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Contract Type Matrix

Prototype Other Transactions
10 U.S.C. § 4022 

 

Prototype Other Transactions, or Prototype OTs, are non-FAR instruments used by DoD to carry out prototype projects that are directly relevant to enhancing the mission effectiveness of military personnel or improving platforms, systems, components, materials, or processes used by the armed forces. Prototype OTs may be used to develop, demonstrate, or evaluate a prototype before making a decision about broader acquisition, fielding, or production.

For OT purposes, a prototype project includes a project that addresses:

A proof of concept, model, or process, including a business process
Reverse engineering to address obsolescence
A pilot or novel application of commercial technologies for defense purposes
Agile development activity
The creation, design, development, or demonstration of operational utility
Any combination of the above

Prototype OTs may provide a streamlined path to a noncompetitive follow-on production contract or transaction when the statutory requirements are met. Under 10 U.S.C. § 4022, follow-on production may be awarded without further competition if competitive procedures were used for the prototype project, the participants in the transaction successfully completed the prototype project, and the follow-on production is provided for in the original prototype transaction.

Although the Competition in Contracting Act does not apply to OTs, competition should be pursued to the maximum extent practicable. Competitive procedures are especially important when the acquisition strategy may rely on the authority for a noncompetitive follow-on production award.

 

Award Criteria, Approval Thresholds, and Reporting

Prototype OT Award Criteria

Reference Source:  10 U.S.C. §4022(d)

One of the following conditions must be met to award a Prototype OT:

 

  • At least one non-traditional defense contractor or nonprofit research institute participates to significant extent
  • All significant participants are small businesses or non-traditional defense contractors
  • At least one third of total cost provided by sources other than the Federal Government
  • Senior Procurement Executive determines circumstances justify use of a transaction that provides for:
      • Innovative business arrangements not feasible or appropriate under a contract
      • Opportunity to expand defense supply base not practical or feasible under a contract

Reference Source: USD A&S/R&E Memo: Definitions and Requirements for OTs

Successful completion can occur prior to the conclusion of a prototype project to allow the government to transition any aspect of the prototype project determined to provide utility into production, while other aspects of the prototype project have yet to be completed. Prototype OTs shall contain a provision that sets forth the conditions for the prototype agreement to be successfully completed.

Additionally, the government shall include notice of the possibility of a follow-on production award in both the Prototype OT solicitation and the Prototype OT agreement.

Follow-on Production Award Criteria

Reference Source:  10 U.S.C. §4022(f)

 

The following conditions must be met in order to award a non-competitive follow-on Production OT or FAR contract:

 

  • Competitive procedures were used to award the Prototype OT
  • The prototype project in the transaction was “successfully completed”

 Reference Source: USD A&S/R&E Memo: Definitions and Requirements for OTs

“Successful completion” of a prototype project requires written determination of the responsible approving official stating the efforts under a Prototype OT:

  • Met the key technical goals of a project;
  • Satisfied success metrics incorporated into the Prototype OT; or
  • Accomplished a particularly favorable or unexpected result that justifies the transition to production

Successful completion can occur prior to the conclusion of a prototype project to allow the government to transition any aspect of the prototype project determined to provide utility into production, while other aspects of the prototype project have yet to be completed. Prototype OTs shall contain a provision that sets forth the conditions for the prototype agreement to be successfully completed.

Additionally, the government shall include notice of the possibility of a follow-on production award in both the Prototype OT solicitation and the Prototype OT agreement.

OT Approval Authorities and Thresholds

Reference Source: USD A&S/R&E Memo: Authority for Use of OTs for Prototype Projects

The following approval authorities and dollar thresholds (per individual OT award) are applicable to Prototype and Production OTs. The approval authorities above $100 million are non-delegable.

The value of each individual OT is considered separately for purposes of determining approval authority, rather than the total value of all OTs included in a prototype project or follow-on production effort. Any contractor cost sharing should be included in the OT value.

Separate approvals are required for Prototype OTs and follow-on Production OTs.

Value of Individual Transaction
Organization  Up to $100M  $100M to $500M  Over $500M
CCMDs with Contracting Authority Commanding Officer  USD (R&E) or USD (A&S)  USD (R&E) or USD (A&S)*
Defense Agencies (DA) and Field Activities (FA) with contracting authority; Defense Innovation Unit (DIU)  Director  USD (R&E) or USD (A&S)  USD (R&E) or USD (A&S)*
Military Departments  Senior Procurement Executive  Senior Procurement Executive  USD (R&E) or USD (A&S)*
DARPA and Missile Defense Agency  Director  Director  USD (R&E) or USD (A&S)*

* An Under Secretary must also make a written determination in accordance with 10 U.S.C. §4022(B). Additionally, the Congress shall be notified at least 30 days before this authority is exercised The Office of the Under Secretary making the written determination is responsible for Congressional notification.

Reporting

Reference Source: USD A&S Memo – Required and Recommended Use of eBusiness Tools When Awarding and
Administering Other Transactions 

  • Prototype and Production OTs must be reported in the Federal Procurement Data System
  • When using a contract writing system (e.g., Standard Procurement System – Procurement DefenseDesktop (SPS/PD2)) to execute Prototype and Production OTs, AOs may utilize the automated Contract Action Report (CAR) process to propagate OT data into FPDS. Otherwise, to report Prototype and Production OTs, AOs must utilize the OT module within FPDS.
  • OTs awarded to a consortium should be reported in accordance with Appendix F.
  • Prototype and Production OTs must identify the 9th position of the award number as a “9.” The other positions of the award number and modifications will be assigned the same as procurement contracts. If the award supports a significant federal government or Department effort or initiative, Defense Pricing and Contracting will issue instruction for what identifier should be added to the ‘Description of Requirements’ field to easily track these actions when reporting to FPDS.
  • See Appendix A for all required and recommended eBusiness tools.
  • Reference Appendix F of the DoD OT Guide for OT Consortia Reporting Requirements.

Common Applications

  • Prototype projects to evaluate feasibility, military utility, or operational utility
  • Demonstrations, models, proofs of concept, and pilots
  • Novel application of commercial technologies for defense purposes
  • Agile development activities
  • Reverse engineering to address obsolescence
  • Technology maturation tied to a prototype project
  • Projects involving nontraditional defense contractors, small businesses, commercial innovators, or traditional defense contractors when the statutory participation or cost-sharing requirements are met

 

Pros Cons
Reduces barriers to entry for nontraditional contractors and commercial innovators. Requires experienced acquisition, technical, legal, fiscal, and agreements personnel.
Allows flexible planning, evaluation, selection, negotiation, and management approaches. The Government must manage risk without relying on the full FAR procurement framework.
Cost accounting system requirements generally do not apply the same way they do under procurement contracts. Lack of standardized processes can challenge inexperienced teams.
Allows flexible negotiation of data rights, intellectual property, payment milestones, and agreement terms. Follow-on production authority is available only when statutory conditions are satisfied.
May use CSO procedures, consortia, or stand-alone OT agreements when appropriate. Poorly structured prototype efforts can create transition, pricing, competition, or oversight risk.
Can support a streamlined path to follow-on production when the prototype is successfully completed. High-dollar efforts require additional approvals and reporting.

 

Restrictions

  • Must involve a prototype project directly relevant to DoD mission effectiveness or platforms, systems, components, materials, or processes.
  • At least one of the statutory participation or cost-sharing conditions must be met, such as significant participation by a nontraditional defense contractor or nonprofit research institution, significant small business participation, one-third non-Government cost share, or a senior procurement executive determination of exceptional circumstances.
  • Competition should be used to the maximum extent practicable.
  • Noncompetitive follow-on production requires successful completion of the prototype project and use of competitive procedures for the prototype project.
  • Requires appropriate Agreement Officer authority and compliance with agency OT procedures.
  • Prototype OT transactions expected to cost more than $100 million but not more than $500 million require a written determination by the head of the contracting activity, or the applicable DARPA, DIU, or MDA director. Transactions expected to cost more than $500 million require higher-level written approval and congressional notice under 10 U.S.C. § 4022.
  • Follow-on production awards above applicable thresholds may require additional approvals and congressional notice.

 

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