Expanding Other Transaction Authority gets a Nod from DOD Section 809 Panel

Published: January 24, 2019

Federal Market AnalysisAcquisition ReformDEFENSEPolicy and Legislation

The DOD acquisition panel recommends clarifying and expanding the authorities to use OTAs.

In an effort to streamline and improve the efficiency and effectiveness of the Department of Defense’s (DOD) acquisition process Congress directed the creation of panel to review defense acquisition regulations in Section 809 of the fiscal year (FY) 2016 National Defense Authorization Act (NDAA). Recently, the Section 809 Panel released Volume 3 of its two-year effort that includes broad-sweeping recommendations on nearly every aspect of defense acquisitions, including Other Transaction Authority (OTA.)

Congress and DOD have viewed Other Transaction agreements (OTs) that sidestepped most of the Federal Acquisition Regulation (FAR) rules as a tool to help DOD quickly field emerging technological capabilities to keep the U.S. military competitive with our adversaries who were working to gain a technological advantage. At the start, OTA was viewed as temporary and limited to prototyping efforts. But in the FY 2016 NDAA Congress gave permanent authority for the use of OTs for follow-on production, specifically in directed energy, high-speed munitions, autonomous systems, undersea warfare, cyber technology, and intelligence data analytics

But after reviewing existing statutes and regulations, the Section 809 Panel determined that the current acquisition authorities defined in statute “do not adequately allow use of Other Transaction agreements (OTs) for follow-on production and use of OTs for rapid fielding existing technologies when necessary.”

Recommended Changes for OTA

The Section 809 Panel recommended that Congress and DOD clarify and expand the authority to use Other Transaction Agreements for production efforts and capabilities.

Clarifying OT Authorities

One issue highlighted by the Panel centers on discrepancies in the understanding and application of the authorities to use of OTs to move quickly from prototype to production efforts. The specific example provided was a 2018 Defense Innovation Unit (DIU) follow-on production award for cloud migration services that was protested by a firm that had not competed for the original prototype OT. The Government Accountability Office (GAO) sustained the protest because DIU failed to include the option for a follow-on production award in the original prototype OT.

Under the current state follow-on production OTs are authorized only if:

  • The original prototype OT included an option for a follow-on production award
  • Competitive procedures were used to select the participants in the original prototype OT
  • The prototype project was successfully completed by the participants
  • The prototype project participants are willing and able to complete the production of the prototype.

So, under current rules, use of a follow-on production OTs are still not available in situations for which the prototype OT does not include the option of a follow-on production OT.

The 809 Panel argues that the very strict “letter of the law” interpretation by GAO is overly restrictive, “compliance for compliance’s sake” and does not jive with Congress’ repeated encouragement that DOD should interpret the OT statute broadly and use OTs liberally. Further, the Panel notes that in its protest sustainment GAO put itself in the place of determining what “successfully completed” means, not the agency with the requirement, i.e. DIU. Finally, the 809 Panel cites inconsistencies in different parts of the statute dealing with OTs that hinder the use of OT for production efforts.

Expanding OT Authorities

The flexibility that OT provides in fielding emerging technologies is significantly restrained by limiting OT to the prototype stage and the other limitations listed in the bullets above. Further, current rules restrain the use of OT to acquire more mature capabilities from suppliers that are unwilling to work with the DOD under the existing FAR-based contracting process. This is especially true for nontraditional suppliers. Currently, the only path to fielding existing prototypes and production solutions is through traditional procurements – OTAs are not an option.

The 809 Panel suggests this should change by giving an agency’s service acquisition executive (SAE) expanded ability to authorize follow-on production OTs, not as an easy way to avoid the FAR, but in exceptional circumstances that support high priority needs.

Conclusion

The Panel’s recommendations will require both legislative action and guidance from the Pentagon to expand existing authorities to use OTs and clarify areas of discrepancy and confusion. Provided the recommendations are well received on the Hill it will take possibly a year or more for such changes to come through the normal channels, assuming Congress continues to use the annual NDAA to affect such changes.

One thing appears to be clear from the Panel’s assessment and recommendations – the benefits of OTA are not realizing their potential and desired effects. The DOD continues to struggle to field new capabilities with the speed and volume that they perceive is needed to meet the challenge presented by our adversaries. As a result, industry should expect to see a continued expansion and maturity in the use of Other Transaction Agreements.