Defense Spending on Other Transaction Agreements for Cloud Computing, FY 2019-2021

Published: January 12, 2022

Federal Market AnalysisUSAFARMYCloud ComputingContracting TrendsDEFENSEForecasts and SpendingInformation TechnologyNAVY

Defense spending on cloud-related OTAs weakened in FY 2021.

Key Takeaways

  • Defense spending on cloud-related OTAs dropped 70% from FY 2019 to FY 2021.
  • Cloud-related OTA spending rose only in the Navy. It fell in the Army, Air Force, and across the Defense Agencies.
  • OTAs for cloud prototypes might become a thing of the past as cloud computing becomes more common in the DOD.

For several years now, the Department of Defense (DOD) has been leveraging a new type of procurement called Other Transaction Authority (OTA) to develop prototype systems using cutting-edge commercial technology. Cloud Computing is one of the technologies that DOD customers have been exploring through OTA awards. Now that we are in Q2 of FY 2022, the latest data on OTA spending is available for fiscal year 2021. The DOD’s 90-day lag in reporting contract spending means we always need to wait until January to download the data for Q4 of the previous fiscal year.

That data shows the DOD spent $131M on OTA contracts for prototype cloud systems.

Total Cloud-Related OTA Spending, FY 2019-2021

A glance at the obligations data for cloud-related OTAs reveals that spending has been declining since it hit a high of $442M in FY 2019. By FY 2021 it totaled only $131M, which is a drop of 70% from two fiscal years earlier.

Cloud-Related OTA Spending by Defense Organization, FY 2019-2021

Looking at total spending by defense organization illustrates the extent to which Army has been leveraging OTA agreements for cloud-related projects as opposed to the other parts of DOD. Accordingly, declining OTA spending by the Army is largely, although not entirely, responsible for the  decline noted above. This is due to changes in several key programs. One of these is the Integrated Visual Augmentation System (IVAS), which leverages cloud for the storage and dissemination of data taken in by IVAS headsets. The Army spent $500M on the IVAS prototype OTA before moving the system to full production in the spring of 2021. That spending, totaling more than $200M per year, disappeared almost entirely after the shift.

Other Army cloud efforts using OTA contracts for development include the Persistent Cyber Training Environment (PCTE) ($117M in FY 2021), the Army Accessions Information Environment (AIE) ($56M in FY 2021), and the Army Training Information System (ATIMS), for which the Army spent $46M in FY 2021. Spending on the PCTE and AIE declined in FY 2021 as well while Army’s spending on ATIMS rose from $14.5M the year before.

Air Force and the Defense Agencies also spent less on cloud-related OTAs in FY 2021. Air Force’s spending in FY 2019-2020 focused primarily on the Enterprise IT-as-a-Service Compute and Store effort, which transitioned from prototype to a production program in FY 2021. So, whereas in FY 2020 the Air Force spent $36M on the EITaaS C&S effort, in FY 2021 it spent $0.

Cloud-related OTA spending by the Defense Agencies, meanwhile, fell to just $1.6M in FY 2021 and all of that took place at the Office of the Secretary of Defense for its Applied Machine Learning Optimized Cloud Environment.

Navy proved to be the lone bright spot when it came to cloud-related OTA spending last fiscal year, spending $22M, which is its highest total yet. Naval Sea Systems Command’s IaaS for Disconnected/Intermittent Connectivity project attracted most of that spending ($16M), followed by $6M spent on the Navy’s portion of the Persistent Cyber Training Environment.

Parting Thought

Spending on OTAs comes and goes due to the fact that these are short-term prototype efforts. The sharp drop in FY 2021 reflects the maturation of multiple programs from prototype to production. As cloud computing use becomes more common across the department OTAs used for cloud computing might become a thing of the past.