Trends in DOD’s Use of Other Transaction Authority, FY 2016-2018

Published: May 29, 2019

Federal Market AnalysisUSAFARMYContracting TrendsDEFENSEForecasts and SpendingInformation TechnologyNAVY

DOD spent more than $400M on IT via Other Transaction Agreements in FY 2018.

Technology industry concern about the Department of Defense’s use of Other Transaction Agreements (OTAs) has grown since Congress expanded the DOD’s authority to include information technology several years ago. OTAs had been around a long time before this, but use of the authority was typically limited to manufacturing, supplies, and certain unskilled services before Congress gave DOD the green light to include IT. DOD seized on the new authority with a vengeance, awarding multi-million dollar contracts to traditional and non-traditional firms alike after competitions that involved little more than white paper responses to statements of need. Industry consortia also sprang up to focus communications between vendors and government and ensure that OTA announcements received the responses they required.

New data compiled by Deltek quantifies the extent to which the DOD is leveraging OTAs and the types of requirements they are using it for the most, including those classified as IT.

Total OTA Spending, FY 2016-2018

The chart below shows DOD’s use of OTAs from two perspectives. The first, represented by the light blue columns, is the total value of awarded contracts (TCV). The second perspective is obligations (i.e., spending) on OTAs.

Altogether, DOD components awarded contracts valued at almost $52B from FY 2016 to 2018. Total spending on those contracts comes in much lower at $8.5B, but this still a considerable sum.

OTAs for Non-IT vs. IT

Drilling into spending specifically on IT requirements vs. non-IT requirements yields the following results.

All parts of DOD still use OTAs primarily for non-IT requirements, including law enforcement, canine training, etc. This said, tens of millions of dollars are still flowing via OTAs to fulfill IT requirements. Air Force spends the most, with OTAs supporting activities like the Air Operations Center’s Kessel Run program. Defense Agencies come in next with $157M spent by organizations like the Assistant Secretary of Defense for Research and Engineering ($21M), the Missile Defense Agency ($13M), and the Office of the Defense Chief Information Officer ($12.5M).

The most telling difference in spending on IT OTAs between FY 2016 and FY 2018 comes when we look at the total numbers. In FY 2016, DOD spent $49.4M through OTAs for IT requirements. By FY 2018 that number had grown to $402M. Air Force led the charge with its OTA IT spending rising from $18M in FY 2016 to $214M in FY 2018. Over that same period Army’s spending ballooned from $20M to $82M. Navy’s grew from $0 in FY 2016 to $24M in FY 2018 and Defense Agency spending leapt from $11M to $82M.

DOD spends more than $50B annually on IT requirements, so the $402M it spent on IT via OTAs in FY 2018 represents only a tiny percentage by comparison. Nevertheless, spending on IT via OTAs rose nearly 10x over 3 fiscal years so the continuation of this trend bears watching.