DOD's Use of OTAs for Prototype Projects Has Increased

Published: December 04, 2019

Contracting TrendsDEFENSEInnovationNational Defense Authorization ActResearch and Development

A study of Department of Defense (DOD) use of Other Transaction Authority (OTA) for prototype development grew from 2016 to 2018.

The Government Accountability Office (GAO) studied trends in OTA-related contract awards and actions from fiscal year (FY) 2016 to FY 2018 found that the DOD is making significantly greater use of OTAs for prototypes each year.

Expanding Authorities

Congress began providing DOD the authority to use other transactions in 1989 through the National Defense Authorization Act (NDAA) and has gradually expanded the authority over time. With the FY 2016 NDAA Congress authorized DOD’s OTA use for prototype and follow-on production transactions, and that authorization is being well-utilized.

Funding of OTA Efforts Rises

GAO analyzed Federal Procurement Data System-Next Generation data and examined relevant documents from a non-generalizable sample of 11 prototype other transactions. These transactions represented various dollar values from the four DOD components that had the highest obligations through prototype other transactions in fiscal year 2018. GAO also examined DOD and component policies and interviewed DOD officials. GAO focused only on other transactions used to support prototyping efforts.

GAO found that prototype contract dollars obligated via OTA awards rose from $1.4B in FY 2016 to $3.7B in FY 2018. Total OTA-related obligations identified by GAO came to $7.2B.  

The total number of new prototype other transactions increased from 34 to 173 from FY 2016 to FY 2018. While the number of actions, including modifications and orders, related to prototype other transactions increased from 214 to 445 over the same period. (See chart below.)


Army Leads DOD in OTA Use

From FY 2016 to 2018 Army obligated $5.3B through OTA awards for prototype efforts, easily outpacing the other DOD components in OTA usage. (See chart below.)

Other findings include:

  • Non-Traditional Contractors Benefit – Companies that typically did not do business with DOD received 88% of OTA transactions awarded.
  • Defense Advanced Research Projects Agency (DARPA) Leads Defense Agencies – Obligating $972M through FY 2018, DARPA uses OTAs more than any other Defense Agency. Total OTA obligations elsewhere in the 4th Estate came to $133M.
  • Air Force OTA Use is Picking Up – Although well short of Army’s obligations, the Air Force spent $829M on OTA prototypes.
  • Navy OTA Use Lags – Total Navy OTA obligations from FY 2016 to 2018 reached $30M, lagging behind the other military departments.

Expanding Access to Innovation

DOD Contracting officials noted to GAO that the DOD is purposely encouraging the use of these transactions as a way to acquire innovative technology from non-traditional companies that it could not typically access through the traditional acquisition process. DOD also reported that in 88 percent of the 1,250 new awards and actions made from FY 2016 through FY 2018 at least one non-traditional company or non-profit research institution participated to a significant extent, which is one of the statutory conditions that Congress established for the appropriate use of a prototype other transactions.

The result is that the increased OTA use is expanding opportunities for non-traditional DOD suppliers and injecting new innovation into the DOD supply chain at a time when the rate of technological change and complexity is only increasing.