MA

Trends in Defense Use of Other Transaction Authority, FY 2019-2021

Published: January 19, 2022

Federal Market AnalysisUSAFARMYDEFENSEForecasts and SpendingNAVYProcurementResearch and Development

Three-year defense spending on OTA contracts approaches $40B.

Key Takeaways

  • DOD spent a total of $37B on Other Transaction Authority contracts from FY 2019-2021.
  • Industry partners seeking OTA-related work should focus their efforts on the Army as it spends multiples more on OTA contracts annually compared to the rest of DOD.
  • The DOD spends more on cyber security related OTA contracts than any other type of IT project.  

Whereas last week’s post dove into the details surrounding the Department of Defense’s use of Other Transaction Authority (OTA) for cloud computing, and a colleague posted on OTA spending for cyber, this week’s post pulls back a bit to take a higher-level view of the DOD’s spending on OTAs in general. The analysis includes spending on both information technology (IT) and non-IT requirements, from fiscal years 2019 to 2021.

Total DOD OTA Spending by Market Segment

Defense OTA spending occurs in roughly 15 market sectors, including everything from Research and Development and IT to Professional Services, Ship Building, and even Furniture and Appliances. This spending has ranged in recent years from $7.6B in fiscal 2019 to a high of $16B in fiscal 2020. In fiscal 2021, OTA spending experienced a bit of a pull-back to $13.5B, while total OTA spending over all 3 fiscal years reached $37B combined.

The chart below shows total DOD OTA spending by the top four segments. The fifth segment “Other” represents a catch-all category for spending in the other 11 segments.

Spending on R&D dominates all other categories. This is not surprising given that the reason OTA exists is for government customers to develop and test prototype projects. These can be vehicles, a cyber capability, or even a new medical treatment. In other words, although spending may be lumped into “R&D” the thing being developed could also be part of another segment. 

Total DOD OTA Spending by Organization

When it comes to OTA-related spending, the Army stands head and shoulders above the rest of the DOD. This is true regardless if the good or service being purchased is IT-related or not.

The Army outspends all of the rest of DOD on OTAs by a lot every year. The discrepancy reached a high point in FY 2020 when the Army spent nearly four-times as much on its OTA projects than all of the other DOD organizations combined. This ratio of Army to DOD OTA spending decreased to just over two-times in FY 2021 as the Army reduced its spending while other parts of the DOD slightly increased theirs.

The bottom line is that if a company wants to maximize its earning potential doing OTA-related work it really needs to be laser-focused on working with the Army, and then the Air Force, before any other part of the department. 

Total DOD OTA Spending by Type of Technology

The use of OTA for IT prototypes has grown in recent years. When it comes to the type of prototype technologies being purchased, those enhancing cyber security are favored, with spending growing from $198M in FY 2019 to $645M in FY 2021.

Spending on Command, Control, and Communications (C3) solutions also grew strongly in FY 2019, totaling $455M. Since, then, however, C3 Capability spending dropped off, reaching $291M in FY 2021. Other strong growth areas in terms of spending include 5G/Mobility ($185M in FY 2019 vs. $285M in FY 2021) and Artificial Intelligence/Machine Learning, which rose from $154M in FY 2019 to $198M in FY 2021. For the first time last fiscal year, the DOD also spent $55M on a project that can be defined clearly as IT Services. This took place at the Office of the Secretary of Defense for a program titled “Lead System Integrator and Sub-Systems” awarded to Boeing.

Check out the latest reports from Federal Market Analysis: Defense IT Priorities and Strategies, 2021-2023 and Intelligence Community IT Landscape, 2021-2023