What are the advantages of using an Other Transaction Authority (OTA) contract over a Federal Acquisition Regulation (FAR) based contract?

The Federal Government’s access to cutting-edge commercial solutions from the private sector has become increasingly vital, given the unprecedented levels of innovation and technological proficiency in the private sector. Traditionally, procurement has been bound by the Federal Acquisition Regulations (FAR), which, despite their longstanding presence, can be cumbersome and slow to execute.

Enter the Other Transaction Authority (OTA) contract, a potential game-changer. In this discussion, we’ll delve into the definition of OTA and highlight its advantages compared to conventional FAR contracts.

Federal Acquisition Regulations (FAR)

A FAR-Based Contract, governed by the Federal Acquisition Regulation (FAR), outlines rules for the U.S. government’s procurement of goods and services. However, FAR and Defense Federal Acquisition Regulation Supplements (DFARS) contracts are often burdened with stringent terms and conditions, making them challenging to navigate.

Other Transaction Authority (OTA)

On the other hand, an OTA contract,  offers a specialized vehicle for specific federal agencies, such as the Department of Defense (DoD), to access research and development (R&D) projects or prototypes from commercial sources. Unlike FAR-based contracts, OTAs do not adhere to a standardized format and provide greater flexibility, avoiding the detailed terms and conditions found in FAR contracts. The flexibility of OTAs facilitates collaboration with unconventional government contractors, allowing them to engage more effectively with the federal government. While OTAs have fewer guidelines, they do come with certain limitations, such as a maximum limit of $500 million and specific conditions regarding participation.

Benefits of OTA contracts include:

There are several benefits to using an OTA over the FAR. The main ones are listed below.

  1. Optimal Business Methods: OTAs apply optimal business methods according to USC 2302.
  2. Faster and More Accessible: OTAs are faster, more easily reachable, and less expensive than conventional contracting methods.
  3. Reduced Governmental Interference: OTAs minimize governmental interference and bureaucratic obstacles.
  4. Emphasis on Technological Outcomes: Unlike FAR contracts, OTAs prioritize technological outcomes over procedural considerations.
  5. Cost Reduction: OTAs reduce the overall expenditure of research projects.
  6. Inclusion of Conventional and Unconventional Contractors: OTAs incorporate items and concepts from both conventional and unconventional contractors.

Main Uses for an OTA

Primary Applications of OTAs include developing system prototypes not subject to Federal Acquisition Regulations. They are particularly well-suited for fostering innovative technology from unconventional sources.”

(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 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.


In conclusion, the use of Other Transaction Authority (OTA) contracts presents a paradigm shift in how the federal government engages with the private sector, especially in the realms of research, development, and prototyping. The advantages of OTAs over traditional Federal Acquisition Regulation (FAR) contracts are evident in their flexibility, speed, and emphasis on outcomes. By providing a streamlined and efficient procurement mechanism, OTAs unlock the potential for collaboration with nontraditional defense contractors and technology firms. This is crucial in harnessing the unparalleled innovation and technological prowess of the private sector to meet the evolving needs of the government.

In essence, embracing Other Transaction Authority contracts signifies a departure from the conventional, offering a path that is more responsive, inclusive, and results-oriented. As technology continues to evolve, the use of OTAs exemplifies a forward-looking approach, ensuring that the federal government remains at the forefront of innovation and well-equipped to address the complex challenges of the future.