“FEDERAL NEWS NETWORK” By Anastasia Obis
“FY 2025 defense legislation lowered level of approval for OTA transactions up to $500 million, allowed follow-on production without a new competitive contract, & established tracking number & value of awards to small businesses and non-traditional defense contractors.”
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“A contracting method known as Other Transaction Authority (OTA) has been around since 1958, during the beginnings of NASA and the Advanced Research Projects Agency. For nearly six decades, government agencies used this vehicle to work with research labs, universities and small businesses to build prototypes.
But the 2016 defense policy bill transformed this once obscure and rarely used contracting vehicle into a key tool for moving innovative technologies out of the lab and into production.
“That [National Defense Authorization Act] enabled [the Defense Department] to start using Other Transactions to not just buy prototypes, but actually to move from prototype into production,” said David Berteau, president of the Professional Services Council.
The 2016 defense legislation drastically expanded the use of OTA to allow the Defense Department and other agencies to procure products and services outside of the constraints of the Federal Acquisition Regulations (FAR).
The bill authorized DoD to use OTAs for follow-on production without requiring a separate competitive contract — as long as the prototype project was initially awarded under an OTA and successfully completed. It also required the defense secretary to ensure that all “significant” participants are small businesses or nontraditional defense contractors.
The dollar amount threshold for requiring approval was increased, which gave DoD components more autonomy to award OTAs. The legislation also encouraged the use of consortium-based OTAs, where multiple companies, universities and research groups work under a single umbrella agreement with the government.
And unlike FAR-based contracts that are slow, cumbersome and challenging to implement, OTA agreements offer greater flexibility and fewer constraints since they are not subject to the Truth in Negotiations Act, cost accounting standards or mandatory FAR-based certifications.
“The success of Other Transaction Authority is securing contracts with companies that will not otherwise work with the government or Pentagon, so-called ‘nontraditional defense contractors.’ Other Transactions are not your typical government contracts. Instead, Other Transactions are unshackled from orthodox government contracting regulations like the FAR, opening the door to commercial flexibility and freedom of contract,” said Christoph Mlinarchik, a government contracts expert and owner of ChristophLLC.com.
As a result, the use of OTAs surged across the Defense Department.
In fiscal 2023, federal agencies spent nearly $16 billion on OTAs. That is a $4 billion increase from fiscal 2022. During the pandemic in 2020, the use of OTAs spiked to $19.3 billion.
“Operation Warp Speed and developing the COVID 19 vaccines is a really good example of how the U.S. government has used OTAs in terms of rapid development of a vaccine from zero to fielding,” said Stephanie Kostro, executive vice president for policy at the Professional Services Council.
The Army, for example, points to Mine-Resistant Ambush Protected vehicles, IT production services and cloud migration and the Fixed-Wing Utility Aircraft program as examples of successful rapid acquisition. Kostro and Berteau said those efforts are good examples of accelerated procurement timelines as opposed to delivering results faster.
“There’s no doubt that the use by DoD of Other Transaction Authority has provided a way in for companies that otherwise would have had a harder time getting work from DoD.
That opened the door more widely, or in a broader set of areas, for companies to do business with DoD. What I don’t know, and what none of the reports actually focus on is, ‘Did you get better results sooner?’” said Berteau. “The front end is more open, but I don’t know whether the back end has actually delivered anything. I don’t know whether the results from a delivery of benefit, of outcomes are much different, and that’s a big hole in the data. The speed to award is not trivial, but it’s not enough. The goal isn’t to award contracts fast. The goal is to get results faster.”
These are some of the pressing questions and concerns surrounding the use of OTAs that haven’t been addressed so far.
The 2024 defense policy bill directed the Government Accountability Office to submit a report by Feb. 1, 2025 on the use of OTAs; the work is still underway, and the report is set to issue this summer.
Some of the data the GAO is looking at is the number of actions executed, how many agreements are going through the consortia system, and if the recipients of these awards are truly non-traditional defense contractors.
“The Pentagon is saying that just over 92% of the OTA actions back in 2022 were awarded to those who had a non-traditional element in their agreement. As you move forward, what is that 92%? Who are the non-traditionals? I’m really eager to learn about the entities that are doing the work that are delivering the results. That is a little bit of a black box, not just for us, but for those in Congress who are asking GAO to do that kind of deep dive,” said Kostro.
2025 defense policy bill
The fiscal 2025 defense legislation introduced several significant provisions related to OTAs. One provision lowers the level of approval for transactions up to $500 million.
The bill also clarifies that if an OTA was initially awarded for a prototype project, the DoD can transition to follow-on production without requiring a new competitive contract. The follow-on production contract does not have to be another OTA.
In addition, the bill requires the DoD to establish a process to track the number and value of awards to small businesses and non-traditional defense contractors using OTAs.
“A lot of work has been done on OTAs in the fiscal 2025 bill,” said Kostro. “Sometimes Congress likes to let those sit for a year and then readdress two years after that. I don’t know what’s going to happen in the fiscal 2026 bill, but I wouldn’t be surprised if there’s at least a conversation about production, increased thresholds and greater use of OTAs.”
ABOUT THE AUTHOR:
Anastasia Obis is a defense reporter for Federal News Network. Her coverage focuses on a wide range of topics, including technology, cybersecurity, policies that will shape the future of warfare, modernization efforts, acquisition and personnel.
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