Other Transaction Authority (OTA)
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, 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. 2371) for (1) Research, (2) Prototype, and (3) Production Purposes.
Guide: Other Transaction Authority (OTA) Guide – Dec 2018
Presentation: DAU Acquisition Symposium OT – 2018
(1) Research Purpose 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 sought to adopt commercial practices or standards, diversify into the commercial sector, or partner with Non-Traditional Defense Contractors.
(2) Prototype Purpose allows for projects directly relevant to weapons or weapon systems proposed to be acquired or developed by the DoD.
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.”
(3) Production Purpose allows for a noncompetitive, 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 notice that a follow-on Production OT is possible
What are the authorities?
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 project or a cost sharing arrangement requiring that at least one-third of the cost of the OTA come from non-Federal sources.
Each military service has 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.
In accordance with statute, this authority may be used only when one of the following is met:
- 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).
- 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.
What constitutes a prototype project?
The terms “prototype” and “prototype project” are not defined in statute or regulation. 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.”
What is an “other transaction” (OT)?
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. 2371. 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.
AcqLinks and References:
- Other Transactional Authority (OTA) Guide – 3 Dec 2018
- Old Other Transactional Authority (OTA) Guide – 17 Jan 2017 Other Transaction Authority (OTA) Overview
- Old: Other Transaction Guide for Prototype Projects – Jan 01
- Old: Other Transaction Authority (OTA) Guide – Aug 2002
- FAQ: Other Transaction (OT) Authority For Prototype Projects FAQs
- Presentation: DAU Acquisition Symposium OT – 2018
- Report: CRS DoD Use of Other Transaction Authority: Background, Analysis and Issues for Congress – 22 Feb 2019
- Presentation: Air Force Other Transaction Authority (OTA) Overview – July 2016
- Article: Another Option in a Tightening Budget: A Primer on DoD “OT” Agreements by Cassidy, Plitsch and Barclay
- Article: Other Transaction (OT) Authority Mythology: Reflections on the Cure-all of DEFENSE Procurement
- Website: 10 U.S.C. 2371b “Authority of the Department of Defense to carry out certain prototype projects”
- Website: Existing OTA Consortium
- (Old) Members Tutorial: Other Transaction Authority (OTA)