An Update on Defense Other Transaction Authority and Commercial Solutions Opening Use

Back on March 6, the then new Secretary of Defense issued a memorandum “Directing Modern Software Acquisition to Maximize Lethality.” That memo noted, “software is at the core of every weapon and supporting system we field” and went on to state that “while commercial industry has rapidly adjusted to a software-defined product reality, [the] DOD has struggled to reframe our acquisition process from a hardware-centric to a software-centric approach.”

The DOD, therefore, would now reform its acquisition processes to “keep pace with commercial technology advancements and field capabilities much faster. Central to this reform would be maximizing “the use of Commercial Solutions Openings (CSOs) and Other Transaction Agreements (OTAs) as the default solicitation and award approaches for acquiring capabilities.”

What was coming as far as software acquisition was concerned appeared to be clear to industry. Namely, that the DOD would start awarding more OTAs and CSOs and spending more on those agreements.

The order, however, had mixed results across the DOD in Q2 and Q3 of FY 2025. Full data for FY 2025 is not available as of this article’s publication due to the 90-day DOD reporting lag, so it focuses only on those two quarters.

Other Transaction Agreements

First, when it comes to the total number of OTA-related actions across DOD, including awards and modifications, the number increased from 1,849 in Q2 to 2,069 in Q3. But when compared to the same period in FY 2024, that increase is not out of line. In Q2 FY 2024 OTA-related actions totaled 1,879. By the end of Q3, they had risen to 1,979. In short, defense organizations reported 118 OTA-related actions from Q2-Q3 of FY 2025, but in FY 2024 they reported 100 actions. That’s not a big delta.

Second, let’s look at spending. The data shows that Air Force OTA spending increased from $1.1B in Q2 to $1.6B in Q3. Navy OTA spending also increased from $307M to $530M.

However, Army OTA spending decreased from $1.4B to $927M. Marine Corps OTA spending also decreased from $60M to $39M. Similarly, Defense Agency OTA spending decreased from $942M to $899M.

In other words, not all of DOD pulled in the same direction as far as OTA use was concerned.

Commercial Solutions Openings

The picture is even more negative when it comes to the use of CSOs.

Air Force CSO spending in Q1 of FY 2025 totaled $34M. Spending then decreased to $12M in Q3.

Army CSO spending peaked at $18.4M in Q2 of FY 2025 before dropping to a mere $3.8M in Q3.

Defense Agency CSO spending decreased from $4.0M in Q2 FY 2025 to $925K in Q3.

Navy CSO spending decreased from $838K in Q2 FY 2025 to $0.0 in Q3.

You read that last line correctly. The Navy and Marine Corps spent nothing on CSOs in Q3 of last fiscal year.

Summing up, then, the data shows that defense organizations responded poorly to the Secretary’s order when it came to using or spending on CSOs. As for OTAs, the Air Force and Navy increased spending in Q2-Q3 FY 2025, but the Army and Fourth Estate did not.

We’ll need to wait until January to see what the reported data reveals about OTA/CSO spending/use in Q4. Now, however, the directive for DOD to use OTAs and CSOs more often appears stillborn.

GovWin Analyst Steve Mihalisko contributed to this article.