DOD’s Inspector General Finds Flaws in the Administration of Other Transaction Agreements

Key Takeaways

• Defense contracting personnel did not track OTAs awarded through consortia.
• Defense contracting personnel lack training when it comes to properly applying security and other regulations to OTAs.
• Some capabilities procured via Other Transaction Authority did not deliver long-term value.

With $28.6B flowing through contracts awarded via Other Transaction Authority (OTA) from Fiscal Years 2018 to 2020, industry interest in the subject has never been higher. Oversight authorities have their eye on OTAs, too, resulting in the publication of an Audit of Other Transactions Awarded Through Consortiums last week by the Department of Defense Inspector General (DODIG).

The DODIG reviewed a non?statistical sample of 13 base awards for the audit. Valued at $24.6B, all of these contracts were active in FYs 2018 and 2019. What the DODIG found is that defense “contracting personnel did not always plan and execute OTs awarded through consortiums in accordance with OT laws and regulations.” The audit revealed specifically that defense contracting personnel did not:

1. Properly track OTAs awarded through consortia.
2. Keep an accurate count of OTAs and associated dollar values because the Federal Procurement Data System?Next Generation was not set up to track consortium OTAs and individual consortium projects and because there is no guidance on how to award the projects to a consortium.
3. Consistently award OTAs in accordance with applicable laws and regulations because there is little guidance or training on awarding consortium OTAs.
4. Have a consistent basis on which to negotiate Consortium Management Organization (CMO) fees because no guidance is in place for establishing these fees.
5. Ensure the security of controlled or restricted information being sent to consortia because contracting personnel relied on the CMOs to vet consortium members and ensure proper safeguarding of controlled and restricted data.
6. Require consortium members to register in the System for Award Management (SAM).
7. Perform cumulative security reviews of technical information provided to consortium members, instead performing those reviews on a per?project basis.
8. Always obtain the best value or properly apply OTA requirements to ensure components are investing in technologies that produce capabilities of long-term value and lethality.

This list of findings demonstrates that despite using OTAs for years there remain significant weaknesses in the DOD’s administration of the awarded contracts.

Acquisition workforce training is required, as is updated guidance and security reviews. The lack of understanding what data is being shared with consortia is particularly alarming in view of the fact that the DOD is currently designing a Cyber Maturity Model Certification program which will potentially cost even trusted industry partners millions of dollars to comply with, and yet DOD itself is handling data security poorly.

Not obtaining capabilities of long-term value aligned with the National Defense Strategy is also problematic because OTAs are supposed to be the primary way that defense mission owners procure, prototype, and pilot so-called game-changing commercial technologies. If these types of capabilities are not being produced by the use of OTA contracts then it might be worthwhile for DOD to re-examine the use of traditional contracting avenues for acquiring them.

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