Other Transactions (OT) Guide
Common OT Myths and Facts
Myth 1: There is only one type of OT available to DoD.
FALSE. There are two different OT statutory authorities that can result in three different types of OTs. The first is for basic, applied, and advanced research projects at 10 U.S.C. §2371. The second is for prototype projects at 10 U.S.C. §2371b. There are differences between the two authorities and agencies should consider which is makes the most sense for their problem set. The OT for Prototype authority is much more commonly known; however, this does not mean it is appropriate for all circumstances. Consider the following when determining which authority is appropriate:
- Does the technology have a dual-use application (application in both the commercial and government sectors)? Are we entering this program to push the state-of-the-art in a particular technology area? Do we need to create items to test out the approach to determine how far we have pushed the technology but keeping the test items was incidental to the overall effort? If yes, then this program could result in an OT under 10 U.S.C. §2371.
- Is the application of the technology for primarily military uses? Is the ultimate goal of the program to create a prototype asset that will be delivered to the Government? Is the main desire to acquire a reasonable number of prototypes to test in the field before making the decision to purchase in quantity? If yes, then this program could result in an OT under 10 U.S.C. §2371b.
- Once a prototype agreement is awarded and it satisfies the requirements of 10 U.S.C. 2371b (f), it can be followed by an award for the production phase of the program without re-competition. The follow-on agreement for the production phase can take many forms, including a new OT for Production agreement.
Myth 2: The OT authorities are new and are rarely used.
FALSE. The underlying concept of OTs have been around for more than 60 years. Beginning with the NASA Space Act in 1958, OTs have been a tool available to the Federal R&D community. DoD was given the authority for Research OTs in FY89 and Prototype OTs in FY94. More than seven civilian agencies, in addition to NASA, have the authority to do either one or both types of OTs. While the use of these authorities have ebbed and flowed in these organizations as a whole over the years, largely tied to the swings of acquisition reform, they have been continuously used since FY89.
Myth 3: Since an OT is termed an “agreement,” it is not a contract.
FALSE. When most people in the Government hear the term “contract,” they automatically think “Federal Acquisition Regulation (FAR)-based procurement contract” awarded under the traditional acquisition process and subject to all of the federal acquisition statutes and regulations. OT agreements are not procurement contracts, but they are legally valid contracts. They have all six legal elements for a contract (offer, acceptance, consideration, authority, legal purpose, and meeting of the minds) and will be signed by someone who has the authority to bind the federal government (i.e. an Agreements Officer (AO) A warranted individual with authority to enter into, administer, or terminate OTs. To be appointed as an AO, the individual must possess a level of responsibility, business acumen, and judgment that enables them to operate in the relatively unstructured environment of OTs. AOs need not be Contracting Officers, unless required by the Component’s appointment process. ). The terms and conditions can be enforced by and against either party. The organizations within DoD routinely using OTs have called them agreements to ensure that there would be no confusion between these arrangements and FAR based procurement contracts.
Myth 4: Since CICA does not apply to OTs, competition and fairness are not a consideration.
FALSE. Both OT statutory authorities require the use of competitive practices to the maximum extent practicable. Agencies are not required to complete the formal competition structure laid out in Competition in Contracting Act (CICA) (i.e. three tiers of competition: full and open, limited and sole source with justification and approval) nor follow the competition rules in the FAR. The OT statutes and guidance allow the agency to determine what the competition will look like and how it will be structured. Competition is a good thing. It helps keep prices low, quality high, and gives the Government leverage in negotiations.
If an agency wishes to award a follow-on from a Prototype OT into either a Production OT or a procurement contract without re-competing, the solicitation documents and the original OT award must have been competitive and provide for the award of either type of follow-on award.
Myth 5: OTs Cannot be Protested
FALSE. While bid protests are rare for OTs, agencies should be mindful of the possibility. Agency-level protests are possible if the agency choses to include language in its solicitation describing the procedures. While not required, agencies may want to include such language to encourage any issues to be handled internally and quickly. GAO has limited jurisdiction to review OT decisions and protests to GAO regarding OT awards are rare. Protests to the U.S. Court of Federal Claims are also possible but are a rare occurrence.
Myth 6: None of the federal statutes or regulations apply to OTs.
FALSE. OT authorities are authorized by law with clear statutory guidelines. Generally, the statutes and regulations applicable to acquisition and assistance do not apply to OTs. Since OTs are defined in the negative—they are NOT procurement contracts, grants, or cooperative agreements—any statute, regulation, or policy that applies solely to these types of contractual arrangements will not apply to OTs. However, statutes and regulations applicable to acquisition and assistance are only a subset of all federal statutes or regulations. Laws and regulations that are unrelated to the acquisition or assistance process will still apply to OTs. These can include, but are not limited to, appropriations, security, export control, socio-economic, and criminal laws.
Myth 7: OTs can only be awarded through a consortium.
FALSE. There are many teaming arrangements permitted, to include award to a single company, joint venture, partnership, consortium (through its members or authorized agent), or a prime contractor with subcontract relationships. The possibilities are endless for OTs (and for FAR-based contracts). Each construct has its advantages and issues, and each situation may dictate a different approach. Ideally, the Government should allow the performers to determine the best way to organize their teams. Artificially forcing performers into a particular team structure often has adverse effects on efficiency and performance.
Myth 8: The OT authorities can only use RDT&E appropriations.
FALSE. While the majority of OT efforts are focused on RDT&E activities, the statute does not prohibit the use of other fiscal appropriations. It is important to consider the nature of the intended effort and whether the appropriation being used is appropriate for the activity of the project. This determination ultimately rests with the funding agency comptroller, but leveraging OT’s does not automatically preclude use of non-RDT&E appropriations
Myth 9: Anyone in DoD can award an OT.
FALSE. The USD(A&S) has designated the Directors of the Defense Agencies, the Directors of Field Activities with contracting authority, the Commanding Officers of Combatant Commands (CCMDs) with contracting authority and the Director of the Defense Innovation Unit as having the authority to carry out Prototype OTs and follow-on Production OTs as permitted by section 2371b. This designation does not apply to the military departments, the Defense Advanced Research Projects Agency (DARPA), and the Missile Defense Agency (MDA), which have their own authorities prescribed in statute. (see here for recent policy).
Myth 10: OTs will always be faster to award than other contractual instruments.
FALSE. The OT award process will not always be faster than the traditional procurement processes and sometimes can be as long or longer. The speed of award is tied to many factors, many of which are internal to the organization. For example, some agencies will award an OT but conduct the source selection process as if it were subject to FAR Part 15. In that case, awarding the OT could take nearly as long as a procurement contract. Likewise, if the OT award must go through the same approval chain as a procurement contract, it could take as long. Also, because all of the terms and conditions in an OT are negotiable, drafting the agreement and negotiating it between the Government and the performer can take a long time. The OT award process can be faster if the Government team embraces the flexibility of the authority, is prepared, and the process remains as streamlined as possible.