What exactly is an OTA? By definition, an OTA is an “Other Transaction Authority.” It is “used by the Department of Defense for carrying out prototype projects for work that is directly relevant to enhancing the mission effectiveness of military personnel and the supporting platforms, systems, components, or materials proposed to be acquired or developed by the Department of Defense, or to improvement of platforms, systems, components, or materials in use by the armed forces.” This blog focuses on OTAs for prototype projects.
The OTA was originally established to improve Government access to commercial technologies. It was intended for research and prototypes of technologies, systems, etc. The authority began in 1995 with sunset provisions, but was made permanent in Section 815 of the 2016 National Defense Authorization Act (NDAA) and is now codified in 10 USC § 2371b. It is called “Other” because it is legally binding but it is not a contract, grant or cooperative agreement.
In order to participate in an OTA, a company must meet one of four requirements. There has to be at least one nontraditional defense contractor or nonprofit research institution significantly involved; all significant participants (excluding the Federal Government) must be small or nontraditional defense contractors; the Senior Procurement Executive (SPE) can make a written determination that circumstances justify the use of an OTA; or a minimum of one-third of the funding must come from a non-Federal source. In accordance with 10 USC § 2371b(d)(2)(A), the one-third of the funding that must come from a non-Federal source, does “not include costs that were incurred before the date on which the transaction becomes effective.” Examples of this include bid and proposal costs, parallel or prior research and sunk costs/costs incurred prior to the project.
Many companies are under the impression that a nontraditional Defense Contractor is a contractor that has not previously done business with the Federal Government. However, that is incorrect! As discussed in 10 USC § 2302, a nontraditional contractor is “an entity that is not currently performing or has not performed for at least the one-year period preceding the solicitation of sources by the Department of Defense for the procurement or transaction, any contract or subcontract for the Department of Defense that is subject to full coverage under the cost accounting standards prescribed pursuant to Section 1502 of title 41 and the regulations implementing such section.” A company providing the Government with commercial products or services will typically be determined to be a nontraditional contractor, as well as companies that have not done significant development work in the previous year.
This is only the tip of the iceberg on OTAs. The Other Transaction Authority and rules are reviewed annually by Congress. Each review typically creates changes, expansion and updates so be sure to review the most current authority. For more information, please refer to the latest OTA Guide located http://acqnotes.com/acqnote/careerfields/other-transaction-authority-ota.