Major Capability Acquisition (MCA)

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Development Contracts

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Each page in this pathway presents a wealth of curated knowledge from acquisition policies, guides, templates, training, reports, websites, case studies, and other resources. It also provides a framework for functional experts and practitioners across DoD to contribute to the collective knowledge base. This site aggregates official DoD policies, guides, references, and more.

DoD and Service policy is indicated by a BLUE vertical line.

Directly quoted material is preceeded with a link to the Reference Source.

Reference Source: FAR 34.005-5

Whenever practicable, the full-scale development contracts should provide for the contractors to submit priced proposals for production that are based on the latest quantity, schedule, and logistics requirements and other considerations that will be used in making the production decision.

Contracting Strategies

Reference Source: Contracting Cone

The Contracting Cone presents the full spectrum of FAR and non-FAR based contracting solutions available for consideration.

The contracting strategies highlighted below may be particularly well-suited for design and development of Major Defense Acquisition Program (MDAP) systems or subsystems.

Contracting by Negotiation (FAR Part 15)

Reference Source: Contracting Cone - Contracting by Negotiation (FAR Part 15)

FAR Part 15 describes the procedures for competitive and non-competitive open market acquisitions exceeding the Simplified Acquisition Threshold (SAT).  Open market is defined as products or services not available from required sources of supply, such as GSA schedule contracts, outlined in FAR Part 8.

  • Requirement not met through FAR Part 8 Federal Supply Schedules or existing contract vehicle

See additional references and resources for this strategy in the Contracting Cone - Contracting by Negotiation (FAR Part 15).

IDIQ/MAC/GWAC Contracts (FAR Part 16.5)

Reference Source: Contracting Cone – IDIQ (FAR Part 16.5)

IDIQ contracts provide a method to order from existing agency indefinite-delivery contracts as well as contracts awarded by another agency (i.e. Government-wide Acquisition Contracts (GWAC) and Multi-Agency Contracts (MAC)).

  • Scope determination required (work, period of performance, and ceiling)
  • Fair opportunity required for a delivery-order or task-order exceeding micro-purchase threshold unless one of the following statutory exceptions applies:
    • The agency need for the supplies or services is so urgent that providing a fair opportunity would result in unacceptable delays
    • Only one awardee is capable of providing the supplies or services required at the level of quality required because the supplies or services ordered are unique or highly specialized
    • The order must be issued on a sole-source basis in the interest of economy and efficiency because it is a logical follow-on to an order already issued under the contract, provided that all awardees were given a fair opportunity to be considered for the original order
    • It is necessary to place an order to satisfy a minimum guarantee
    • For orders exceeding the simplified acquisition threshold, a statute expressly authorizes or requires that the purchase be made from a specified source
    • In accordance with section 1331 of Public Law 111-240 (15 U.S.C. §644(r)), contracting officers may, at their discretion, set aside orders for any of the small business concerns identified in FAR Part 19.000(a)(3). When setting aside orders for small business concerns, the specific small business program eligibility requirements identified in FAR Part 19 apply.

See additional references and resources for this strategy in the Contracting Cone – IDIQ.

Prototype Other Transactions (OTs)

Reference Source: Contracting Cone – Prototype OTs

Prototype OTs (10 USC §4022) 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.

Prototype OT Award Criteria

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

*As defined in 10 U.S.C. § 3014, a non-traditional defense contractor is an entity that is not currently performing and has not performed, for at least one-year period preceding the solicitation of sources for the other transaction, any contract or subcontract for the DoD that is subject to full coverage under the cost accounting standards (CAS).



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.


Follow-on Production Criteria

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:

(1) Met the key technical goals of a project;
(2) Satisfied success metrics incorporated into the Prototype OT; or
(3) 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.


Prototype OT and Follow-on Production OT Approval Authorities

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
2371 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.



  • FAR/DFARS are not applicable
  • 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


See additional references and resources for this strategy in the Contracting Cone – Prototype OTs.

Contract Types

Reference Source: FAR 16.101

A wide selection of contract types is available to the Government and contractors in order to provide needed flexibility in acquiring the large variety and volume of supplies and services required by agencies. Contract types vary according to:

  • The degree and timing of the responsibility assumed by the contractor for the costs of performance; and
  • The amount and nature of the profit incentive offered to the contractor for achieving or exceeding specified standards or goals.

The contract types are grouped into two broad categories: fixed-price contracts (see subpart 16.2) and cost-reimbursement contracts (see subpart 16.3). The specific contract types range from firm-fixed-price, in which the contractor has full responsibility for the performance costs and resulting profit (or loss), to cost-plus-fixed-fee, in which the contractor has minimal responsibility for the performance costs and the negotiated fee (profit) is fixed. In between are the various incentive contracts (see subpart 16.4), in which the contractor’s responsibility for the performance costs and the profit or fee incentives offered are tailored to the uncertainties involved in contract performance.

Reference Source: FAR 16.601

A time-and-materials contract provides for acquiring supplies or services on the basis of direct labor hours at specified fixed hourly rates that include wages, overhead, general and administrative expenses, and profit; and actual cost for materials (except as provided for in 31.205-26 (e) and (f)).

Reference Source: Contracting Cone

The Contracting Cone provides a Contract Type Matrix that maps the contract types that are allowed for each of the contract strategies outlined in the Contracting Cone. Note that non-FAR based, or Statutory Authority, contract strategies are executed via agreements vice contracts.

Contract Type Selection - EMD Phase

Reference Source: DAG CH 1– Contract Types

In Engineering and Manufacturing Development, programs contract for completion of the system design and preparation for production.

Reference Source: DFARS 234.004

In accordance with section 818 of the National Defense Authorization Act for Fiscal Year 2007 (Pub. L. 109-364), for major defense acquisition programs at Milestone B:

  • The milestone decision authority shall select, with the advice of the contracting officer, the contract type for a development program at the time of Milestone B approval or, in the case of a space program, Key Decision Point B approval;
  • The basis for the contract type selection shall be documented in the acquisition strategy. The documentation—

(1) Shall include an explanation of the level of program risk; and

(2) If program risk is determined to be high, shall outline the steps taken to reduce program risk and the reasons for proceeding with Milestone B approval despite the high level of program risk; and

  • If a cost-reimbursement type contract is selected, the contract file shall include the milestone decision authority’s written determination that—

(1) The program is so complex and technically challenging that it would not be practicable to reduce program risk to a level that would permit the use of a fixed-price type contract; and

(2) The complexity and technical challenge of the program is not the result of a failure to meet the requirements of 10 U.S.C. 2366a.

See 216.301-3 for additional contract type approval requirements for cost-reimbursement contracts.

For fixed-price incentive (firm target) contracts, contracting officers shall comply with the guidance provided at PGI 216.403-1 (1)(ii)(B) and (C).


The contracting officer shall include in solicitations for contracts for the technical maturation and risk reduction phase, engineering and manufacturing development phase or production phase of a weapon system, including embedded software:

  • Clearly defined measurable criteria for engineering activities and design specifications for reliability and maintainability provided by the program manager, or the comparable requiring activity official performing program management responsibilities; or
  • Ensure a copy of the justification, executed by the program manager or the comparable requiring activity official performing program management responsibilities for the decision that engineering activities and design specifications for reliability and maintainability should not be a requirement, is included in the contract file (10 U.S.C. 2443).

Test & Evaluation Considerations for Contracts

Reference Source: DAG CH 8-3.12 Incorporating T&E into DoD Acquisition Contracts

Programs involve T&E personnel early and keep them involved with the PM, the KO, the SE, and the other program office leads throughout the contracting process, to ensure they understand, accept, and include T&E policies, practices, procedures, and requirements in the contract as necessary for program success. Inputs from the Chief Developmental Tester, advised by the Lead DT&E Organization and the T&E WIPT, inform the contracting process on:

  • The quantities, configurations, and types of deliverable test articles (expendable and non-expendable) and prototypes (if applicable) required for government T&E.
  • Required contractor investments, expenditures, and developments required to support government T&E; e.g., threat simulators, targets, instrumentation, logistics and transportation for test preparation and set-ups, training, documentation, and personnel to support test events.
  • Personnel and other support to T&E WIPT, integrated test teams.
  • Contractor generated data and test reports for inclusion in the Contract Data Requirements List (CDRL).

T&E Considerations

Reference Source: DAG CH 8-3.12 Incorporating T&E into DoD Acquisition Contracts

In the early phases of development, the contractor plans and executes the majority of design testing that transitions technology from science and technology efforts into functional capabilities desired by the military, as well as qualification testing of sub-component parts and products from vendors that makes up the system delivered to the military. The Lead DT&E Organization and Participating Test Organizations need to understand the contractor testing capabilities, processes, data collection, and analysis methods to assess the appropriate amount of visibility into those test activities as well as determine data collection and transfer benefiting government test organizations to avoid redundant or unnecessary testing. Government test organizations determine cost/benefit ratios with visibility into proprietary activity and data transfer to the government. In addition, consideration is given to near- and end-state evaluations during operational testing (OT).

The PM, combat developer, and appropriate T&E personnel collaboratively develop the acquisition and T&E strategies so that users’ capability-based operational requirements (i.e., CDD, Concept of Operations/Operational Mode Summary/Mission Profile (CONOPS/OMS/MP) are correctly translated into accurate contractual terms; and actions that give the highest probability of successful outcome for the government-contracted events provide for sufficient time to execute all regulatory and statutory T&E activities and reporting.

Incorporating T&E into DoD acquisition contracts is the test focus for the pre-RFP Review. It is essential that a good draft TEMP be available for the review and that the RFP adequately addresses the TEMP.

One key issue to remember: if the contract does not include a T&E item or requirement, do not expect it!