Innovative Procurement Methods: Commercial Solutions Openings and Other Transaction Agreements

The Department of Defense’s use of an old procurement method known as Other Transaction Authority (OTA) for buying IT is shaking up the technology market. Congress granted DOD the authority to award Other Transaction Agreements in the FY 2016 National Defense Authorization Act and increasingly DOD has been making use of it. As Deltek documents in its recent Federal Acquisition Landscape: Trends and Issues report, DOD’s use of OTA to award contracts for IT capabilities has grown steadily over the last two years. Ostensibly, these awards are made for new commercial solutions, allowing Defense Agencies and Military Departments to prototype cutting-edge capabilities. If a capability proves successful, the prototype can result in a lucrative, much larger follow-on award for production, such as a $750M contract awarded to World Wide Technology in November 2017 for Tanium’s endpoint security solution.

OTAs have received the lion’s share of attention recently given the announcement of some very large awards, but there is another innovative procurement option available to DOD buyers – Commercial Solutions Openings. CSO announcements result in OTAs for prototype work. They are therefore related to Other Transaction Authority, but there are also significant differences between CSO procedures and OTA awards. This post outlines some of these differences.

Solicitation Procedures

One of the biggest differences between CSOs and OTA is the way they are solicited. CSOs use a merit-based solicitation procedure similar to a Broad Agency Announcement. Vendors responding successfully to a CSO announcement will be awarded an Other Transaction Agreement. CSO announcements can only result in the award of an OTA, not of any other type of contract or agreement. OTA awards, by contrast, can be awarded as a result of multiple types of solicitation procedures, including research announcements, program announcements, and ordinary requests for proposals. CSOs are thus best thought of as a type of solicitation procedure while OTA is more a type of award.

Limits on Awarded Values

Another significant difference between CSOs and OTA is the potential value of the awarded contract.  An OTA awarded by DOD as a result of a CSO can have a maximum value of $100M before requiring senior level approval and Congressional reporting requirements. OTA awards using other solicitation procedures (i.e., research announcements, program announcements, RFPs, etc.) have no maximum value.

Cost/Pricing Structure

CSOs have limits here as well. Other Transaction Agreements awarded from a CSO announcement are  always fixed price. These limitations do not apply to OTA awards made via solicitations other than a CSO. These may use a variety of cost-type pricing structures.

Pilot Program

CSO awarded contracts are subject to the duration limits of the DOD’s CSO pilot program. Authorized by Section 879 of the FY 2017 NDAA, the pilot program runs to September 30, 2022. No OTA awarded under the auspices of the CSO pilot program can be in effect past that date. OTA contracts awarded via non-CSO solicitation procedures have flexible duration periods.

Agency Authority

Lastly, there is the question of agencies authorized to use CSO procedures. DOD is one of the departments granted the authority by Congress. The General Services Administration and Department of Homeland Security, however, have also been granted authority to pilot the use of CSOs. They are the only civilian agencies permitted to do so.

OTA is a different story. As mentioned at the top of this post, Other Transaction Authority is not a new procurement method. DHS, the National Aeronautics and Space Administration, and the Department of Transportation have long possessed the authority to award OTA contracts. The Department of Energy may also award OTA contracts.

Concluding Thought

The innovation in all of this is the growing use by DOD of OTA contracts and CSO procedures for IT requirements. DHS is also moving in this direction for cyber security solutions. Should these procurement methods prove successful industry could see other civilian agencies requesting Other Transaction Authority for prototyping IT modernization projects. If they receive this authority it could significantly transform the federal IT market.