Resource Guide: "Other Transaction Authority" in the Federal Government

An OTA by any other name.

Hello! If you’re here, then that probably means you want to understand the all-too-elusive OTA. 

You’ve repeatedly seen the term throughout industry media, and by now you might even be able to parrot back a basic definition based on context clues and Wikipedia searches. On the outside, it seems fairly simple — an “Other Transaction Authority” (OTA) is essentially how it sounds. . . it’s an(other) way to work with the Federal Government. Think of it as the “other white meat” in comparison to traditional award tools such as grants, challenges or technology investment agreements (TIAs). 

In June 2018, the Pulse sought out to bust some myths regarding OTs in the Federal Government - and of course - we weren’t completely satisfied. So we are venturing out again to create a simplistic resource guide for Government Contractors to assist them in their journey to understand the history, application, and the opportunity behind this creative procurement tool.


Then and Now

The history of how OTAs were first conceptualized is indicative of its nature.  In 1958, Congress created OTAs in order to close the space exploration technology gap between U.S. and Russia.  The intent was to implement a procurement avenue that would permit NASA to engage with commercial and academic organizations though a far less encumbered Federal procurement process. The original intention for OTAs was for advanced research projects until Congress first expanded its use in 1994 to include prototypes - an expansion generally regarded as underutilized.

Fast forward to 2016 when Congress really kicked it into high gear with the 2016 National Defense Authorization Act (NDAA) which expanded and officially codified OT authority and production follow-on OT authority for the Defense Department. This law change was a game-changer.

But what has the IT marketplace abuzz now is are the important clarifications to prototype OTAs addressed by the 2018 NDAA. Some say this clarification has breathed new life into the alternative acquisition strategy away from its Research & Development (R&D) roots, but all can agree that this provides much-needed guidance on how to leverage the new authority. 

This new push permits Department of Defense (DoD) agencies to award prototype OTAs as long as it is “directly relevant to enhancing the mission effectiveness of military personnel and the supporting platforms, systems, components, or materials to be acquired or developed by the DoD, or to the improvement of platforms, systems, components, or materials in use by the armed forces.” 

A little broad, right?

This generous authorization lends itself nicely to the already flexible definition of OTAs which is why you have seen a big push in OTAs becoming the new norm for some impactful, high-valued “technology” acquisitions. 

So why does DoD - and perhaps soon the Federal Civilian sector (if given proper authority and guidance) - lean heavily on OTAs? Because time is of the essence in IT acquisition AND the procurement regulation red tape can be too cumbersome to acquire IT in a timely way. At a recent OTA Consortium event, one Admiral mused that under the traditional IT acquisition model, by the time a new ship left the bay its technology could be over ten years behind the times. 

We in Government Contracting know he isn’t exaggerating.

Traditional IT procurement has been a cost strategy that requires gambling millions or billions of taxpayer dollars, the result of which could be an ineffective or incompatible IT solution. It has also severely hindered the Pentagon’s number one imperative - warfighter readiness. 

The new pulse given to the anemic arm of traditional OTAs aligns IT acquisition with the original intention of the 1958 Congress - outshine, outrun, and outplay the competition - and affords the warfighter the same ethos in readiness against an adversary. 

Federal Buyers and OTA Authority

Great - I’ll go to my Federal customer and recommend an OTA approach then!  

Not so fast, eager GovCon. It is important to note that not every Federal agency has OTA Authority. In fact, only 11 Federal agencies and departments have the authority to utilize OTAs. As for prototypes other federal agencies outside of DoD, such as Department of Homeland Security (DHS) and Department of Energy (DOE), carry prototype authority going back to the early 2000’s. Their authority derived from references to DoD’s prior authority under note 845 *shout out the procurement nerds that pointed us to that one*.

OTA Regulations

Today there are primarily three (3) types of OTAs: 

  • Prototyping OTA: Prototype agreements are directly relevant to enhancing mission effectiveness of military personnel and supporting infrastructure. Depending on the agreement there can be a significant cost sharing portion through a Non-Traditional Defense Contractor (NTDC) participation (at least ⅓). Custom IP is negotiated at an arm's length and is not limited by FAR/DFARS or DODGARS. This is the foundation by which the entire new OTA approach is built. 

  • R&D Agreements: R&D agreements spur development of advanced technologies that may have commercial application and are usually awarded on a cost-sharing basis. R&D Agreements are long-established and achieve different goals under (often times) different consortiums vs the Prototyping OTA.

  • Production OTA: Production OTAs (more like sole-source contracts) are follow-on production contracts or transactions which are authorized when either a competitive procedure was used for the selection of the parties for participation in transaction; or the participants in the transaction successfully completed the prototype project provided for in the transaction. 

Explaining the law surrounding OTAs is like searching for a Federal agency’s procurement forecast. It is tedious, nuanced, and at times – a little disappointing.  This is because the regulations have been pared down and disseminated by industry experts (including us) who compare OTAs to standard acquisition processes and say, “OTAs are best defined by what they are not.” 

It’s not as absolute as all that, but suffice it to say OTAs are not generally subject to acquisition regulations (i.e. Federal Acquisition Regulation  and Defense Federal Acquisition Regulation) and the cost accounting standards – although most laws still apply, if only tangentially.  

Federal agency action – regardless if it is a traditional or non-traditional procurement method –  may still be subject to a legal challenge albeit under limited circumstances. An agency’s decision to utilize a vehicle, or the way in which it executes an OT effort can still be subject to some laws. But like any procurement effort, OTAs are generally awarded after a “competition” among the consortium members and after those contractors are afforded fair “notice” of the Government’s intention to solicit white papers or proposals. If a Federal agency’s efforts step outside the scope of what was originally contemplated by the solicitation, there may be legal recourse. That was addressed in one of the most recent and famous cases of this is the General Accountability Office’s (GAO) decision in Oracle America, Inc

When you remove the jargon and legalese and focus on the way that these opportunities are obtained through Consortium’s, OTA’s are basically a contract vehicle and thereby a different solicitation method.

BUT before we discuss how the Federal Government competes an OTA opportunity, we need to discuss what (and who) exactly are bidding on these opportunities. 

OTA-Consortium

An OTA-Consortium is a business relationship or “enterprise partnership” between a Federal Government sponsor and a “lead” organization - a consortium management firm - that agrees to participate under a binding contractual instrument (i.e. a common rule set). It is important to note that the Federal Government counterpart can either be a single sponsor or can consist of multiple Federal sponsors coordinated through one lead Federal agency. The consortium management firm (i.e. the lead organization) offers the Federal Government sponsor (aka their customer) a single point-of-contracting and is responsible for acting as an “honest broker” that provides the proper support in the acquisition of deliverable’s for a cut of the deal. 

At its core, an OTA-Consortium is a well-organized (and generally non-profit) club. Typically, anyone can join the consortium—often for a nominal annual fee of around $500 (some go higher). Consortium members often consist of for-profit, not-for-profit and/or non-profit entities, or universities and other academic research organizations that have competence in a specific technical domain of interest.  

Each consortium acts as superficially as an outsourced procurement shop – but with a twist. The consortium management firm has responsibilities such as:

  • Communicating the needs of its Federal customers to its members

  • Hosting events and seminars

  • Issuing Requests for White Papers (RFWPs) (an instrument equivalent to a Request for Proposal or Quotes [RFP or RFQ])

Funding and Competing OTAs

All vendors need to understand how the Federal Government creates and competes an OTA opportunity. While the principal purpose of an OTA is historically for Research, Development, Test, and Evaluation (RDT&E) activities, Congress has provided an ambiguously defined authority to permit customers to utilize OTAs for Prototypes instead of forming traditional efforts.

That means that all funds are available, provided that the Federal Government’s acquisition team complies with both Fiscal Law and the requirements of the OT statue. Fiscal Law applies to the expenditure of federal funds, regardless of procurement instrument; whereas OT Statutory Compliance serves as an independent determination of the appropriateness of the award instrument.  

At the local level, each Federal Government authority is able to execute an initial OT agreement up to $250M, but there are no limits on how many follow-on prototype OT contracts may be executed if the Federal authority wants to continue past the initial prototype project. This makes tracking the cumulative value and history of such awards almost impossible. 

In short: there is no limit to the number of follow-on contracts, dollar obligations - or even the contract vehicle - for follow-on OT contracts that the FedGov authority may execute in aggregate.  

Members receive and submit a response to a RFWP to the consortium management firm who then submit it to the Federal Government. The Federal Government then selects an Awardee and executes a contract with that member (through the consortium management firm). An OTA contract can be FAR-based or subject, sole-sourced, or can be executed under a particular vehicle, etc.  

Note: Solicitation methods such as Commercial Solutions Opening (CSO), Annual Calls for White Papers, Broad Agency Announcements (BAAs) and Prize Challenges are separate and distinct from OTAs. Furthermore, OTs are NOT Middle Tier Acquisitions (MTAs). MTAs - Rapid Prototyping and Rapid Fielding - are regulated by Section 804 and are used as program management tools; whereas OTs are again procurement tools. OTs and MTAs are authorities which are potentially complementary, however, they ARE NOT the same.

OTAs General Benefits

Inclusivity

Large contractors benefit from working with new commercial partners; small business benefit from a more prominent role; commercial entities benefit from the vast experience of the former.

Collaboration

One of the core mechanics of the OTA process is that collaboration is highly encouraged or often times it can be required.  The “Prime” and “Subcontractor” relationship isn’t utilized for OTAs. Rather, often white papers are submitted with “teams” of companies – all working together to provide the Government with the holistic solution.  This approach allows offers to submit white papers with diverse IT products and solutions. 

Communication

OTAs dissolve the no-contact approach that often limits companies from openly communicating with the Government customer. If the Government likes what the vendor wrote in their white paper, it can request a presentation of your solution where the vendor and its team will be given an opportunity to demonstrate exactly how it is the best solution in the marketplace to solve the problem. In that presentation, the vendor will face live and direct questions from the Federal customer’s representative to determine whether or not  the vendors solution is viable. There, the vendor and the Federal customer can have a productive dialogue that can inform, or even improve, the Federal customer’s approach. The consequence of this process is a more thoughtful solution, an ability to separate the wheat from the chaff, and it affords the Federal customer an opportunity to adjust its expectations. 

Benefits for Government

OTAs certainly permit the Government to acquire products and services faster, but it can also be argued that it helps the Government acquire products and services cheaper. With OTAs, the Government can acquire products and services at scale – prototyping a solution over a few short months and with a limited cost-effective deployment. Instead of investing millions (or billions) on rolling the dice for a solution that might end up on the shelf for one reason or another, the Federal Government can rapidly procure a relatively cheap pilot program to test drive the solution in a controlled, limited environment, before ordering the solution at scale.

Benefits for SB Vendors

Each OTA acquisition should include a NTDC.  The FAR defines an NTDC as “an entity that is not currently performing AND has not performed, for at least 1 year period preceding the solicitation of sources by the DoD for the procurement or transaction, any contract or subcontract for the DoD that is subject to the full coverage under the cost accounting standards (CAS) [.]” 

When discussing a NTDC we need to understand the original intention for OTAs was to attract forward-leaning commercial companies to work with the Federal Government through promises of cutting the red tape, permitting broader negotiation of intellectual property rights, and unburdening the acquisition process with the requirements of cost accounting.  In essence – to mirror how commercial entities successfully identify and outsource vendor solutions every day. 

What people don’t understand about NTDCs is the term no longer applies only to commercial entities

In reality, the designation also CAN apply to socially and economically disadvantaged contractors. Thereby, OTAs can be especially helpful for small Government Contractors.  Revisiting 48 CFR §212.  001 - small business concerns are exempt from CAS, therefore meaning that most Government Contractors with socio-economic certifications (i.e.  SDVOSB, 8(a), WOSB, etc.) would fall within the definition. This has significant consequences because the final rule also added the following at DFARS 212.  102(a)(iii). However, this is not a hard-and-fast interpretation, so it is up to the customer’s discretion. 

As with anything these days - business revenue boundaries (commercial firms vs. defense firms) don’t really exist, and these promises are not really what they seem.

Benefits for LB Vendors

Simplistically, OTs offer Large Business vendors less risk and more frequent opportunities for Federal face-to-face time, without risking getting into trouble. Furthermore, due to the construct of OTs, Large Business vendors are able to enjoy developing custom solutions while avoiding burdensome overhead costs. OTs offer Large Business vendors something tangible - they can watch their investment grow in real-time - which offers up the perk of avoiding waste and lost B&P dollars.

OTA’s and Your Pipeline

incorporating OTAs into a Vendor’s federal business development process

  1. Join a consortium that’s right for you and your company

  2. Attend the events to network with other bidders

  3. Once a solicitation drops, build your team of other consortium members and submit your response

  4. Start noticing the utilization of OTAs vs the reduced solicitations being pushed towards vehicles

  5. Thank The Pulse for pointing this out to you because your pipeline has stayed healthy

Conclusion

Why are otas important today?

The Defense community (and the Federal Government at large) is at the same crossroads the space exploration program was in 1958. It is no secret that the United States needs to maintain technological superiority and military readiness - and needs the American people (and our corporations) to help identify smart, quick solutions to keep up with all that is available in the marketplace.


want to learn more?

OTAs aren’t tracked like regular opportunities. Do you want to learn more about OTs/consortiums but don’t know where to begin? The Pulse presents the output of our incessant research in the form of a quick reference sheet. This downloadable spreadsheet includes the following columns for 32 different OT/Initiatives identified as of September 2019:

  • Name + Contract Number

  • Consortium Focus Areas + Number of Members

  • Type of Agreement + Extent Competed

  • Est. Ceiling Value + Current Total Obligations

  • Year Awarded + Completion Year

  • Federal Sponsor + Management Firm

  • Government POC

  • Consortium Summary/Notes (to include projects awarded, etc.)

We did the research so you don’t have to. Purchase now and see if your organization can leverage any of these initiatives.

The Pulse of GovCon