If you gave me $17 million on the credit card, I could call Cabela’s tonight and outfit every soldier, sailor, airman and Marine, and I’d get a discount on it for a bulk buy. This is a pistol. The technology’s been around for five centuries, and arguably it’s the least important weapons system in the Department of Defense inventory.[1]

Senior leaders within the Department of Defense (DoD) have grown increasingly frustrated with an acquisition system characterized by ever-increasing costs and significant delays in getting end items to customers. Their frustration has been heard by Congress and has resulted in recent Congressional action. The latest major acquisition reform effort started with the Fiscal Year (FY) 2016 National Defense Authorization Act (NDAA), with each subsequent NDAA containing various provisions that are meant to modernize and accelerate the antiquated and cumbersome federal acquisition system providing flexibility and allowing for the agile acquisition of next-generation technology. The FY 18 NDAA includes numerous reform provisions as well as a direct effort by Congress to force DoD to implement the changes contained in prior-year reform bills and use authorities that Congress has previously passed.

This Congressional effort includes a provision requiring the Secretary of Defense to establish a preference for using Other Transaction Authorities (OTAs) for science and technology, prototyping, and experimental purposes as provided by 10 U.S.C. §§ 2371, 2371b, and 2373. The end result is that Other Transaction (OT) agreements are being used with increasing frequency across DoD especially in areas where technology rapidly advances such as robotics, artificial intelligence, cybersecurity, autonomous systems, and space. The increased use of this flexible acquisition tool poses numerous challenges for both the federal government and non-traditional defense contractors looking for access to increased business opportunities.

Other Transaction Authorities are not defined by statute or in the Federal Acquisition Regulation (FAR). In fact, it is much easier to define an OTA by what it is not. An OTA is not a procurement contract, grant, or cooperative agreement. However, these agreements are still legally binding contracts between a defense contractor and the government.

There are essentially two basic types of OTAs. Other Transaction agreements awarded under 10 U.S.C. § 2371 for basic, applied, and advanced research projects, and OT agreements awarded under 10 U.S.C. § 2371b for prototypes. These statutory authorities place OTAs outside of the normal legal and regulatory construct of federal procurements, which reduces the barriers for non-traditional contractors and allows for greater flexibility in contracting for prototype projects, to include follow-on production. Although many procurement regulations do not apply to OTAs, these contracts are still subject to some legal and regulatory requirements so the government can maintain control while ensuring transparency and fairness.

The major advantage of using an OTA is that the terms of the agreement are driven by negotiation and not regulation. As such, the key to a successful agreement is proper planning and execution to ensure that the terms are tailored to the needs of the project and are fair to both parties. With this recent Congressional interest, OTAs have become a major priority across DoD. This includes an increased emphasis on training acquisition professionals, including contract attorneys, on how to successfully negotiate and implement OT agreements.

On Friday, June 22, I will be participating in exactly that type of training by serving as a panelist to discuss acquisition reform and OTAs at the Intelligence Community Legal Conference in Washington, D.C. I will post more about that experience, and some of the inherent risks associated with OTAs, in the near future. Meanwhile, if you have any questions about OTAs or OT agreements please do not hesitate to contact us.

Timothy A. Furin is a partner in the firm’s Government Contracting Group. He draws on his background as an acquisition law specialist in the U.S. Army Judge Advocate General’s Corps to help clients navigate the federal government procurement process.

[1] Gen. Mark Milley discussing the Army’s Modular Handgun System at the New America Foundation’s Future of War Conference, Army Times, https://www.armytimes.com/news/your-army/2016/03/28/army-chief-you-want-a-new-pistol-send-me-to-cabela-s-with-17-million/ (last visited Jun. 15, 2018).