Government Accountability Office (GAO) Finds Pentagon Lacks Ability to Track Other Transaction Agreements

GAO finds Pentagon LACKS ABILITY TO TRACK $16 BILLION IN OTA’s and “cannot assess the extent to which they are delivering capabilities to the warfighter,”  The Pentagon agrees.

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“NATIONAL DEFENSE MAGAZINE” By Tabitha Reeves

“The Defense Department is increasingly relying on other transaction agreements for prototyping contracts, but their outcomes have been poorly tracked, leading to uncertainty regarding their effectiveness, the Government Accountability Office reported in September.

Other transaction agreements, or OTAs, are a flexible contracting mechanism not subject to the Federal Acquisition Regulation system that can be used to develop prototypes. They can attract nontraditional defense contractors that might not otherwise choose to contract with the Defense Department under traditional FAR-based contracts, according to the report, “Other Transaction Agreements: Improved Contracting Data Would Help DoD Assess Effectiveness.”

Once the department is ready to produce a prototype on a large scale, it may award follow-on production work via either a standard contract — which is subject to the rules and policies of the Federal Acquisition Regulation — or a production OTA — which is not.

The Defense Department’s financial obligations toward these agreements for both prototyping and production have significantly risen in recent years, from $1.8 billion in fiscal year 2016 to over $18 billion in fiscal year 2024, the GAO report stated.

However, while prototype OTA spending totaled more than $16 billion last year, the Defense Department lacks the ability to “systematically track the extent to which it transitioned prototype projects using OTAs into production efforts,” meaning it “cannot assess the extent to which OTAs are delivering capabilities to the warfighter,” the report said.

In its web-based tool that tracks these agreements, the Defense Department can identify production OTAs, as well as the associated vendors and costs. However, there is no reliable method for documenting Federal Acquisition Regulation production contracts that were transitioned for follow-on production work from a prototype OTA.

Pentagon officials have internally discussed making changes to their web tracking system “but did not pursue the changes due to it not being a priority,” the report said.

Instead, the department “manually collects data on follow-on FAR production contracts as part of its annual report to Congress,” the report said.

GAO found that this manual collection and reporting of Federal Acquisition Regulation production contracts was “unreliable and inaccurate” in fiscal year 2023. While the department’s manual reporting had noted 48 contracts of this nature, only seven of these were actually FAR production contracts.

“The majority of these 48 contracts were instead prototype and production OTAs,” the report stated.

Upon sharing this with Pentagon officials in November 2024, the officials said they “inadvertently omitted a data field from the fiscal year 2023 data request, which may have caused some mistakes during the data entry process,” the report said.

The Defense Department went on to supply additional guidance to the personnel responsible for reporting this information, but “it is too early to determine whether DoD’s actions will result in more reliable and accurate FAR production contract data in the future,” the report said.

Additionally, GAO found that the Pentagon has limited insight into how much nontraditional contractors participate in OTAs — one of the goals for awarding these agreements in the first place.

Under consortia-based OTAs, work is awarded through a group of consortium members, which may include traditional and nontraditional contractors, nonprofits and academic institutions.

The Government Accountability Office found in 2021 that the department’s web-based recording system lists the consortium management organization — rather than the awardees who perform the work — when tracking consortia-based OTAs, the report said.

In response to these findings, new data fields were added to the system to name specific awardees. But after reviewing data records from fiscal years 2023 and 2024, GAO found that 84 percent of consortium-related data was reported correctly, while “the remaining 395 records inaccurately list the consortium management organization as the vendor performing work.”

The Defense Department is “in the process of collecting lessons learned” about OTAs and has improved its visibility into its use of them, the report said. However, further action is needed, as gaps remain in “decision-makers’ visibility into the use of consortia-based OTAs, and the extent to which prototype OTAs transition into capabilities through FAR production contracts.”

GAO recommended that the Pentagon develop and implement a systematic process to track FAR production contracts using follow-on authority, as well as ensure that the data for individual consortia-based OTAs is reported “fully and accurately,” naming each contract participant.

“Improved data in these two areas would help DoD gauge what changes, if any, are needed to ensure OTAs are delivering capability to the warfighters, as well as attracting nontraditional defense contractors — two of the overarching goals for using OTAs,” the report said.

In a response letter included in the report, the Defense Department concurred with both recommendations.”

Pentagon Lacks Ability to Track Other Transaction Agreements, GAO Finds