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Contract Type Matrix

Prototype OTs (10 USC §4022) 

Prototype OTs are appropriate for research and development and prototyping activities to enhance mission effectiveness of military personnel and supporting platforms, systems, components, or materials. Prototype OTs may be used to acquire a reasonable number of prototypes to test in the field before making a decision to purchase in quantity. Prototype OTs provide a streamlined path to award a non-competitive follow-on Production OT or FAR contract.

For OTs, a “prototype project” is defined as a prototype project addressing a proof of concept, model, reverse engineering to address obsolescence, pilot, novel application of commercial technologies for defense purposes, agile development activity, creation,  design, development, demonstration of technical or operational utility, or combinations of the foregoing. A process, including a business process,may be the subject of a prototype project.

 

Competition

Although the Competition in Contracting Act (CICA) is not applicable to OTs, competition should be pursued to the maximum extent practicable to incentivize high quality and competitive pricing. Additionally, competitive procedures are required in order to leverage the authority for transition to follow-on production contracts or transactions without subsequent competition.

 

Award Criteria and Approval Thresholds

Prototype OT Award Criteria

Reference Source: 10 U.S.C. §2371b (d)
***10 U.S.C. §4022(d) a/o Jan 2022***

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

 

  • At least one non-traditional defense contractor participates to significant extent or
  • All significant participants are small or non-traditional defense contractors or
  • One third of total cost provided by sources other than gov (if no non-traditional defense contractor participation) or
  • Agency 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

Follow-on Production Award Criteria

Reference Sources: 10 U.S.C. §2371b (f) ***10 U.S.C. §4022(f) a/o Jan 2022*** and USD A&S/R&E Memo: Definitions and Requirements for Other Transactions Under Title 10, United States Code, Section 2371b

 

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, and
  • The prototype project in the transaction was “successfully completed”

“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. (This is especially relevant given the 2018 GAO ruling in favor of Oracle America Inc’s protest of the U.S. Army’s follow-on Production OT to REAN Cloud LLC.)

OT Approval Authorities and Thresholds

Reference Source: USD A&S Memo: Authority for Use of Other Transactions for Prototype Projects Under 10, United States Code, Section 2371b 

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
Commanding Officers of Combatant Commands (CCMD) 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 section 2371b. 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.

 

 

Common Applications

  • R&D activities to advance new technologies and processes and prototyping or models to evaluate feasibility or utility of a technology
  • To address perceived obstacles to doing business with the government by non-traditional vendors to include intellectual property rights and compliance with cost accounting standards
  • For flexibility to tailor agreements to reach non-traditional vendors with innovation research development and demonstration (RD&D) solutions
  • For negotiable funding arrangements, payment milestones, and length of agreement to achieve research and prototype projects

 

Pros

Cons
Attributes of an OT can enable faster development and potential fielding of capability Pursuit and execution of an OT requires highly experienced and empowered staff; lack of guidance, structure, and processes can challenge and intimidate inexperienced staff
Reduces barriers to entry for non-traditional vendors; allows greater government access to commercial innovators that do not typically do business with the government Government assumes increased risks without the process, precedent, and protection of the FAR
Provides a potential avenue to access to third party funding (e.g., venture capital) Flexible arrangements in intellectual property and cost accounting data can have long-term negative implications for the government
OTs offer flexible approach to managing intellectual property, enabling greater access to commercial innovators that do not comply with traditional government data rights  
A path has been established to allow for a streamlined, non-competitive follow-on production contract or agreement (production OT, FAR contract, etc.)  
Agencies that have been designed with OT authority have options for OT implementation to include Commercial Solution Opening pilot program, existing consortia OTs, or development of a unique internal OT  
May leverage COTS for prototyping solutions  
OTs are not subject to traditional GAO protests, unless the application of an OT is challenged to be inappropriate (they can be challenged in the court of federal claims)  
Standard cost accounting requirements are not required under an OT, enabling greater access to commercial innovators that previously did not want to share cost data with the government  

 

Restrictions

  • FAR/DFARS are not applicable
  • Agencies must be explicitly authorized by Congress to use OTs
  • Contracting Officer must have Agreement Officer authority to execute OTs
  • Cost sharing requirements apply if no significant participation by non-traditional defense contractors
  • Limited to requirements that have a prototyping element
  • OTs can only deliver limited quantities of prototypes
  • Prototype project must address anticipated follow-on activities, competitive procedures must be used to award prototype project, and successful completion of prototype project required to transition to follow-production vehicle
  • May not exceed $500M without USD R&E or USD A&S approval

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