DOD’s Use of Other Transaction Authority for IT, FY 2016-2018

Published: June 05, 2019

Federal Market AnalysisUSAFARMYCloud ComputingContracting TrendsCybersecurityDEFENSEForecasts and SpendingInformation TechnologyNAVY

IT requirements still make up a small percentage of DOD's Other Transaction Authority awards.

Last week’s post took a high-level look at the Department of Defense’s use of Other Transaction Agreements (OTAs) for information technology. This week’s post dives deeper into the technology areas toward which major DOD organizations are directing OTA dollars.

Total DOD TCV and Spending on IT Using OTAs, FY 2016-2018

Starting with the high-level view, the chart below shows DOD’s use of OTAs from two perspectives. The first, represented by the light blue columns, is what DOD organizations are obligating (i.e., spending) for IT requirements via OTAs. The second perspective, represented by the dark blue columns, shows the total value of OTA contracts awarded (TCV) for IT requirements.

The first observation apparent from this data is that all DOD organizations are not equal when it comes to using OTAs for IT prototypes. Certain organizations, like Army and the Defense Agencies, are awarding far more OTAs than are the Air Force and Navy. This said, when comparing dollars spent vs. dollars awarded, Air Force is obligating a much higher percentage for the OTA contracts it is awarding (roughly 38% of TCV) than Army (roughly 1% of TCV) or Defense Agencies (roughly 12% of TCV). In other words, contractors winning Air Force OTAs earn a higher percentage of available contract dollars.

A second observation worth making is the fact that the awarded value of OTAs get all the publicity, not what’s spent against them. Looking at Army’s TCV total, for example, one would think that the service is putting more than its total annual IT budget through OTA contracts. This would also be the general impression across industry, gauging by the number of questions about OTAs that come up at events. The reality is that spending on OTAs for IT requirements is really pretty low, especially by the Army and the Navy.

IT Areas Where DOD Organizations are Spending via OTAs

The charts below detail the top 5 identifiable technology areas at each DOD organization where they are spending via OTAs.

The key takeaway here is that each part of the DOD is pursuing its own objectives via OTA awards. The two areas they all have in common are investment in cyber solutions and in big data analytics, where commercial technologies have outstripped the in-house capabilities available to the DOD.

Summing up, DOD’s use of OTAs for IT requirements is growing in terms of contracts awarded, but less so in terms of dollars spent via OTAs. This makes it prudent for industry to explore the possibiity of competing for OTA awards, but not to take their eyes off the ball when it comes to competing for contracts awarded via traditional channels. Potential earnings from these standard contracts still far outweigh potential earnings on OTA awards.