Viewpoint: Pentagon Takes Big Step to Clarify Other Transaction Authority Rules

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Senior Pentagon leaders have been calling for increased innovation, speed and affordability in defense systems acquisition for some time. Occasionally they invoke other transaction authorities (OTAs) to accomplish those ends.

Now the Pentagon has added substance to rhetoric by issuing a new “Other Transactions Guide.” This follows the promulgation on Nov. 20, of two policy memoranda on their definitions and requirements and, the authority to use prototype OTAs.

The new guide rescinds the previous guide of January 2017 which was seriously flawed. The new guide addresses both research OTAs (10 U.S.C. 2371) and prototype OTAs (10 U.S.C. 2371b) erasing an artificial division or stovepipes between the closely related authorities.

The ability to transition seamlessly from prototype to follow-on production means OTAs can be used as the basis for a complete alternative to procurement under the Federal Acquisition Regulation for systems development and fielding. They have also been used in the sustainment and upgrade of legacy systems.

The guide is organized in a clear and user-friendly manner. Highlights include case studies and a glossary with useful definitions. It makes plain OTAs are not just about reaching out to nontraditional contractors — as important as that might be. Traditional defense contractors can participate in prototype OTAs via a senior procurement executive determination, by teaming with nontraditional contractors or in other ways.

The new guide also clarifies some other key points.

There are a variety of pathways to use prototype OTAs — they are neither inherently subject to or inherently exempt from major defense acquisition system rules (DODI 5000.02). They may be executed as middle tier Section 804 acquisitions or in other ways.

The guide stresses the need for a cross functional government team to execute the agreements. Agreements officers need to be well qualified but need not be warranted FAR contracting officers.

The guide does not limit OTAs to a technical definition of “acquisition.” Projects have been structured with no government funding, for example. Research agreements are not limited to the technical definition of “assistance.” The arcane Technology Investment Agreement regulation (32 C.F.R. Pt. 37) receives only passing reference in the guide.

The initiation of an OTA project does not start with a determination of agency needs and requirements description as in FAR 2.101. Rather parsing the problem to be solved and communicating the problem to industry while leaving trade space for a variety of solutions is the preferred approach in such agreements.

Funding for OTAs is not restricted to research, development, test and evaluation appropriations. The decision of what funds are appropriate for a project is independent of award instrument.
The one mandatory proviso in the guide requires notice of the potential for follow-on production to be stated in any solicitation or agreement for a prototype project.

There is no single method for publicizing OTAs. Methods that reach potential performers with relevant technologies and capabilities need to be part of a thoughtful outreach strategy.

Payments can be structured as fixed amounts based on accomplishment of observable technical or programmatic milestones.

One of the case studies addresses the U.S. Transportation Command project that resulted in the Oracle America protest. The guide’s requirement for notice of follow-on production addresses the Government Accountability Office’s criticism of the Army contracting office approach in that case. However, the Defense Department’s definitions and requirements policy memorandum issued Nov. 20 clearly rejects GAO’s narrow and skewed definition of when a project is “successfully completed.”

Successful completion occurs when key technical goals of a project are met, success metrics in an agreement are satisfied, or a particularly favorable or unexpected result justifies transition to production. This is also reflected in the guide’s glossary.

Another case study relates to Global Hawk, an unmanned reconnaissance platform developed as an OTA and Advanced Concept Technology Demonstration. The prototype project was highly successful both in terms of achieving technical goals, speed of development and affordability. However, the “rest of the story” is less sanguine. Once transitioned to the traditional acquisition system requirements creep set in and the focus on affordability was lost. Global Hawk is a cautionary tale that starting a project as an OTA does not immunize it from the “costs too much, takes too long” syndrome of business as usual if transitioned to the traditional system.

The issuance of the new guide and policy memoranda constitute substantive steps in the Defense Department’s embrace of OTAs. However, much remains to be done. The department has failed to heed the call of Congress in section 867 of the National Defense Authorization Act of 2018 to create a preference for using OTAs as well as procurement for experimental purposes (10 U.S.C. 2373).

More critical is its failure to fully comply with subsection (g) of section 2371 mandating it to “ensure management, technical, and contracting personnel involved in” OTAs are “afforded opportunities for adequate education and training” including “continuous and experiential learning…”

The new guide is a big step in the right direction. When armed with proper education and training the defense acquisition work force now has the guidance to use OTAs more effectively. Thinking about problems, potential solutions and win/win scenarios is permitted and encouraged by this guide.

Richard L. Dunn is an independent consultant providing advice on the implementation of technology in the military and civil sectors through innovative means. He is also the founder of the Strategic Institute for Innovation in Government Contracting.

Topics: Contracting, Defense Department, Defense Contracting