Other Transaction Authority is Hot at the DOD

Published: December 13, 2017

Federal Market AnalysisAcquisition ReformContracting TrendsDEFENSEInformation TechnologyPolicy and LegislationResearch and Development

Big changes in IT acquisition related to Other Transaction Authority may be coming to the DOD.

If you attend government contracting industry events or even just read the trade media you’ve probably heard a lot recently about something called “Other Transaction Authority” or “Other Transaction Agreements.” OTAs are not a new form of doing business with the federal government. Section 845 of the 1994 National Defense Authorization Act (NDAA) first authorized the use of OTAs by the Defense Advanced Research Projects Agency (DARPA), then known as ARPA, for “prototype projects that are directly relevant to weapons or weapon systems proposed to be acquired or developed by the Department of Defense.” OTAs remained largely in the purview of weapons system development until fiscal 2015 when Congress expanded the authorization in that year’s NDAA so that DOD could use OTAs for IT projects. This is when the discussion we hear today got going and it seems to be reaching a fever pitch. Here’s why knowing about OTAs is important for traditional government IT contractors.

DOD officials from Ellen Lord, the Under Secretary of Defense for Acquisition, Technology and Logistics (AT&L), down to the humblest program manager are talking about ramping up the use of OTAs. Lord, for example, recently stated that after discussions with Raj Shah, the Director of the Defense Innovation Unit-Experimental (DIUx), she wants to build on the success of the program, especially by “using OTAs to attract small, innovative contractors to do business with the Pentagon.” Then there are comments by influential figures like Senator John McCain (R-Ariz.), Chair of the Senate Armed Services Committee, who thinks the DIUx’s prototyping approach “should become the standard practice [and] not [a] workaround to the regular system. We need these innovations for major defense acquisition programs, not just science and technology efforts.”

Read that last sentence again. In it Senator McCain seems to be implying that he wants DOD prototyping, with its rapid acquisition OTA approach, to become standard practice for all major defense acquisition programs.

Starting to get the picture? Defense acquisition appears to be evolving into something different than it has been in recent decades. Driven by the fear of falling behind near-peer competitors like Russia and China, demands that defense IT procurement get much quicker are putting pressure on the system as it currently exists. The question now is how long it will take before OTAs become a form of standard practice. After all, if the Army can award a $34M production contract to established contractor World Wide Technology to implement a “prototype” Tanium Endpoint Protection product that the Air Force had already rolled out to more than 600K devices, who’s to say the next big contract award won’t also go to a traditional contractor paired with a non-traditional contractor (NTC)?

The WWT award should be a wake-up call to contractors not paying attention to OTAs and the work of the DIUx and Rapid Capabilities Offices across the DOD. What can your company do to profit from the coming surge in OTAs? Most importantly, you should explore relationships with one or more NTCs. OTA rules state that traditional defense contractors are eligible for OTA awards if they leverage the expertise of an NTC to a significant degree. “Significant” in this case means the NTC supplies a new key technology or product, accomplishes a significant amount of the effort, causes a material reduction in cost or schedule, and/or delivers an increase in performance.

Consortia of traditional and non-traditional contracting companies are forming now. Take, for instance, the Cyberspace Real-time Acquisition Prototyping Innovation Development (C-RAPID) effort at Army Program Executive Office Enterprise Information Systems. They want a vendor to form a consortium for work related to the Defensive Cyberspace Operations (DCO) environment, a program for which the Army requested a $53M budget in FY 2018 alone. The bottom line is that defense contractors should be looking closely at efforts like this and adjust their pursuit strategies accordingly. It looks like a wave of OTA money is building on the horizon. Get ready to ride it.