What are “Other Transactions”?

Other Transactions (OTs) present both an opportunity and a challenge for the federal government and contractors. At their core, they are an(other) way to do business with the government outside of traditional contracts, grants, and cooperative agreements.

The original intention of this procurement tool was to simplify the federal buying process. But dig deeper, and you’ll find that things are a little more complicated than that. 

In 2018 and 2019, The Pulse™ sought to bust some myths regarding federal government OTs and create a simplistic resource guide for federal contractors when navigating this creative procurement tool. A few years passed, and we wanted to check in on the OT world and see what had changed and remained the same.

So, let’s dig in! 

OTs have been part of the government contracting ecosystem since 1958.

When Russia launched Sputnik 1, it became clear that the United States was falling behind. Congress knew we needed to develop advanced technology quickly. In response, the National Aeronautics and Space Act of 1958 established a civilian agency to control all space and aeronautical activities sponsored by the federal government (henceforth known as NASA). To facilitate this new agency’s work, the Space Act authorized “contracts, leases, cooperative agreements, or other transactions as necessary.” Thus, the “Other Transactions” were born. 

The goal was to implement a procurement avenue permitting NASA to engage with commercial and academic organizations through a far less encumbered federal procurement process. At their inception, OTs were intended for advanced research projects. But in the decades since, their purpose has broadened.

Before getting into that, we must tell a significant story. You see, NASA was only the start. It wasn’t until the Department of Defense (DOD) received its OT Authority (OTA) that it got the attention it deserved. 

In 1989, the Department of Defense (DOD) received its first Research and Development (R&D) OTA for the Defense Advanced Research Projects Agency (DARPA) to conduct R&D efforts. The FY94 National Defense Authorization Act (NDAA), P.L. 103-60, introduced Section 845 agreements, which were the precursor to the prototype authority we use today (10 USC 4022).

The language introduced expanded the authority further to include the development of prototypes “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.”

It wasn’t until FY16 that the NDAA expanded and officially codified the OT authority for prototype and follow-on production at the DOD. Remember, before FY16, these two types of DoD OTs were Science and Technology (S&T) and prototype authority (Section 845 PL 103-160). Today, the DOD is thought to have three separate OT authorities governed by two statutes which are used in different scenarios depending on the DOD’s needs:

• 10 USC 4021 (Research OT): used for basic, applied, and advanced research projects when a procurement contract, grant, or cooperative agreement is not feasible or appropriate.
• 10 USC 4022 (Prototyping OT): used for prototyping directly relevant to DoD mission requiring either one-third (1/3) cost share or significant nontraditional defense contractor (NDC) participation, and 
• 10 USC 4022(f) (Production OT): used for follow-on production contracts or transactions authorized when: a) competitive procedures are used for the selection of parties for participation in the transaction, and b) the participants in the transaction completed the prototype project provided by the transaction.

Being the most popular kid in school, DOD tends to get most of the attention; but they are not the only federal agency with OT authority. Since 2018, OTA’s have expanded significantly to include more than 30 federal entities.

Understanding how these authorities differ is critical, especially when using them across multiple agencies. One thing is clear—OTs aren’t going away any time soon.

So, how do they work, and what do they mean for your business?

OTs may be flexible but aren’t free of rules and regulations. They are limited to specific federal entities and can only be used for certain procurements.

As shown above, most OTs can be categorized into R&D and prototype/demonstration. This categorization is derived from the statute’s language and is sometimes clarified in the agency guides. These guides are occasionally public information and sometimes only distributed internally.

DOD has publicly shared both of its guides online. You can access the OUSD R&E (10 USC 4021) guide here and the OUSD A&S (10 USC 4022) guide here.

The ambiguity and flexibility of how OT authority is defined are significant advantages for the government in executing these agreements. As long as the government complies with fiscal law and the requirements of the agency’s OT statute, funds are available.

Generally, the statute will cover any guidance on limits and dollar thresholds. For example, DOD has several approval thresholds for prototype efforts and follow-on production. However, the NASA statute does not make that distinction. 

In short, the total aggregate dollar obligations awarded to a single entity through OT agreements are unlimited. 

This is an advantage for both the government and the firm holding the agreement, but it makes tracking the cumulative value and history of such awards almost impossible. We’ll talk more about OTs’ limitations, but a lack of data transparency is undoubtedly one of them.

The government issues a Request for White Paper (RFWP) (an instrument equivalent to a Request for Proposal or Quotes [RFP or RFQ]). Firms receive the RFWP, develop a response, and submit it to the consortium management firm, which then submits it to the federal government. The federal government selects an awardee and executes a contract with that member (through the consortium management firm). An OT agreement can be FAR-based, subject, sole-sourced, or executed under a particular vehicle.

Broad Agency Announcements (BAA) and Commercial Solutions Openings (CSO) are currently the most common solicitation methods used in the DOD. 

BAAs are used to obtain proposals for basic and applied research and development to advance or evaluate cutting-edge technologies unrelated to a specific system or hardware requirement. CSOs are a competitive process to obtain solutions or new capabilities that fulfill requirements, close capability gaps, or provide potential technological advances.

CSO procedures are similar to those for BAAs, except that a CSO can be used to acquire innovative commercial items, technologies, or services that directly meet program requirements. In contrast, BAAs are restricted to basic and applied research.

Other agencies sometimes use different names and titles for their solicitation methods and tend to post them on their website versus always having to post through SAM.gov. So, agencies looking for these opportunities will have to do some hunting. If this sounds like a barrier, it could be for some. For others who don’t have a SAM.gov account, this is a better method. Another consolidated way the industry can use is through consortia.

Wait a minute…what’s a consortium?

You must know about consortia if you’re trying to join the wide world of federal OT agreements.

An OTA consortium is a business relationship or “enterprise partnership” between a government sponsor and a “lead” organization – a consortium management firm – that agrees to participate under a binding contractual instrument (i.e., a standard rule set). It is important to note that the 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 government sponsor (aka their customer) a single point of contracting. It is responsible for acting as an “honest broker” that provides the proper support in acquiring deliverables for a cut of the deal.

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

Each consortium acts superficially as an outsourced procurement shop 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 RFWPs

Note: You do not need to be part of a consortium to receive an OT agreement. But, if you’re a traditional government contractor, you must meet additional requirements. Namely, you must demonstrate that a non-traditional contractor is participating to a “significant extent” and that there is a cost-share agreement. At the same time, the acquisition executive must provide a written demonstration of the exceptional circumstances justifying the use of an OTA. 

OTs present both an opportunity and a challenge for the federal government and contractors. To get a clearer picture of OTs and their role in the government contracting ecosystem, we contacted the expert, Dr. Dolores Kuchina-Musina, Chief Disruptor and the Founder of REXOTA Solutions. 

Opportunities 

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

OTAs facilitate communication between government and industry. They dissolve the no-contact approach that often limits companies from openly communicating with government customers. Suppose the government likes what the vendor wrote in their white paper. In that case, it can request a presentation of your solution, where the vendor and its team will be allowed to demonstrate precisely how it is the best solution in the marketplace to solve the problem.

OTs encourage (and sometimes require) collaboration. Often, white papers are submitted by “teams” of companies—all working together to provide the government with a holistic solution. This approach allows offers to submit white papers with diverse IT products and solutions.

OTs can save the government time and money. With OTs, the government can acquire products and services at scale, prototyping a solution over a few months and with a limited cost-effective deployment.

OTAs create low-risk opportunities for industry innovation. Due to the construction of OTs, vendors can develop custom solutions while avoiding burdensome overhead costs.

OTAs remove barriers to entry. Non-traditional contractors can service the public sector while enjoying less red tape and broader negotiation of intellectual property rights without the burden of cost accounting.

Challenges

OTs sound good… what’s the catch?

OT agreements are not always faster. While they are intended to expedite the government’s access to innovation and critical technology, the agreement process can take just as long as a traditional contract award. 

Definitions are vague, making it hard to build a cohesive strategy around OT agreements. Further, OTA utilization data are incomplete at best. Together, these challenges prevent the industry from creating a complete picture of the OT market. 

We’ve said it before, but not every agency has the authority to enter an OT agreement. If your target customer isn’t on the list, you’ll need a different strategy. 

The regulations governing OTAs are messy… an expert will need to look at any proposed agreements to ensure the terms are compliant without overstepping the statutory requirements for an OT.

Below are a few things to consider before incorporating OTs into your federal business development process:

• Do your federal market research and understand which agency you want to work with that has an OT.
• Attend industry days, pitch events, and networking events with the government and industry.
• Create a capture process and bid/no bid decision to ensure you are spreading yourself evenly.
• Once a solicitation drops, build your team and submit your response.
• Start noticing the utilization of OTs vs. the reduced solicitations being pushed toward vehicles.
• Join a consortium that’s right for you and your company.
• Stay updated with the latest guidance to ensure you are on top.

Last, thank The Pulse for pointing this out; your pipeline has stayed healthy!