establishes its goals and objectives. Selects projects for an award based on developed criteria.
  • Consortia Manager: Develops and establishes the process and procedures to be followed. Executes consortium member agreements with each member organization.
  • Consortium: A group of companies that have been selected to participate in the consortia. This group can change from year to year.

Website: Existing OTA Consortium

Key Questions to Answer When Setting up an Other Transaction (OT)

  • Is an OT the best possible approach?
  • Do we have the authorization to use OT?
  • What is the schedule for using an OT?
  • What type of funding will we use?
  • When are funds available?
  • What are the approval steps?
  • Does our organization have experience with executing OT?

Commercial Solutions Opening (CSO) for Other Transaction Agreement (OTA)

Commercial Solutions Openings (CSO) is a “solicitation method” that can use either a non-FAR or FAR-based solicitation method and can use either a OT contract or FAR-based fixed-price contract (but not cost-reimbursable).

Benefits of using the Other Transaction Agreement (OTA)

An OTA is a powerful and extremely useful tool that, if executed correctly, brings many benefits. A few of the benefits are:

  • Most of the laws and regulations governing federal procurement contracts do not apply
  • Flexible selection and evaluation procedures
  • Competitive procedures shall be used to due to the maximum extent practicable
  • Schedule reduction due to decreased administrative burden and flexibility to restructure projects mid-course
  • Cost reduction in the form of fewer non-value-added activities and reduced overhead/administrative burden
  • The following are not applicable:
    • Competition in Contracting Act (CCA)
    • Bayh-Dole & Rights in Technical Data
    • Truth in Negotiations Act
    • DoD Grants and Agreements Regulations (DODGARS)
  • Award selection is not subject to protest under the Government Accountability Office (GAO)
    • Maybe be protested at the agency level or in the Court of Federal Claims
    • Protest may focus on the appropriate use of authority

AcqNotes Tutorial

AcqLinks and References:

Updated: 2/7/2024

Rank: G1

Leave a Reply