The encyclopedia · Strategy & Leadership · Strategic decision · 1995–2020
DoD's 'other transactions' let prototypes skip the FAR and reach Silicon Valley.
DoD uses Other Transactions to build prototypes outside the FAR and procurement statutes, drawing in non-traditional firms.
U.S. Department of Defense
the move
DoD wanted access to fast-moving commercial innovation, but FAR-based contracting imposed years of process that new firms would not accept.
So Congress created Other Transaction authority (now 10 U.S.C. §§ 4021–4022): agreements that are not contracts, grants or cooperative agreements and are exempt from most procurement law. They are used for prototype projects, generally with at least one significant non-traditional contractor.
The intent, as a contracting law firm put it, was to reach commercial entities 'that are hesitant to do business with the government (think Silicon Valley)'. OTA was made permanent in the FY2016 NDAA and its approval thresholds were raised in FY2018.
why it works
- Exempting prototypes from the FAR removes years of process for a defined stage
- Requiring a non-traditional participant keeps the lane aimed at new entrants rather than incumbents
- A scoped, time-limited prototype authority contains the risk instead of loosening all procurement
what transfers
When rules are the barrier, create a separate, clearly scoped lane with different rules rather than watering down the main one.
what came after
DoD uses OTAs across programs, and DARPA and the service labs ran much of their prototyping through consortia. The GAO has repeatedly cautioned that DoD does not measure the benefits well and that the key metric — the number of non-traditional contractors — is not clearly reported, so the tool's payoff is hard to verify.
references
- Defense Acquisitions: DOD Has Implemented Section 845 Recommendations but Reporting Can Be Enhanced
- Other Transaction Authority: What Is It and How Can I Get It?
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