Other Transaction (OT) Authority
L. Elaine Halchin
Specialist in American National Government
January 27, 2010
Congressional Research Service
7-5700
www.crs.gov
RL34760
CRS Report for Congress
P
repared for Members and Committees of Congress
Other Transaction (OT) Authority
Summary
An other transaction (OT) is a special vehicle used by federal agencies for obtaining or
advancing research and development (R&D) or prototypes. An OT is not a contract, grant, or
cooperative agreement, and there is no statutory or regulatory definition of “other transaction.”
Only those agencies that have been provided OT authority may engage in other transactions.
OT authority originated with the National Aeronautics and Space Administration (NASA) when
the National Aeronautics and Space Act of 1958 was enacted. Subsequently, seven other specific
agencies have been given OT authority: the Department of Defense (DOD), Federal Aviation
Administration (FAA), Department of Transportation (DOT), Department of Homeland Security
(DHS), Transportation Security Administration, Department of Health and Human Services, and
Department of Energy. Other federal agencies may use OT authority under certain circumstances
and if authorized by the Director of the Office of Management and Budget (OMB).
Generally, the reason for creating OT authority is that the government needs to obtain leading-
edge R&D (and prototypes) from commercial sources, but some companies (and other entities)
are unwilling or unable to comply with the government’s procurement regulations. The
government’s procurement regulations and certain procurement statutes do not apply to OTs, and,
accordingly, other transaction authority gives agencies the flexibility necessary to develop
agreements tailored to a particular transaction. The Competition in Contracting Act (CICA),
Contract Disputes Act, and Procurement Integrity Act are examples of three statues that do not
apply to OTs.
Evaluating OTs and the use of OT authority is a challenging undertaking. Because the Federal
Acquisition Regulation (FAR) and certain procurement statutes do not apply to OTs means that
the methods or mechanisms used to track contractor performance and results also do not apply.
Additionally, the types of activities, functions, and outcomes associated with other transactions
cannot be easily measured for the purpose of evaluation. It does not appear that anyone has yet
devised a reliable method for conducting an evaluation that would yield quantifiable, objective
data.
Evidence of congressional interest in the use of other transaction authority includes the expansion
of OT authority over the years (as noted above), and a 2008 congressional hearing on the
Department of Homeland Security’s use of OT authority.
This report will be updated as events warrant.
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Other Transaction (OT) Authority
Contents
Introduction ................................................................................................................................ 1
Origin and Expansion of Other Transaction Authority ................................................................. 2
Background .......................................................................................................................... 2
Agencies That Have OT Authority ........................................................................................ 5
National Aeronautics and Space Administration .................................................................... 6
Department of Defense ......................................................................................................... 7
Federal Aviation Administration .......................................................................................... 13
Department of Transportation.............................................................................................. 14
Department of Homeland Security ...................................................................................... 14
Transportation Security Administration ............................................................................... 16
Department of Health and Human Services, National Institutes of Health ............................ 17
Department of Energy ......................................................................................................... 17
Other Agencies ................................................................................................................... 18
Applicability of the FAR and Procurement Statutes to Other Transactions ................................. 18
Evaluating the Use of OT Authority .......................................................................................... 22
Nontraditional Contractors .................................................................................................. 23
Other Assessments of OTs................................................................................................... 25
Additional Considerations for Evaluating OTs..................................................................... 28
Is OT Authority Used Appropriately? .................................................................................. 29
Policy Options .......................................................................................................................... 31
Conclusion................................................................................................................................ 34
Tables
Table 1. Statutes and Statutory Provisions That Do Not Apply to Other Transactions ................ 19
Contacts
Author Contact Information ...................................................................................................... 34
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Other Transaction (OT) Authority
Introduction
An other transaction (OT) is a special type of vehicle or instrument used by federal agencies for
research and development purposes, and only those agencies that have statutory authority to
engage in OTs may do so. There is no statutory or regulatory definition of “other transaction,”
though, in practice, it is defined in the negative: an OT is not a contract, grant, or cooperative
agreement. While the government may benefit from the work carried out pursuant to an other
transaction, an OT does not necessarily involve the purchase of goods or services.1 Using an OT,
the government may gain access to research or technology developed by, or in concert with, one
or more non-governmental entities, such as commercial firms.2Depending on the language of a
particular statute, an agency may use OTs for basic, applied, or advanced research projects;
prototypes; or some other purpose.3 Alternatively, an agency also may use a contract for research
and development (R&D), which is covered by Part 35 of the Federal Acquisition Regulation
(FAR), but OTs provide certain advantages over contracts.4 Generally, the advantages derive from
the fact that OTs are not subject to the FAR and certain procurement statutes.5 Companies (and
1 An executive agency uses a contract “when ... (1) the principal purpose of the instrument is to acquire (by purchase,
lease, or barter) property or services for the direct benefit or use of the United States Government; or (2) the agency
decides in a specific instance that the use of a procurement contract is appropriate.” (31 U.S.C. §6303.) (Italics added to
aid in identifying significant terms.) In addition to describing when a federal agency shall use a contract, the Federal
Grant and Cooperative Agreement Act (P.L. 95-224; 31 U.S.C. §§6301-6308), which is popularly known as the Chiles
Act, also describes when an agency shall use a grant (31 U.S.C. §6304) or a cooperative agreement (31 U.S.C. §6305).
2 Although the word “commercial,” when used in discussing OT authority, does not appear to have a generally agreed
upon definition, several authors who have written about OTs offer their own explanations or definitions. In one of is
reports on DOD’s use of OT authority, the Government Accountability Office (GAO) uses the term “commercial firm”
to identify a company that typically does not do business with DOD. (U.S. General Accounting Office, DOD’s
Guidance on Using Section 845 Agreements Could be Improved, GAO-NSIAD-00-33, Apr. 2000, p. 4. GAO was
renamed the U.S. Government Accountability Office in 2004.) The DOD inspector general (IG), as reported by GAO,
“defined a commercial firm as one that had not performed research on cost-based contracts or that had been subject to
an audit by the Defense Contract Audit Agency within the past 3 years.” (Ibid., p. 14.) A broader definition may be
found in a Public Contract Law Journal article: “For purposes of this article, when the term ‘commercial’ is used, it
encompasses all entities that are not part of the Federal Government, including universities, laboratories, and nonprofit
entities.” (Diane M. Sidebottom, “Updating the Bayh-Dole Act: Keeping the Federal Government on the Cutting
Edge,” Public Contract Law Journal, vol. 30, no. 2 (winter 2001), p. 226.) The definitions of “commercial item” and
“commercial activity” found in the in Federal Acquisition Regulation (FAR) and Office of Management and Budget
(OMB) Circular A-76, respectively, have specific applications. The FAR’s definition of “commercial item” has to do
with procedures that apply to the purchase of commercial items. (FAR 2.101.) The definitions of “commercial activity”
(and “inherently governmental activity”) found in Circular A-76 are used to distinguish between activities that can be
subjected to competitive sourcing and those that cannot (U.S. Office of Management and Budget, Circular No. A-76
(Revised), May 29, 2003, available at http://www.whitehouse.gov/omb/circulars/a076/a76_rev2003.pdf, pp. A-2-A-3
and D-2.)
3 While testifying at a congressional hearing in 2008, the chief procurement officer (CPO) of the Department of
Homeland Security described, for example, how the Transportation Security Administration (TSA) used OTs as a way
to reimburse costs associated with certain airport projects. (U.S. Congress, House Committee on Homeland Security,
Subcommittee on Emerging Threats, Cybersecurity and Science and Technology, “Other Transaction Authority:
Flexibility at the Expense of Accountability?” 110th Cong., 2nd sess., unpublished hearing, Feb. 7, 2008, p. 4.)
4 The FAR is Title 48 of the Code of Federal Regulations (CFR). It is “the primary regulation for use by all Federal
Executive agencies in their acquisition of supplies and services with appropriated funds.” (FAR, “Foreword.”) The
FAR is available at http://www.acquisition.gov/far/current/pdf/FAR.book.pdf.
5 The FAR “applies to all acquisitions as defined in Part 2 of the FAR...” (FAR 1.104.) Part 2 does not include a
definition of “other transaction.” Additionally, the definition of “contract action” in the FAR specifically excludes other
transactions: “‘Contract action’ means any oral or written action that results in the purchase, rent, or lease of supplies
or equipment, services, or construction using appropriated dollars over the micro-purchase threshold, or modifications
(continued...)
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other entities) unwilling or unable to comply with government procurement regulations and
statutes might be less likely to engage in a contract than an OT. By using an OT instead of a
contract, an agency and its partners are able to develop a flexible arrangement tailored to the
project and the needs of the participants: “Other Transactions are meant to present the
Government and contractor with a ‘blank page’ from which to begin when negotiating such
instruments.”6 Additionally, OTs promote “a more collaborative working relationship,” which can
be more conducive to R&D than the type of relationship established by a contract.7
After reviewing the origin and expansion of other transaction authority, this report examines the
advantages of other transactions, reviews the applicability of the FAR and procurement statutes to
OTs, discusses methods and challenges involved in evaluating other transactions, presents
suggestions for the use of OTs, and concludes with a list of possible policy options.
Origin and Expansion of Other Transaction
Authority
Background
The reasons for the introduction and passage of specific legislative provisions that provide one or
more agencies with OT authority may vary, or, in some cases, may not have been articulated or
disclosed. This section, although it incorporates material published after several agencies already
had received OT authority, describes several factors that, taken collectively, might have played a
significant role in creating an environment favorable to the establishment of OT authority.
Over the years, the federal government’s position as a primary source of funding for R&D has
changed, and this change has had implications for how the federal government obtains R&D.
Testifying in 2002, a managing director from the Government Accountability Office (GAO) noted
that the federal government’s financial contribution to R&D research had decreased over the
years:
[T]he R&D landscape has changed considerably over the past several decades. While the
federal government had once been the main provider of the nation’s R&D funds, accounting
(...continued)
to these actions regardless of dollar value. Contract action does not include grants, cooperative agreements, other
transactions, real property leases, requisitions from Federal stock, training authorizations, or other non-FAR based
transactions.” (FAR 4.601.) (First use of italics in original. Second use of italics added to aid in identifying relevant
language.)
6 Nancy O. Dix, Fernand A. Lavallee, and Kimberly C. Welch, “Fear and Loathing of Federal Contracting: Are
Commercial Companies Really Afraid To Do Business With the Federal Government? Should They Be?” Public
Contract Law Journal, vol. 33, no. 1 (fall 2003), p. 26. The benefit of OT authority is that it “... allows government and
industry to define their relationship through negotiations without the normal constraints. Under OT authority, the
program management approach, program objectives and criteria for measuring progress, oversight and reporting
requirements, price to the government, fee for industry, and the statement of work are embodied in an Agreement
reflecting the results of this negotiation. Agreements are inherently more flexible than traditional contracting vehicles,
and could be changed simply by the mutual agreement of government and industry participants.” (U.S. General
Accounting Office, Acquiring Research by Nontraditional Means, GAO/NSIAD-96-11, Mar. 1996, p. 3.)
7 U.S. General Accounting Office, Acquiring Research by Nontraditional Means, p. 3.
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for 54 percent in 1953 and as much as 67 percent in 1964, as of 2000, its share amounted to
26 percent, or about $70 billion, according to the National Science Foundation.8
With most R&D being carried out in the private sector, “the federal government must now
increasingly compete with others to obtain the research and technology it needs.”9 Elaborating on
how the government’s circumstances have changed, Diane M. Sidebottom wrote the following:
[In the past,] ... the Government was a large customer of ... complex technologies and was
often the only customer for production quantities of some of the more expensive inventions.
While Government still has deep pockets, these pockets are nowhere near as deep as they
were in the past. Massive budget cutbacks across the board have put the Government in the
interesting position of being just another customer of technology and often not the largest
customer at that. More and more, the Government is relying on commercial off-the-shelf
technologies and leveraging the investment in technology that is being made privately by
commercial industry. The situation has changed so much that many corporations are refusing
to do business with the Government because its regulatory rules are too onerous. The
Government is finding that not only can it not acquire many of the technologies it needs, but
also many corporations will not even accept government dollars to help develop new
technologies.10
Despite the government’s ongoing need to take advantage of the commercial sector’s leading-
edge technology and research, statutory and regulatory procurement requirements have served as
a deterrent to working with the federal government. While “[t]he name of the game now in
corporate high-tech research is speed and stealth,” the federal government “responds poorly to
both ... largely because of the myriad of regulatory and statutory requirements the agency must
satisfy before the actual award and during its administration.”11 Although the government’s
regulatory and statutory requirements provide for, among other things, consistency, some would
argue, as the author of the following passage does, that standardization is not necessarily
conducive to R&D.
While, in theory, consistency ensures fairness and equal treatment, it does not necessarily
allow for different needs and situations. In the R&D arena, every technology area has its own
special peculiarities and problems that may require multiple solutions. The commercial
world largely recognizes this and negotiates unique contracts and agreements to specifically
address each situation. The Government is usually unable to do that because of the
regulatory framework under which it works. The statutes and regulations are largely
unchangeable, leaving the Contracting Officer only a minimal amount of discretion. The
discretion that does exist is rarely used because innovation in contracting is highly suspect in
many government organizations. This inability to be flexible and negotiate alternative
solutions has turned off many companies, particularly the high-tech ones. These corporations
tend to employ innovative thinkers who are unimpressed by the cookie-cutter approach of
the Government’s system. When confronted by such a system, they often will refuse the
8 U.S. General Accounting Office, Industry and Agency Concerns Over Intellectual Property Rights, GAO-02-723T,
May 10, 2002, p. 3.
9 U.S. General Accounting Office, Information on the Federal Framework and DOD’s Other Transaction Authority,
GAO-01-980T, July 17, 2001, p. 1.
10 Diane M. Sidebottom, “Intellectual Property in Federal Government Contracts: the Past, the Present, and One
Possible Future,” Public Contract Law Journal, vol. 33, no. 1 (fall 2003), pp. 86-87.
11 Ibid., p. 86.
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Government’s arrangement and find other methods of financing under more compatible
terms.12
Aside from the issues raised above, complying with government statutes and regulations
constitutes, for some companies, an unacceptable administrative burden. The following passage
focuses exclusively on Department of Defense (DOD) contracting, but, nevertheless, it captures
the scope of the task facing companies that compete for government contracts:
Depending on such factors as the contract type and dollar value, a DOD contract could
incorporate more than 100 contract clauses. These clauses implement statutory or regulatory
requirements covering such issues as financial management and intellectual property, among
others. While these requirements are intended to protect the government’s or suppliers’
interests, concerns have been raised about the costs or impact of complying with the
requirements.13
Evidence of the extent to which some companies go to ensure proper compliance with
government regulations was uncovered by GAO in its study of government contractors and
government acquisition requirements. GAO’s review of eight companies’ operations revealed that
[f]our companies ... have a separate administrative structure for government sales, and two
other companies ... have added employees to their administration to handle their government
contracts, in order to ensure compliance with the acquisition requirements. The remaining
two companies ... have subsidiaries that they reportedly keep separated to avoid being
burdened with requirements, especially cost accounting standards and cost and pricing data
requirements.14
Government requirements concerning intellectual property rights and cost accounting standards,
in particular, are often cited as barriers to companies that otherwise might compete for
government contracts. Although an extensive discussion of intellectual property rights is beyond
the scope of this report, the following passage summarizes the government’s intellectual property
rights: “In general, the government obtains unlimited rights when technical data were developed
or created exclusively with government funds, government purpose rights when the data were
created with mixed funding, and limited rights when the data were created exclusively at private
expense.”15 After noting that intellectual property concerns have affected the willingness of at
least some companies to enter into government contracts, GAO identified several specific
concerns: “perceived poor definitions of what technical data is needed by the government, issues
with the government’s ability to protect proprietary data adequately, and unwillingness on the part
of government officials to exercise the flexibilities available to them concerning intellectual
12 Ibid., p. 87.
13 U.S. General Accounting Office, DOD’s Guidance on Using Section 845 Agreements Could Be Improved,
GAO/NSIAD-00-33, Apr. 2000, pp. 5-6.
14 U.S. General Accounting Office, Impact on Company Structures and Operations, GAO/NSIAD-94-20, Apr. 1994, p.
5.
15 U.S. General Accounting Office, DOD’s Guidance on Using Section 845 Agreements Could Be Improved, p. 47.
“Government purpose rights enable the government to allow others to use the data for government purposes, while
limited rights generally require the government to obtain the contractor’s written permission before doing so. (Ibid.)
Part 27 of the FAR “prescribes the policies, procedures, solicitation provisions, and contract clauses pertaining to
patents, data, and copyrights.” (FAR 27.000.) Several CRS reports address various aspects of intellectual property
rights. For example, see CRS Report RL32051, Innovation and Intellectual Property Issues in Homeland Security, by
John R. Thomas.
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property rights.”16 An additional problem is that giving the government “rights to certain
information and data ... could decrease ... businesses’ competitive advantage.”17
On the one hand, the government’s cost accounting standards, coupled with the Truth in
Negotiations Act (TINA)18 and the FAR’s cost contract principles and procedures (Part 31 of the
FAR), “are among the government’s primary means of attempting to assure itself that it acquires
goods and services at a fair and reasonable price on a cost-based contract.”19 Compliance with
these statutory and regulatory requirements and procedures may mean, for example, that a
company has to disclose certain information to the government and permit the government to
audit its books. While the thrust of these requirements is to protect the government, they can pose
an administrative burden to companies: “... many commercial companies cannot or will not
establish the separate accounting systems needed to perform government cost-reimbursement
contracts, grants, or cooperative agreements.”20 Furthermore, a company might be concerned that
“a false move [on its part] could result in liability under the False Claims Act,” or it might be
wary of “the risk attendant to the right of the Federal Government to audit books and records for
years after the contract is complete and after the federal customer has accepted and paid for the
goods or services.”21
Agencies That Have OT Authority
Although other transaction authority “as it currently exists began in 1989 with Congress’s
enactment of legislation authorizing the Defense Advanced Research Projects Agency (DARPA)
to use other transactions,”22 the first agency that received OT authority was the National
Aeronautics and Space Administration (NASA). In chronological order, the agencies that have
OT authority, and the Congress in which the applicable statute or statutes were enacted, are as
follows:
• 85th Congress: NASA
• 101st Congress: DOD (OT authority for science and technology)
• 103rd Congress: DOD (OT authority for prototypes)
16 U.S. General Accounting Office, Industry and Agency Concerns Over Intellectual Property Rights, p. 2.
17 U.S. Government Accountability Office, Further Action Needed to Promote Successful Use of Special DHS
Acquisition Authority, GAO-05-136, Dec. 2004, pp. 24-25. “One reason companies have reportedly declined to contract
with the government is to protect their intellectual property rights. Alternatively, insufficient intellectual property rights
could hinder the government’s ability to adapt developed technology for use outside of the initial scope of the project.
Limiting the government’s intellectual property rights may require a trade-off. On the one hand, this may encourage
companies to work with the government and apply their own resources to efforts that advance the government’s
interests. However, it also could limit the government’s production options for items that incorporate technology
created under an other transaction agreement.” (U.S. Government Accountability Office, Status and Accountability
Challenges Associated with the Use of Special DHS Acquisition Authority, GAO-08-471T, Feb. 7, 2008, p. 10.)
18 41 U.S.C. §254b; P.L. 87-653; 76 Stat. 528.
19 U.S. General Accounting Office, DOD’s Guidance on Using Section 845 Agreements Could Be Improved, pp. 38-39.
20 Richard N. Kuyath, “The Untapped Potential of the Department of Defense’s ‘Other Transaction’ Authority,” Public
Contract Law Journal, vol. 24, no. 4 (summer 1995), p. 543.
21 Nancy O. Dix, Fernand A. Lavallee, and Kimberly C. Welch, “Fear and Loathing of Federal Contracting: Are
Commercial Companies Really Afraid To Do Business With the Federal Government? Should They Be?” p. 9.
22 Ibid., p. 25.
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• 104th Congress: Federal Aviation Administration (FAA)
• 105th Congress: Department of Transportation (DOT)
• 107th Congress: Transportation Security Administration (TSA) and the
Department of Homeland Security (DHS)
• 108th Congress: Department of Health and Human Services (HHS), National
Institutes of Health (NIH), and other agencies
• 109th Congress: Department of Energy (DOE)
Most of what is known about the rationale for, and use of, other transactions is based on DOD’s
experiences with OT authority. Aside from NASA, DOD has had OT authority longer than any
other government agency, and NASA “has not developed or used the instrument in the same way
that has the Department of Defense.”23 It does not appear that any of the other agencies that have
received OT authority have comparable experience using OTs. Additionally, several agencies’ OT
authority is based on DOD’s authority, and DOD figures prominently in the literature on other
transactions. Additionally, the history of DOD’s efforts to obtain OT authority is well
documented. Accordingly, the information regarding DOD’s OT authority is more extensive, both
in this section and throughout the report, than the information presented for other agencies. The
following information regarding the expansion of OT authority to specific agencies is presented
in chronological order. The final section covers OT authority for other agencies.
National Aeronautics and Space Administration
Other transaction authority originated with the passage of the National Aeronautics and Space Act
of 1958,24 which authorized NASA to
... enter into and perform such contracts, leases, or other transactions as may be necessary in
the conduct of its work and on such terms as it may deem appropriate, with any agency or
instrumentality of the United States, or with any State, Territory, or possession, or with any
political subdivision thereof, or with any person, firm, association, corporation, or
educational institution.25
Relevant congressional documents from the 85th Congress do not indicate what was meant by
“other transaction” and do not explain why this term was included in the Space Act.26 Reportedly,
the former General Counsel for NASA, Paul Dembling, coined the term “other transaction.”27
23 Ibid., pp. 23-24.
24 P.L. 85-569; 42 U.S.C. §2473; 72 Stat. 426, at 430. This statute came to be called the “Space Act.” (John M.
Logsdon, moderator, Legislative Origins of the National Aeronautics and Space Act of 1958, Proceedings of an Oral
History Workshop, Monographs in Aerospace History, Number 8 (Washington: National Aeronautics and Space
Administration, 1998), p. iii.)
25 42 U.S.C. §2473(c)(5).
26 U.S. Congress, Senate Special Committee on Space and Astronautics, National Aeronautics and Space Act of 1958,
report to accompany S. 3609, 85th Cong., 2nd sess., S.Rept. 1701 (Washington: GPO, 1958); U.S. Congress, House
Select Committee on Astronautics and Space Exploration, Comparison of H.R. 12575 As Passed the House (The
National Aeronautics and Astronautics Act of 1958) and As Passed the Senate (The National Aeronautics and Space
Act of 1958, committee print, 85th Cong., 2nd sess., June 18, 1958 (Washington: GPO, 1958); U.S. Congress,
Conference Committee, National Aeronautics and Space Act of 1958, conference report to accompany H.R. 12575, 85th
Cong., 2nd sess., H.Rept. 2166 (Washington: GPO, 1958).
27 Nancy K. Sumption, “Meeting the Department of Defense’s Objectives,” Public Contract Law Journal, vol. 28, no. 3
(continued...)
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Although the conference report did not explain the term or provide a rationale for “other
transactions,” it included the following statement: “The conferees adopted the Senate version of
the provision authorizing the Administration to enter into contracts, leases, and other agreements
and transactions, on the grounds that the omitted House provisions are covered by existing law.”28
Department of Defense
At DOD, OT authority originated with the passage of legislation during the 101st Congress, which
provided the Defense Advanced Research Projects Agency (DARPA) OT authority for R&D
projects.29 Subsequent legislation, which was enacted during the 103rd Congress, provided DOD
OT authority for prototypes. Although the applicable statutes are comprehensive in terms of
establishing requirements for the use of OTs, neither statute defined “other transaction,” and the
latter statute did not define “prototype.”30
Prior to 1989, “DoD interpreted its authority to enter into R&D [research and development]
agreements as limited to procurement contracts and grants,” and, according to department policy,
it could use grants only for arrangements with universities and nonprofit organizations.31 The
other vehicles available to DARPA—in particular, contracts—were inadequate, and some
companies were reluctant to enter into a contract with the government. The following passage
describes some problems DARPA encountered in using government contracts for R&D:
It became apparent in the late 1980s ... that the standard government contract and standard
DOD grant were inadequate for DARPA to carry out its advanced research mission. For
example, DARPA missed out on opportunities to contract with some of the most innovative
companies, including small start-ups and large commercial companies, that developed some
of the most promising new technologies. Many of these companies lacked either the desire or
the government-required systems to perform a contract under the government procurement
regulations. In addition, when DARPA used a standard government procurement contract to
form a consortium, it created an awkward contractual relationship.32 DARPA needed a
contractual vehicle that would allow it to set up a multiparty agreement where consortium
members would be equal. In 1988 DARPA concluded that it “needed additional flexibility in
its approaches to support advanced R&D.” DARPA turned toward the National Aeronautics
and Space Administration (NASA) for inspiration in obtaining a new statutory authority to
fill the void discussed above.33
(...continued)
(spring 1999), p. 384.
28 U.S. Congress, Conference Committee, National Aeronautics and Space Act of 1958, p. 19.
29 DARPA used to be known as the Advanced Research Projects Agency, or ARPA.
30 U.S. General Accounting Office, DOD’s Guidance on Using Section 845 Agreements Could Be Improved, p. 6.
31 Kuyath, “The Untapped Potential of the Department of Defense’s ‘Other Transaction’ Authority,” p. 526.
32 DARPA needed to form consortia to address “the development of certain technologies,” and using contracts for this
purpose resulted in “awkward and inappropriate contractual relationships.” A contract is not well suited for an
arrangement in which “each consortium member [is] equivalent to a co-prime contractor with the Government.” (Ibid.,
pp. 526-527.) In the case of a government procurement that involves one or more subcontractors, a government agency
awards a contract to the prime contractor, and the prime contractor awards a contract to one or more subcontractors.
33 Sumption, “Meeting the Department of Defense’s Objectives,” pp. 381-382.
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Additionally, DARPA realized that R&D contracts “often result[ed] in no deliverables, except
reports, to the Government,” and the reports were of “little direct value to DoD....”34 Instead,
R&D contracts benefitted the government by advancing research, or by showing whether a
particular approach or line of inquiry was fruitful.35
By the late 1980s, DARPA, DOD, and a group of retired military and government officials shared
an interest in providing DARPA with a new approach for R&D work.
By 1988, Dr. Raymond Colladay, then director of DARPA, concluded that DARPA needed
additional flexibility in its approaches to supporting advanced R&D. The House
Appropriations Committee had directed that DARPA submit a report to Congress on
alternative management systems by early 1989. Among other initiatives suggested in his
report, Colladay advocated the creation of a new and flexible R&D agreement authority for
DARPA. The report was never sent directly to Congress. However, the biennial review of
Defense Agencies required by the Goldwater-Nichols Act was performed during 1989. In
October 1989 the Office of the Secretary of Defense (OSD) Study Team issued its report,
which recommended that DoD prepare legislation that would give DARPA authority to enter
into innovative contractual agreements.
About the same time, a group of retired flag officers and other former government officials
lobbied Congress for additional authority for DARPA to enter into innovative contractual
agreements so that DARPA could contract with the best and brightest companies in the
research community. This group included individuals well known to the administration and
Capitol Hill, who convinced Congress to add appropriate language to the Defense
Authorization Bill for FY 1990.36
Apparently, one or more of these efforts was successful as OT authority for DARPA was included
in S. 1352, which was incorporated into H.R. 2461 as an amendment on August 4, 1989. The
following passage is from the Senate report that accompanied S. 1352:
The [Senate Armed Services] committee recognizes that the maturation of many
technologies funded by the Defense Advanced Research Projects Agency may have
significant commercial application. The committee applauds the efforts of DARPA in this
area and supports a broadening of this effort. Current law does not authorize DARPA to
enter into “cooperative agreement” or “other transactions” as distinct from “grants” or
“contracts.” Additionally, current law does not allow for any proceeds of such arrangements
to be applied to a fund for the development of other advanced technologies. Accordingly,
section [222] clearly establishes the legal authority of DARPA to enter into cooperative
arrangements and other transactions. In granting the authority to enter into “other
transactions,” the committee enjoins the Department to utilize this unique authority only in
those instances in which traditional authorities are clearly not appropriate.37
34 Kuyath, “The Untapped Potential of the Department of Defense’s ‘Other Transaction’ Authority,” p. 527.
35 Ibid.
36 Ibid., pp. 527-528.
37 U.S. Congress, Senate Committee on Armed Services, National Defense Authorization Act for Fiscal Years 1990 and
1991, report to accompany S. 1352, 101st Cong., 1st sess., S.Rept. 101-81 (Washington: GPO, 1989), pp. 126-127. The
remainder of the section, “Cooperative Research and Other Transactions Authority,” is as follows: “The legislation
would also permit DARPA to recoup the fruits of such arrangements, when there is a “dual use” potential for
commercial application, for reinvestment in the development of other technologies with the potential for military
utility. The committee further recommends the authorization of $25 million for the establishment of a fund for this
purpose with the intention that DARPA should enter into such agreements on a cost-share basis with the private sector
(continued...)
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Although H.R. 2461 did not include a provision similar to Section 222 of S. 1352 (prior to the
incorporation of S. 1352 into H.R. 2461 by amendment), the House Committee on Armed
Services noted that, of two legislative proposals “raised too late for thorough consideration by the
committee” for inclusion in H.R. 2461, one of them
would authorize the Director of DARPA to enter into cooperative agreements and the
Secretary of Defense to provide ‘proceeds or other payments to the United States arising out
of such agreements’ to a fund set up in the Treasury for such activities. Apparently, the
National Aeronautics and Space Administration has such authority, and similar authority was
previously granted to the Department of Defense for the semiconductor industry consortium,
SEMATECH, in sections 271-278 of the fiscal years 1988/1989 Defense Authorization Act
(P.L. 100-180).38
In another section of this report, the House Armed Services Committee discussed DOD’s need for
a robust technology base. Although OT authority was not mentioned in this section, which is
reproduced here, in part, OTs are related to the enhancement of DOD’s technology base.39
U.S. forces rely on modern technology and industrial strength as fundamental components of
our deterrent by providing superior defense systems as force multipliers against the larger
number of weapons fielded by our adversaries. Therefore, it is mandatory that the
Department of Defense maintain a healthy technology base that keeps pace with technology
opportunity and the military’s long range plan to defeat current and potential future threats to
national security.
... the United States needs new initiatives to invigorate the technology base to ensure that
invention and innovation will remain in our industry, which has been a cornerstone of our
free enterprise system and national strength.
Distinguished scientific experts advised the committee that the component of RDT&E
[research, development, test, and evaluation] with greatest opportunity to help maintain a
strong defense industrial and technology base are the research ... and the exploratory
development ... categories. If defense is critically dependent on the industrial technology
base, then the Department of Defense cannot expect to continue to survive with the research
investments of the past, but must re-invest its proportionate share in the common pool of
technical knowledge and human technical talent.
The committee intends both to correct trends and redirect certain efforts in the fiscal year
1990 DoD technology base program to ensure a vigorous, modern and advancing pool of
(...continued)
under appropriate circumstances. The committee directs the Secretary to ensure that a review of all DARPA activities is
conducted on an annual basis with a view towards terminating those arrangements which do not appear to have a
reasonable expectation of success. The committee directs that any cooperative agreement or other transaction entered
into between DARPA and other parties be structured to achieve set objectives for a limited duration. This authority
should not be used to establish permanent partnerships or other relationships involving continuing financial support
from DARPA.” (Ibid., p. 127.)
38 U.S. Congress, House Committee on Armed Services, National Defense Authorization Act for Fiscal Years 1990-
1991, report to accompany H.R. 2461, 101st Cong., 1st sess., H.Rept. 101-121 (Washington: GPO, 1989), pp. 177-178.
39 An article written in 2002 noted that “Other Transactions authority was created to further three specific Department
of Defense missions: (1) enhancing American military technological superiority, (2) streamlining the acquisition
process, and (3) integrating civilian and military technology industries.” (David S. Bloch and James G. McEwen,
“‘Other Transactions’ with Uncle Sam: A Solution to the High-Tech Government Contracting Crisis,” Texas
Intellectual Property Journal, vol. 10, no. 2 (winter 2002), p. 210.)
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technology that will be available to provide the needs of the nation’s defense in the future.
Furthermore, the committee intends to foster and encourage linkages among the Department
of Defense, industry and universities; and to bolster the defense industrial base and provide
greater opportunity to “spin off” technology into the civilian sector.”40
The conference report accompanying H.R. 2461 noted that the House bill did not contain a
provision similar to the one found in S. 1352 which provided DARPA OT authority, and stated
that the House receded “with an amendment that would establish ... authority [for other
transactions and cooperative agreements] on a two-year trial basis.”41
On November 29, 1989, the President signed H.R. 2461, which was enacted as P.L. 101-189,
National Defense Authorization Act for FY1990 and FY1991. Section 251 of P.L. 101-189
amended Chapter 139 of Title 10 by adding a new section, Section 2371. Section 251(a)
authorized the “Secretary of Defense, in carrying out advanced research projects through the
Defense Advanced Research Projects Agency, [to] enter into cooperative agreements and other
transactions with any person, any agency or instrumentality of the United States, any unit of State
or local government, any educational institution, and any other entity.” Several years after the
passage of P.L. 101-189, DOD’s Office of Inspector General (IG) summarized why DOD was
given OT authority:
Congress authorized the use of ‘other transactions’ to increase involvement in DoD programs
by commercial firms that traditionally have not entered into contracts or agreements with the
DoD. DoD officials requested the authority to stimulate or support research and development
by commercial firms and consortia that were believed to be reluctant to conduct research for
DoD because they would be subject to the FAR and DOD procurement regulations. Congress
authorized the use of ‘other transactions’ and allowed DoD officials a considerable degree of
flexibility in negotiating terms and conditions. The intent of ‘other transactions’ was to
obtain research from traditionally non-DoD commercial firms and to capitalize on
commercial firms’ research investments.42
In 1993, DARPA’s OT authority was expanded, through the enactment of P.L. 103-160, National
Defense Authorization Act for FY1994, to include prototypes relevant to weapons or weapon
systems.43 (The authority was provided in Section 845. Hence, prototype OTs are also known as
“Section 845” (or “845”) projects or OTs.) Subsequent to the passage of P.L. 103-160, GAO
40 U.S. Congress, House Committee on Armed Services, National Defense Authorization Act for Fiscal Years 1990-
1991, pp. 127-128.
41 U.S. Congress, Conference Committee, Authorizing Appropriations for Fiscal Year 1990 for Military Activities of
the Department of Defense, for Military Construction, and for Defense Activities of the Department of Energy, to
Prescribe Personnel Strengths for Such Fiscal Year for the Armed Forces, and for Other Purposes, conference report
to accompany H.R. 2461, 101st Cong., 1st sess., H.Rept. 101-331 (Washington: GPO, 1989), p. 531.
42 U.S. Department of Defense, Office of the Inspector General, Award and Administration of Contracts, Grants, and
Other Transactions Issued By the Defense Advanced Research Projects Agency, Report No. 97-114, Mar. 28, 1997, p.
39. The authors of the RAND study conducted for DOD considered factors that might contribute to the success of OTs.
The “research to date suggests that when at least one of the following conditions is met, OT [authority] will likely be
beneficial”: “When DoD desires access to technology that is predominantly the result of commercial development, OT
[authority] provides a mechanism for nonintrusive, value-added protection. When there is considerable uncertainty
regarding both performance goals and what is technically achievable and affordable, OT [authority] provides the
necessary flexibility to manage high-risk projects. When DoD might benefit from innovative business relationships
with industry, or among industry participants, OT [authority] provides the mechanism to define those relationships.”
(Giles Smith, Jeffrey Drezner, and Irving Lachow, Assessing the Use of “Other Transactions” Authority for Prototype
Projects (Santa Monica, CA: RAND Corporation, 2002), p. 33.)
43 10 U.S.C. §2371 note; 107 Stat. 1547, at 1721.
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wrote: “While the intent [of the 1994 congressional authorization for OT prototypes] is never
spelled out explicitly in congressional documents, it is apparent that one major goal was to
improve DoD access to technologies that were being developed for the commercial market.”44
Notable changes to DOD’s OT authority were effected by P.L. 103-355 and P.L. 108-136. Section
1301 of P.L. 103-355, Federal Acquisition Streamlining Act of 1994, provided authority to the
Secretary of Defense and the service secretaries to enter into OTs for “carrying out basic, applied,
and advanced research projects.”45 Under Section 1601 of P.L. 108-136,46 National Defense
Authorization Act for FY2004, the Secretary may use the procedures authorized in 10 U.S.C.
§2371 and Section 845 of P.L. 103-160 to procure “property or services for use ... in performing,
administering, or supporting biomedical countermeasures research and development....”47
The following is a summary of selected provisions of 10 U.S.C. §2371, which governs R&D OTs:
• The Secretary of Defense and the Secretary of each military department may,
under the authority of 10 U.S.C. §2371, enter into other transactions for the
purpose carrying out basic, applied, and advanced research projects. In using OT
authority, the Secretary of Defense shall act through DARPA or any other DOD
element the Secretary designates.
• Advance payments may be permitted.48
• An “other transaction” “may include a clause that requires a person or other
entity to make payments to the Department of Defense or any other department
or agency of the Federal Government as a condition for receiving support under
the ... other transaction.”49
• The Secretary of Defense shall ensure, “to the maximum extent practicable,” that
an “other transaction” does not provide for research that would duplicate research
already being conducted by DOD programs.50
• The Secretary of Defense shall ensure, to the extent that he or she determines
practicable, that funds provided for a transaction “do not exceed the total amount
provided by other parties to the ... other transaction.”51 This provision does not
apply to prototype OTs.52
• The Secretary of Defense shall ensure that a transaction “may be used for a
research project when the use of a standard contract, grant, or cooperative
44 U.S. General Accounting Office, Acquiring Research by Nontraditional Means, pp. 5-6.
45 Sec. 1301(b) of P.L. 103-355.
46 10 U.S.C. §2370a note; 117 Stat. 1392, at 1680.
47 Sec. 1601(c) of P.L. 108-136.
48 10 U.S.C. §2371(c).
49 10 U.S.C. §2371(d)(1).
50 10 U.S.C. §2371(e)(1)(A).
51 10 U.S.C. §2371(e)(1)(B).
52 10 U.S.C. §2371 note.
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agreement for such project is not feasible or appropriate.”53 This provision does
not apply to prototype OTs.54
The following is a summary of selected provisions of 10 U.S.C. §2371 note, which governs
prototype projects:
• Under 10 U.S.C. §2371 note, as amended by Section 855 of P.L. 109-364, the
Director of DARPA, the Secretary of a military department, or any other official
designated by the Secretary of Defense may, under the authority 10 U.S.C.
§2371, “carry out prototype projects that are directly relevant to weapons or
weapon systems proposed to be acquired or developed by the Department of
Defense, or to improvement of weapons or weapon systems in use by the Armed
Forces.”
• For prototype projects expected to cost at least $20 million but no more than
$100 million, the agency’s senior procurement executive (or, for DARPA or the
Missile Defense Agency, the director of the agency) is required to prepare a
written determination that addresses the items listed in Section 845(a)(2)(A) of
P.L. 103-160. For prototype projects expected to exceed $100 million, the Under
Secretary of Defense for Acquisition, Technology, and Logistics is required to
prepare a written determination that addresses the items listed in Section
845(a)(2)(B).55
• “To the maximum extent practicable, competitive procedures shall be used when
entering into agreements to carry out projects....”56
• For a prototype project that has payments in excess of $5 million, a clause shall
be included in the agreement that provides for the Comptroller General to
examine certain records “of any party to the agreement or any entity that
participates in the performance of the agreement.” Certain conditions apply to
such reviews.57
• A prototype OT is to include at least one nontraditional defense contractor who
participates “to a significant extent in the prototype project.”58 If none of the
parties is a nontraditional defense contractor, then the parties other than the
federal government must provide at least one-third of the total cost of the project,
or the agency’s senior procurement executive is to determine “in writing that
exceptional circumstances justify the use of a transaction that provides for
53 10 U.S.C. §2371(e)(2).
54 10 U.S.C. §2371 note.
55 10 U.S.C. §2371 note; Sec. 845(a)(2) of P.L. 103-160, as amended. To aid in finding the referenced text, citations for
material from 10 U.S.C. §2371 note refer to Sec. 845 of P.L. 103-160.
56 10 U.S.C. §2371 note; Sec. 845(b)(2) of P.L. 103-160, as amended.
57 10 U.S.C. §2371 note; Sec. 845(c) of P.L. 103-160, as amended.
58 A “nontraditional defense contractor” is “an entity that has not, for a period of at least one year prior to the date that a
transaction (other than a contract, grant, or cooperative agreement) for a prototype project under the authority of this
section is entered into, entered into or performed with respect to—(1) any contract that is subject to full coverage under
the cost accounting standards prescribed pursuant to section 26 of the Office of Federal Procurement Policy Act (41
U.S.C. 422) and the regulations implementing such section; or (2) any other contract in excess of $500,000 to carry out
prototype projects or to perform basic, applied, or advanced research projects for a Federal agency, that is subject to the
Federal Acquisition Regulation.” (10 U.S.C. §2371 note.)
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innovative business arrangements or structures that would not be feasible or
appropriate under a contract.”59
• A transaction involving a prototype project “that satisfies the conditions set forth
in ... [Section 845](d)(1)(B)(I) of P.L. 103-160, as amended] may provide for the
award of a follow-on production contract to the participants in the transaction for
a specific number of units at specific target prices.” Competitive procedures do
not have to be used if the conditions in Section 845(g)(2) of P.L. 103-160, as
amended, are met.”60
• 41 U.S.C. §423 applies to agreements for prototype “other transactions.” This
section of the U.S. Code prohibits the disclosure and acquisition of certain
procurement information; addresses certain circumstances under which a
procurement officer might be contacted regarding non-federal employment;
prohibits a former agency official from receiving compensation from a contractor
under certain circumstances; and provides for criminal and civil penalties and
administrative actions for violations of this section.61
Federal Aviation Administration
A reauthorization act for the FAA provided OT authority to the agency. As the following excerpt
from the conference report suggests, OT authority was part of a package of reforms aimed at
providing the FAA with additional authority:
Senate provision: The managers recognize that to provide reform of the FAA, additional
autonomy in decision-making in a number of areas is needed. For this reason, the managers
agreed to give the FAA authority in the regulatory, personnel, and procurement areas. This
change should result in a new way of doing business for the FAA, with less oversight by
DOT.62
Section 226 of P.L. 104-264, Federal Aviation Reauthorization Act of 1996, amended Title 49 of
the U.S. Code by adding a subsection to Section 106(l). Section 106(l)(6) states, in part, that the
Administrator of the FAA has the authority to enter into “... other transactions as may be
necessary to carry out the functions of the Administrator and the [Federal Aviation]
Administration.” In using this authority, the Administrator “may enter into ... other transactions
with any Federal Agency (as such term is defined in section 551(1) of title 5) or any
instrumentality of the United States, any State, territory, or possession, or political subdivision
thereof, any other governmental entity, or any person, firm, association, corporation, or
educational institution, on such terms and conditions as the Administrator may consider
appropriate.”63
59 10 U.S.C. §2371 note; Sec. 845(d)(1) of P.L. 103-160, as amended.
60 10 U.S.C. §2371 note; Sec. 845 (g) of P.L. 103-160, as amended.
61 10 U.S.C. §2371 note; Sec. 845(h) of P.L. 103-160, as amended.
62 U.S. Congress, Conference Committee, Federal Aviation Authorization Act of 1996, conference report to accompany
H.R. 3539, 104th Cong., 2nd sess., H.Rept. 104-848 (Washington: GPO, 1996), p. 107.
63 Sec. 226 of P.L. 104-264; 110 Stat. 3213, at 3233.
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Department of Transportation
Section 5102 of P.L. 105-178, Transportation Equity Act for the 21st Century, amended Chapter 5
of Title 23 of the U.S. Code by adding a section (Section 502) regarding surface transportation
research. Section 5102 authorizes the Secretary of Transportation to use, among other vehicles,
other transactions for carrying out research, development, and technology transfer activities with
respect to “motor carrier transportation; all phases of transportation planning and development ...;
and ... the effect of State laws” on motor carrier transportation and transportation planning and
development. The Secretary may enter into other transactions with “the National Academy of
Sciences, the American Association of State Highway and Transportation Officials, or any
Federal laboratory, State agency, authority, association, institution, for-profit or nonprofit
corporation, organization, foreign country, or person.”64
Neither the House Committee on Transportation and Infrastructure’s report nor the Conference
Committee’s report on H.R. 2400 (which was enacted as P.L. 105-178) discussed why the
Secretary of Transportation was given authority to enter into other transactions.65
Department of Homeland Security
Among the federal agencies that have other transaction authority, the Department of Homeland
Security is one of two agencies that was provided OT authority in its authorizing legislation, P.L.
107-296 (H.R. 5005), Homeland Security Act of 2002.66 (The other is the Transportation Security
Administration (TSA).) The committee report that accompanied H.R. 5005 does not include an
explanation for providing OT authority to DHS, but, under the heading “Research and
Development Projects,” the report provided the following description of acquisition procedures to
be used by the department:
This section gives the Secretary the authority to carry out a pilot program with streamlined
procedures for the acquisition of goods and services that the Secretary determines are
essential to the Department’s mission of fighting terror. It would provide the Secretary with
enhanced, but specifically defined, flexibilities while maintaining adequate safeguards. The
provisions are based on procedures that are currently part of the Government’s acquisition
system such as micro purchases, simplified acquisition procedures, and special simplified
commercial item acquisitions. The procedures are in the current version of part 13 of the
government-wide Federal Acquisition Regulation. The Department is to use current
government-wide authorities for its “normal” procurements.67
64 Sec. 5102 of P.L. 105-178; 112 Stat. 423.
65 U.S. Congress, House Committee on Transportation and Infrastructure, Building Efficient Surface Transportation
and Equity Act of 1998, report to accompany H.R. 2400, 105th Cong., 2nd sess., H.Rept. 105-467, part 1 (Washington:
GPO, 1998), p. 223; U.S. Congress, Conference Committee, Transportation Equity Act for the 21st Century, conference
report to accompany H.R. 2400, 105th Cong., 2nd sess., H.Rept. 105-550 (Washington: GPO, 1998).
66 116 Stat. 2135, at 2224; 6 U.S.C. §391. The department’s other transaction authority initially was for a five-year
period, ending in January 2008. However, subsequent statutory provisions have extended the authority in increments of
one year or less. Sec. 572 of P.L. 110-161 changed the expiration date to September 30, 2008; Sec. 537 of P.L. 1110-
329 extended the authority one year, to September 30, 2009; and Sec. 531 of P.L. 111-83 moved the expiration date to
September 30, 2010.
67 U.S. Congress, House Select Committee on Homeland Security, Homeland Security Act of 2002, report to
accompany H.R. 5005, 107th Cong., 2nd sess., H.Rept. 107-609, Part 1 (Washington: GPO, 2002), p. 116.
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The following is a summary of selected provisions of Section 831 of P.L. 107-296:
• After determining that the use of a contract, grant, or cooperative agreement is
neither feasible nor appropriate, the Homeland Security Secretary may exercise
the same authority that the Secretary of Defense may exercise under 10 U.S.C.
§2371 for the purpose of carrying out basic, applied, and advanced R&D
projects.68
• The Homeland Security Secretary also may carry out prototype projects in
accordance with Section 845 of P.L. 103-160 (10 U.S.C. §2371 note).69
• GAO is required to produce annual reports on certain aspects of the department’s
use of OT authority and provide the report to the appropriate congressional
committees.70
• The Secretary may procure “the temporary or intermittent services of experts or
consultants (or organizations thereof) in accordance with section 3109(b) of title
5, United States Code ....” If there is an urgent homeland security need, the
Secretary may procure temporary or intermittent personal services for a period of
one year or less “without regard to the pay limitations” of 5 USC §3109.71
• “Nontraditional government contractor” has the same meaning as the term
“nontraditional defense contractor” as it is defined in Section 845(e) of P.L. 103-
160.72
In addition to having OT authority, DHS’s Science and Technology Directorate has established a
commercialization initiative, which is headed by a Chief Commercialization Officer (CCO).73 A
DHS publication describes this initiative as follows: “The mission of S&T’s commercialization
efforts is to identify, evaluate, and commercialize technologies that meet the specific operational
requirements of DHS operating components and first responder communities. The
commercialization efforts actively reach out to the private sector to establish mutually beneficial
working relationships to facilitate cost-effective and efficient product development efforts.”74
Reportedly, this initiative
would cut down S&T’s role—and funding—in research and development, leaving industry
with the task of fully developing products for DHS to purchase. “Why would you pay so
68 Sec. 831(a)(1) of P.L. 107-296. 10 U.S.C. §2371(b) and (f) do not apply to the Homeland Security Secretary’s use of
OT authority. Subsection (b) identifies the DOD components through which the Secretary of Defense may exercise OT
authority, and Subsection (f) establishes separate U.S. Treasury accounts for each military department and DARPA.
69 Sec. 831(a)(2) of P.L. 107-296. It seems unlikely that the limitation on DOD’s OT authority for prototypes—the
authority may be used only for weapons and weapon systems—applies to DHS. “[I]t is reasonable to assume that
Congress did not mean to limit the DHS’s authority to weapon systems, but rather to technology relevant to the DHS’s
homeland security mission.” (Walter F. Zenner, Jeffrey L. Handwerker, and Joseph M. Catoe, Fundamentals of
Contracting with the Department of Homeland Security, Thomson West, Briefing Papers, No. 03-4, March 2003, p. 9.)
70 Sec. 831(b) of P.L. 107-296. The initial GAO report was due no later than two years after the effective date of the
Homeland Security Act. (Ibid.)
71 Sec. 831(c) of P.L. 107-296. It is unclear how this provision relates to the use of other transaction authority,
particularly since essentially the same language is found in the following section (Sec. 832) of this bill.
72 Sec. 831(d) of P.L. 107-296.
73 U.S. Department of Homeland Security, High-Priority Technology Needs, version 2.0, June 2008, available at
http://www.dhs.gov/xlibrary/assets/High_Priority_Technology_Needs.pdf, p. 17.
74 Ibid.
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much for product development and technology development?” [Thomas Cellucci, the Chief
Commercialization Officer, reportedly] said.75 “We have something much more to offer the
private sector. We don’t need to pay them when you have a market this size.” ... [O]ne
contribution [Cellucci] said he can make is to move S&T away from a development system
that too closely resembles the Department of Defense’s acquisition process, with significant
sums dedicated to funding research better left in the hands of companies. “We don’t have to
reinvent the wheel,” he said. “We’re utilizing the free market system. Why wouldn’t we
leverage the skill, the experience, the brain power of the private sector, who are experts in
commercialization?”76
It is unclear what relationship, if any, exists between the department’s use of OT authority and its
commercialization initiative.
Transportation Security Administration
It is unclear why the Transportation Security Administration (TSA) was provided OT authority. A
committee report did not accompany H.R. 3150 (107th Congress), which is where the applicable
legislative provision originated, and the conference report was silent on OT authority.77 It is
possible, since the authorizing statute exempted TSA from the FAR and applied the FAA’s
acquisition management system to TSA, that a decision was made to provide TSA with the same
“personnel and services” authority—which includes OT authority—that the FAA has.78
The source of TSA’s OT authority is Section 101(a) of P.L. 107-71, Aviation and Transportation
Security Act, which states that the head of TSA “shall have the same authority as is provided to
the Administrator of the Federal Aviation Administration under subsection (l) and (m) of section
106 [of Title 49 of the U.S. Code].”79 49 U.S.C. §106(l)(6) authorizes the FAA Administrator “to
enter into and perform such contracts, leases, cooperative agreements, or other transactions as
may be necessary to carry out the functions of the Administration and the Administration.”
75 According to a biography of Thomas Cellucci posted on the IEEE website for a homeland security conference it
sponsored, DHS appointed Thomas Cellucci to a five-year “administrative appointment” as chief commercialization
officer of DHS’s Science and Technology Directorate in 2007. (“U.S. Department of Homeland Security, Science and
Technology Directorate, Thomas A. Cellucci, PhD, MBA, Chief Commercialization Officer,” n.d., available at
http://www.ieeehomelandsecurityconference.org/biography/Cellucci%20Bio-DHS_2%20_casual_.pdf.) The original
name of this organization, IEEE, was the Institute of Electrical and Electronics Engineers, Inc. (IEEE, “About IEEE,”
available at http://www.ieee.org/web/aboutus/home/index.html.)) A news article reported that Cellucci had a “limited-
term administrative appointment.” (Ben Bain, “DHS Allows Industry Liaison to Keep His Business Ties,” FCW.COM,
Feb. 26, 2008, available at http://www.fcw.com/online/news/151749-1.html.)
76 Rob Margetta, “S&T Official Working to Move Product Development Out of DHS, Into Private Sector,” CQ
Homeland Security, June 27, 2008, available at http://homeland.cq.com.
77 U.S. Congress, Conference Committee, Aviation and Transportation Security Act, conference report to accompany S.
1447, 107th Cong., 1st sess., H.Rept. 107-296 (Washington: GPO, 2001).
78 49 U.S.C. §106(l).
79 115 Stat. 597, at 601. Thus, the TSA’s exemption from the FAR, which was terminated as of June 23, 2008, has no
bearing on the agency’s authority to engage in other transactions. (Sec. 568 of P.L. 110-161; U.S. Department of
Homeland Security, “Office of the Chief Procurement Officer; Revision of Department of Homeland Security
Acquisition Regulation; Technical Amendments (HSAR Case 2008—001),” 73 Federal Register 30317, May 27,
2008.)
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Department of Health and Human Services, National Institutes of
Health
Section 221 of P.L. 108-19980, Consolidated Appropriations Act for FY2004, authorized the
Director of the National Institutes of Health (NIH) to use certain funds “to enter into transactions
(other than contracts, cooperative agreements, or grants)” to conduct research for the NIH
Roadmap Initiative.81 The applicable committee report did not include any mention of this
provision.82
Department of Energy
Section 1007 of P.L. 109-58, Energy Policy Act of 2005, amended Section 646 of the Department
of Energy Organization Act (42 U.S.C. §7256) by adding a paragraph at the end of 42 U.S.C.
§7256. The Conference Committee report did not include any discussion of Section 1007.83 The
following is a summary of selected provisions of Section 1007:
• The Secretary of Energy may exercise the same authority to enter into other
transactions as the Secretary of Defense has under 10 U.S.C. §2371, subject to
the same terms and conditions that apply to the Secretary of Defense.84
• In applying 10 U.S.C. §2371, the word “basic” is replaced by “research”; the
word “applied” is replaced by “development”; and the terms “advanced research
projects” and “advanced research” are replaced by “demonstration projects.”85
• The Secretary is required to use competitive, merit-based selection procedures
for other transactions that she or he determines are practicable.
• In using OT authority for research, development, or a demonstration project, the
Secretary must provide written determination that the use of a contract, grant, or
cooperative agreement is neither feasible nor appropriate.
• Any information that is developed pursuant to an OT and that would be protected
from disclosure under 5 U.S.C. §552(b)(4) may be protected by the Secretary
from disclosure for up to five years from the date of development if the
information was obtained from a person other than a federal agency.
• “Nontraditional Government contractor” has the same meaning as the term
“nontraditional defense contractor” in 10 U.S.C. §2371 note.
80 118 Stat. 3, at 256.
81 Sec. 221(a) of P.L. 108-199.
82 U.S. Congress, Conference Committee, “Making Appropriations for Agriculture, Rural Development, Food and
Drug Administration, and Related Agencies for the Fiscal Year Ending September 30, 2004, and For Other Purposes,”
report to accompany H.R. 2673, 108th Cong., 1st sess., H.Rept. 108-401 (Washington: GPO, 2003).
83 U.S. Congress, Conference Committee, Energy Policy Act of 2005, report to accompany H.R. 6, 109th Cong., 1st sess.
H.Rept. 109-190 (Washington: GPO, 2005).
84 Sec. 1007 of P.L. 109-58.
85 Sec. 1007 of P.L. 109-58.
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• The Secretary’s OT authority may be delegated only to other DOE officials who
were appointed by the President with the advice and consent of the Senate.
(These are known as “PAS” positions.)
Other Agencies
With the enactment of P.L. 108-136,86 National Defense Authorization Act for FY2004, other
executive agencies are authorized, under certain conditions, to engage in other transactions.
Neither the House committee report nor the conference report that accompanied H.R. 1588 (108th
Congress), which was enacted as P.L. 108-136, includes a rationale for providing OT authority to
other agencies under certain circumstances.87 The conference report did note that the Senate
receded with an amendment “that would conform the authority provided to civilian agencies with
the existing authority under section 845 [of P.L. 103-160] and would clarify that the Director of
the Office of Management and Budget must authorize the use of this authority by civilian
agencies on a case-by-case basis.”88
The following is a summary of selected provisions of Section 1441:
• The head of an executive agency that engages in basic, applied, advanced
research, and development projects that are necessary to the agency’s research
and development and that have the potential to facilitate defense against or
recovery from terrorism or nuclear, biological, chemical, or radiological attack
may use OT authority. The agency head may use the same authority as the
Secretary of Defense may exercise under 10 U.S.C. §2371, except for the
subsections having to do with DARPA (subsection (b)) and support accounts
(subsection (f)).
• The head of an executive agency may use OT authority for the purpose of
carrying out prototype projects which meet the conditions listed above. This use
of OT authority must be in accordance with the requirements and conditions
provided in Section 845 of P.L. 103-160 (10 U.S.C. §2371 note).
• The head of an executive agency may use OT authority under this provision only
if authorized by the Director of the Office of Management and Budget.
Applicability of the FAR and Procurement Statutes
to Other Transactions
As noted above, OTs are are not subject to the FAR. Additionally, a significant number of
procurement statutes and the government’s cost accounting standards do not apply to other
86 41 U.S.C. §428a note; 117 Stat. 1392, at 1673.
87 U. S. Congress, House Committee on Armed Services, National Defense Authorization Act for Fiscal Year 2004,
report to accompany H.R. 1588, 108th Cong., 1st sess., H.Rept. 108-106 (Washington: GPO, 2003); U.S. Congress,
Conference Committee, National Defense Authorization Act for Fiscal Year 2004, conference report to accompany
H.R. 1588, 108th Cong., 1st sess., H.Rept. 108-354 (Washington: GPO, 2003).
88 U.S. Congress, Conference Committee, National Defense Authorization Act for Fiscal Year 2004, p. 778.
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transactions.89 However, an agency is “required to comply with any other statute that applies to
contractual transactions in general. To make this determination, the terms of each statute must be
analyzed closely. There is no uniform guidance as to which statutes apply to these other
transactions.”90
In 2000, the American Bar Association (ABA) published a monograph produced by the Ad Hoc
Working Group on Other Transactions, which addressed the question of the applicability of
procurement statutes to other transactions. The ABA’s Section of Public Contract Law had
convened the working group. The monograph, which included analyses of 30 statutes, indicated
which statutes apply to OTs and which do not. The statutes and statutory provisions that do not
apply to OTs may be found in Table 1. Some of the statutes may apply only to DOD (the
monograph focused on DOD’s OT authority), but this analysis indicates the applicability of
certain procurement statutes to other agencies’ use of OT authority.
Table 1. Statutes and Statutory Provisions
That Do Not Apply to Other Transactions
Statute or Statutory
Provisiona
Purpose of Statute or Statutory Provisionb
Competition in Contracting Act
“To promote the use of competitive procedures and prescribe uniform
(CICA)
Government-wide policies and procedures regarding contract formation, award,
publication, and submission of cost or pricing data.”
10 U.S.C. §§2301 et seq.; 41
U.S.C. §§253 et seq.
Contract Disputes Act
“To create a comprehensive, fair, and balanced statutory scheme of
administrative and legal remedies for claims under Government contracts.”
41 U.S.C. §§601 et seq.
Procurement Protest System
“To provide a statutory basis for procurement protests by interested parties to
(Subtitle D of CICA)
the Comptroller General.”
Kinds of Contracts
“To establish various restrictions on the terms and conditions of contracts.”
10 U.S.C. §2306
Examination of records of
“To provide authority to the contracting agency to access a contractor’s records
contractor
or plants in order to perform audits of the contractor.”
10 U.S.C. §2313
Contracts: acquisition,
“To provide authority for acquisition, construction, or furnishing of test facilities
construction, or furnishing of
or equipment in connection with R&D contracts.”
test facilities and equipment [to
R&D contractors]
10 U.S.C. §2353
Contracts: indemnification
“To authorize the Military Departments to include provisions in DOD R&D
provision
contracts indemnifying the contractor for certain claims and losses.”
10 U.S.C. §2354
Prohibition against doing
“To prohibit the award by the Department of Defense of contracts, or in some
89 U.S. Government Accountability Office, Further Action Needed to Promote Successful Use of Special DHS
Acquisition Authority, GAO Report GAO-05-136, Dec. 2004, p. 1; John Cibinic, Jr., and Ralph C. Nash, Jr., Formation
of Government Contracts, 3rd ed. (Washington: George Washington University Law School, Government Contracts
Program, 1998), p. 20.
90 Cibinic and Nash, Formation of Government Contracts, p. 20.
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Statute or Statutory
Provisiona
Purpose of Statute or Statutory Provisionb
business with certain offerors
cases subcontracts, to firms that have been debarred or suspended by another
agency.”
10 U.S.C. §2393
Major weapon systems:
“To provide warranty protection to the Government for major weapons systems
Contractor guarantees
it acquires.”
10 U.S.C. §2403
Prohibition on persons convicted “To prevent persons convicted of fraud or any other felony arising out of a
of defense contract related
defense contract from further participating in contracts with the Department of
felonies and related criminal
Defense for a specified statutory period.”
penalty as defense contractors
10 U.S.C. §2408
Contractor employees:
“To prohibit contractors from discharging, demoting, or discriminating against
protection from reprisal for
employees who disclose substantial violations of law related to contracts.”
disclosure of certain information
10 U.S.C. §2409
Limitation on the use of
“To prohibit recipients and requesters of Federal contracts, grants, or
appropriated funds to influence
cooperative agreements from using appropriated funds to pay any person to
certain Federal contracting and
influence or to attempt to influence executive or legislative decision-making in
financial transactions
connection with the awarding of any Federal contract or grant, the making of any
Federal loan, or the entering into of any cooperative agreement.”
31 U.S.C. §1352
Anti-Kickback Act
“To eliminate the practice of subcontractors paying kickbacks in the form of fees,
gifts, gratuities, or credits to higher tier subcontractors or prime contractors for
41 U.S.C. §§51-58c
the purpose of securing the award of subcontracts or orders.”
Procurement Integrity Act
“To ensure the ethical conduct of Federal agency procurements by prohibiting
certain Government officials from accepting compensation from or discussing
41 U.S.C. §423
future employment with bidders or offerors, and prohibiting the unauthorized
receipt or disclosure of contractor bid and proposal information or source
selection information before the award of a Federal agency procurement
contract.”
Walsh-Healey Act,
“To require al covered contracts to contain stipulations regarding minimum
wages, maximum hours, safe and sanitary working conditions, child labor, and
41 U.S.C. §§35-45c
convict labor requirements.”
Drug-Free Workplace Act
“To eliminate any connection between drug use or distribution and Federal
contracts, cooperative agreements, or grants.”
41 U.S.C. §§701-707
Buy American Act
“To provide a preference for domestic products in government acquisition for
public use.”
41 U.S.C. §10a-10d
Bayh-Dole Act
“To set forth Government’s policy regarding al ocation of patent rights to
inventions conceived or first actual y reduced to practice under contracts, grants,
35 U.S.C. §§200-212
and cooperative agreements with small business firms and educational and other
nonprofit organizations.”
Technical data provisions
“To provide for regulations to define the legitimate interest of the U.S. and of a
applicable to DOD
contractor or subcontractor in technical data pertaining to an item or process.”
10 U.S.C. §§2320 and 2321
Truth in Negotiations Act
“To require the submission of cost or pricing data on negotiated contracts in
excess of $500,000, as wel as for certain subcontracts and contract
10 U.S.C. §2306a
modifications.”
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Statute or Statutory
Provisiona
Purpose of Statute or Statutory Provisionb
Cost Accounting Standards
“To provide for the promulgation of uniform standards for al ocating costs to
Government contracts.”
41 U.S.C. §422
Cost Principles
“To provide for the disallowance of certain costs under flexibly priced contracts
and prescribe penalties for the submission of claims for unal owable costs.”
10 U.S.C. §2324
Source: American Bar Association, Section of Public Contract Law, Ad Hoc Working Group on Other
Transactions, Department of Defense “Other Transactions”: An Analysis of Applicable Laws, American Bar Association,
2000, p. 26.
Notes:
a. The source of the name or descriptive information in this column is American Bar Association, Section of
Public Contract Law, Ad Hoc Working Group on Other Transactions, Department of Defense “Other
Transactions”: An Analysis of Applicable Laws, American Bar Association, 2000, pp. 27-29.
b. Ibid., pp. A-1-A-57.
c. This provision or statute may apply to prototype OTs, but it does not apply to OTs involving research and
development. (Ibid., pp. 30-31.)
As reported by GAO, DHS’s list of laws inapplicable to its OTs includes several of the same
statutes and statutory provisions listed in Table 1. They are as follows:
• Bayh-Dole Act
• Competition in Contracting Act
• Contract Disputes Act
• Procurement Protest System
• Limitation on the use of appropriated funds to influence certain federal
contracting and financial transactions
• Anti-Kickback Act of 1986
• Procurement Integrity Provisions
• Walsh Healey Act
• Drug-Free Workplace Act of 1988
• Buy American Act91
The DHS list included two statutes that are not found in Table 1: the Service Contract Act (41
U.S.C. §351 et seq.) and the Fair Labor Standards Act of 1938 (29 U.S.C. §§201-219).92
As the ABA’s Ad Hoc Working Group noted, there is “no uniform guidance” regarding the
applicability of statutes to OTs. In the following passage, the working group described some of
the challenges involved in determining the applicability of procurement statutes to OTs:
91 U.S. Government Accountability Office, Further Action Needed to Promote Successful Use of Special DHS
Acquisition Authority, p. 6.
92 Ibid.
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Although the Working Group considers its analyses to be correct, in a number of cases the
conclusions are somewhat tenuous. For example, in many cases it is simply not clear from
the text of the statute whether it applies only to procurement contracts, or whether it applies
more broadly. In such cases the analysis turns on factors such as the placement of the statute
in a particular statutory scheme, its legislative history, etc. This uncertainty may lead to
unnecessary litigation.93
DOD and DHS also have acknowledged the challenge of determining whether a statute applies,
or does not apply, to an OT. In its OT guide for prototype projects, DOD indicated that the list of
statutes inapplicable to prototype OTs “is provided for guidance only, and is not intended to be
definitive.”94 In a report on DHS’s use of OT authority, GAO noted that “DHS’s other transaction
policy states that contracting officers should review each statute [in the list of statutes considered
to be inapplicable to OTs] with regard [to] any particular arrangement using other transactions
and consult their General Counsel to determine its applicability.”95 DOD and DHS also have
advised their personnel that requirements or statutes that are not tied to the type of instrument
used probably would apply to an OT. DHS guidance is as follows: “To the extent a particular
statute is funding- or program-related (e.g., fiscal and property laws), or is not tied to the type of
instrument used, it generally will apply to an OT. OTCOs [other transactions contracting officers]
should consult with their General Counsel on these matters.”96
As noted by the ABA’s Ad Hoc Working Group (see above), a possible implication of the
uncertainty involved in determining which procurement statutes do not apply to OTs is
“unnecessary litigation.” Another possible implication of this uncertainty is that it might lead to
confusion for some OT participants. A business (or other entity) that participates in OTs with two
or more agencies might not understand why their lists of inapplicable statutes are not the same.
Possibly, a lack of consistency could pose an administrative burden for an OT participant.
Evaluating the Use of OT Authority
The nature of other transaction authority contributes to the challenge of evaluating OTs. Freed
from adhering to the FAR and certain procurement statutes, an agency can tailor an OT to the
needs and circumstances of a particular project and the participants, which means the usual
methods or vehicles for monitoring contractor performance—such as contract administration and
audit services (Part 42 of the FAR) and quality assurance (Part 46 of the FAR)—are not required.
Additionally, aside from counting the number of traditional contractors, it is unclear what features
93 American Bar Association, Section of Public Contract Law, Ad Hoc Working Group on Other Transactions,
Department of Defense “Other Transactions”: An Analysis of Applicable Laws, American Bar Association, 2000, p.
26.
94 Office of the Under Secretary of Defense for Acquisition, Technology and Logistics, “Other Transactions” (OT)
Guide for Prototype Projects, Jan. 2001, p. 41.
95 U.S. Government Accountability Office, Further Action Needed to Promote Successful Use of Special DHS
Acquisition Authority, p. 6.
96 U.S. Department of Homeland Security, Other Transaction Authority, Management Directive 0771.1, July 8, 2005,
p. 4-1. (Italics in original.) DOD’s language is slightly different: “To the extent that a particular requirement is a
funding or program requirement or is not tied to the type of instrument used, it would generally apply to an OT, e.g.,
fiscal and property laws. Each statute must be looked at to assure it does or does not apply to a particular funding
arrangement using an OT.” (Office of the Under Secretary of Defense for Acquisition, Technology and Logistics,
“Other Transactions” (OT) Guide for Prototype Projects, p. 41.)
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of other transactions can be readily measured or evaluated. As discussed below, it is particularly
challenging to evaluate the benefits of OTs.
The Federal Procurement Data System (FPDS), a governmentwide database available online to
the public, is a tool for tracking agencies’ contract actions. 97 Until the passage of P.L. 110-417,
Duncan Hunter National Defense Authorization Act, FY2009, however, there was no requirement
for agencies to submit OT data to FPDS. Section 874 of this statute requires, in effect, that DOD
and DHS submit OT data to FPDS. Other agencies are not subject to this provision, because it
states that data are to be submitted to FPDS for other transactions (and grants and cooperative
agreements) that were “issued pursuant” to 10 U.S.C. §2371, which applies only to DOD and
DHS.
Nontraditional Contractors
A key argument for using OTs is to attract nontraditional contractors who would not otherwise
work for, or with, the government. According to a GAO report, for example, “DHS views the use
of other transactions as key to attracting nontraditional government contractors—typically high-
technology firms that do not work with the government—that can offer solutions to meet agency
needs.”98 10 U.S.C. §2371 note requires that a prototype OT include at least one nontraditional
defense contractor and includes a definition of “nontraditional defense contractor.” Given the
emphasis on attracting nontraditional contractors, and since this is a relatively easily quantifiable
measure, some assessments of the use of OT authority report the number and percentage of
nontraditional contractors participating in OTs.
GAO reported in 2002 that the Secretary of Defense had “required a metric—the number of
participating nontraditional defense contractors—which is measurable and directly related to each
agreement.”99 DOD had considered other metrics, “but concluded that the number of
nontraditional contractors was the only one that was quantifiable to Section 845 [prototype]
outcomes.”100 (The GAO report focused on prototype OTs.) DOD “[o]fficials believe that this
metric is key because involving firms that do not traditionally do business with DOD increases
DOD’s opportunity to leverage commercial technology investments and to take advantage of
commercial business processes, such as using an integrated team approach rather than a
traditional prime-subcontractor structure.”101
A couple of DOD documents have shown that, at least historically, the number and percentage of
traditional contractors have exceeded the number and percentage of nontraditional contractors
participating in OTs. During the period 1990—1998, 203 new contractors (25%) and 607
traditional contractors (75%) participated in research OTs.102 The same report revealed that 60
97 Agencies are required to report contract actions that exceed the micro-purchase threshold to FPDS. (FAR 4.606.)
Generally, the micro-purchase threshold is $3,000, though there are exceptions. (FAR 2.101.)
98 U.S. Government Accountability Office, Further Action Needed to Promote Successful Use of Special DHS
Acquisition Authority, p. 7.
99 U.S. General Accounting Office, DOD Has Implemented Section 845 Recommendations But Reporting Can Be
Enhanced, GAO-03-150, Oct. 2002, p. 2.
100 Ibid.
101 Ibid., p. 7.
102 U.S. Department of Defense, Office of the Inspector General, Cost Charged to Other Transactions, Report No.
2000-065, Dec. 27, 1999, available at http://www.dodig.osd.mil/Audit/reports/fy00/00-065.pdf, pp. i and 3. Although
(continued...)
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new contractors (21%) and 224 traditional contractors (79%) participated in prototype OTs from
1994 through 1998.103 Another DOD IG report stated that, from FY1994 through FY2001, 94.5%
of $5.7 billion expended on 209 prototype OTs went to traditional government contractors.104
Writing in the latter report, the IG stated that it had “found that other transactions have not
attracted a significant number of nontraditional contractors to do business with the Government....
We find this trend disturbing, as other transactions do not provide the government a number of
significant protections, ensure the prudent expenditure of taxpayer dollars, or prevent fraud.”105
In 2008, GAO reported that DHS officials had “confirmed that at least one nontraditional
contractor participated in each other transaction agreement, generally as a partner to a traditional
contractor,” adding that it (GAO) had not “assessed the extent of the involvement of
nontraditional contractors or what portion of the funding they receive.”106 Upon completing its
review of 53 DHS OTs (for the period FY2004-FY2008), GAO reported that 44 involved
nontraditional contractors.107 The composition of project teams for phase one of DHS’s counter-
man-portable air defense systems (MANPADS) project shows a mix of traditional and
nontraditional contractors. The teams were as follows:
• Prime contractor: Northrop Grumman Systems Corporation. Other principal team
members: FedEx Corporation and Northwest Airlines (both are nontraditional
government contractors).
• Prime contractor: BAE Systems. Other principal team members: Honeywell
International’s Air Transport Systems and Delta Airlines Technical Operations
(both are nontraditional government contractors).
• Prime contractor: United Airlines, Inc. (nontraditional government contractor).
Other principal team members: Avisys, Inc. and ARINC Engineering Services.108
Some would argue, though, that the number of nontraditional contractors may have limited
applicability as a metric or evaluation factor. Statutory OT authority for the FAA, DOT, TSA, and
HHS does not require, let alone mention, the inclusion of nontraditional contractors in OTs.
Additionally, for DOD, and the agencies whose statutory authority is based upon DOD’s statute,
the requirement to include a nontraditional contractor applies only to prototype OTs.
(...continued)
the report did not include a definition of “traditional contractor,” it identified new contractors as “contractors that had
not done cost-based research and development with DoD previously.” (Ibid., p. 5.)
103 Ibid.
104 Robert J. Lieberman, deputy inspector general, Department of Defense, statement for the record, House Committee
on Government Reform, Subcommittee on Technology and Procurement Policy, “The Services Acquisition Reform
Act (SARA) of 2002,” Report No. D-2002-064, Mar. 12, 2002, p. 11. The deputy inspector general did not attend the
hearing, which was held on Mar. 7, 2002. A letter included in this report notes that the Chairman of the subcommittee
had agreed to the request of the subcommittee’s ranking member to include the deputy inspector general’s statement in
the hearing record.
105 Ibid.
106 U.S. Government Accountability Office, Status and Accountability Challenges Associated with the Use of Special
DHS Acquisition Authority, GAO-08-471T, Feb. 7, 2008, p. 10.
107 U.S. Government Accountability Office, Improvements Could Enhance Ability to Acquire Innovative Technologies
Using Other Transaction Authority, GAO-08-1088, Sept. 2008, p. 3.
108 U.S. Government Accountability Office, Homeland Security: Further Action Needed to Promote Successful Use of
Special DHS Acquisition Authority, GAO-05-136, Dec. 2004, p. 24.
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Although a statutory definition of “nontraditional defense contractor” does exist, it is unclear
whether, and how, agencies with OT authority verify that a company is a nontraditional
contractor.109 GAO reported, in 2005, that DHS “relies on contractors to self-certify their status as
... nontraditional government contractors during agreement negotiation.”110 It is unclear whether
DOD also permits self-certification, or verifies the status of participants in OT prototypes.
In response to GAO’s statement that “84 of 97 agreements [for prototype OTs] went to traditional
defense contractors,” DOD officials noted that “the large number of traditional defense
contractors at the prime contract level reflects the fact that Section 845 agreements are to be used
on weapon or weapon systems-related projects.”111 Another possible explanation for the lower
than expected number of nontraditional contractors, some might suggest, is that a group of
traditional contractors would need to recruit only a single nontraditional contractor for their
project in order for them to be eligible to participate in an other transaction.
In their study of DOD prototype OTs, Smith, Drezner, and Lachow encountered the same
phenomenon: few nontraditional contractors were participating in OTs. Their research revealed,
however, that “a major part of the new activity [that is, companies new to working with DOD]
[came] from segments of large firms where the firm is a traditional supplier: names like 3M,
Lucent, Motorola, Eastman Kodak, Oracle, and others. But major segments of those firms, using
corporate funds to develop products for the commercial market, had previously been unwilling to
work for DoD under the traditional contracting process.”112 In other words, a company that is a
traditional contractor may have a segment or division that would be considered a nontraditional
contractor, but the division’s status as a nontraditional contractor is masked because it carries the
name of a company that is known to be a traditional contractor. Authors of the RAND study
advised that “[d]emonstrating that [new companies are working with DOD] cannot be done by
simply counting new names on a list of contracts and instead requires a series of individual
company studies.”113
Other Assessments of OTs
In 2001, RAND published the results of a study that assessed DOD’s use of OT authority for
prototype projects. The overarching question of the study, which had been requested by DOD,
was: “Have the results justified the authority to perform projects without being required to
comply with the historical accumulation of laws and procedures?”114 In the following passage, the
authors described the challenges they encountered in their effort to measure the outcomes of OTs:
One important element of our research was to develop a set of metrics that would measure
the relative effects of OT on program outcomes and OT’s broader policy goals. While
attempting to accomplish this, we were unable to develop any practical quantifiable metrics
that others would find credible. The few quantifiable metrics we uncovered are either
109 As noted above, “nontraditional government contractor” (or “nontraditional contractor”) has the same meaning as
the term “nontraditional defense contractor” as it is defined in Section 845(e) of P.L. 103-160.
110 U.S. Government Accountability Office, Further Action Needed to Promote Successful Use of Special DHS
Acquisition Authority, p. 4.
111 U.S. General Accounting Office, DOD’s Guidance on Using Section 845 Agreements Could Be Improved, p. 14.
112 Smith, Drezner, and Lachow, Assessing the Use of “Other Transactions” Authority for Prototype Projects, p. 17.
113 Ibid., p. 18.
114 Ibid., p. 6.
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misleading (e.g., the number of nontraditional contractors) or unverifiable (e.g., cost
avoidance). This result affects both the kind of information we can present and the kind of
conclusions that can be drawn.
The reasons we did not find a practical approach to such metrics are classic in the field of
acquisition policy analysis. We cannot perform a statistical comparison of a group of OT
programs versus a group of conventional programs because there are too many variables and
too few programs. Furthermore, the traditional metrics for such a comparison, and where we
have a good historical database are elements such as cost growth and schedule slip; those are
inappropriate for prototype programs that are inherently risky.
It is not practical to compare a single OT program with a counterpart conducted under
traditional contracting methods because we never have an analog program that is remotely
comparable. We do not have data on what the program would have been like under
traditional methods. And finally, most of the programs in our rather small sample are still
under way so we do not have true outcomes.
Thus, we rely largely on qualitative information in this analysis—the judgments and
opinions of experienced managers who have run both kinds of programs. We are unable to
analytically prove the validity of those judgments and opinions, for all the reasons noted
here. For those same reasons, critics are unable to disprove the claimed benefits of OT
agreements or to quantitatively demonstrate the superiority of another policy or process.115
Having catalogued the methodological challenges inherent in conducting quantitative research of
OTs, the authors of the RAND study opted for a qualitative approach, relying on the “judgments
and opinions of experienced managers.” Their assessment resulted in the following general
conclusions:
• “Important new industrial resources are now participating in DoD
prototype projects because of the freedoms inherent in the OT process.... The
important new industrial capability is drawn from segments of major firms that
had been focusing exclusively on commercial projects but are now willing to
apply their skills and products to military prototypes.”
• “The benefits of OT are broader than just the addition of new industrial
resources. The flexibility of the OT process has been used to: (a) achieve better
use of industry resources through innovative business arrangements and project
designs; (b) improve management of risks and uncertainties through freedom to
modify the program as it evolves; and (c) achieve better value through cost
sharing and reduction of transaction costs. Overall, more effort is being devoted
to product and less to process.”
• “Some risks to the government are incurred, but we believe the immediate
rewards substantially outweigh the risks. Risks arise mainly through relaxing
DoD demands for access to the firm’s financial records, and ownership of
intellectual property (patents and data). However, such relaxation of DoD rights
applies to only a few of the OT prototype projects, mainly those involving
products with strong commercial market potential and where the firm contributes
a significant portion of the development resources. Even in those few projects,
we believe the risks to DoD are limited. Verification of cost records becomes
115 Ibid., pp. 9-10.
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relatively unimportant when a firm is contributing a large share of project costs.
Less-than-complete government ownership of intellectual property might lead to
increased costs in future phases of the project, but those risks are limited. This is
in part because the possible future costs should be discounted to some degree as
they are in the future, and in part because they typically apply in areas where the
technology is moving fast and where the value of specific kinds of knowledge
can rapidly decay. Furthermore, if the flexibility in negotiating intellectual
property and financial audit clauses is removed from the OT authority, most if not
all of the new industrial resources would again become unavailable to DoD.”116
Noting that “these benefits [of OTs] are impossible to quantify in an analytically rigorous
manner,” and that their “conclusions are mostly subjective and interpretive,” the authors added
that the conclusions “do, however, represent the views of a broad cross section of DoD and
industry project managers and agreement officers who have been managing OT prototype
projects. The rewards of creating and managing a more efficient and effective program structure
and management process have led those participants to be uniformly enthusiastic about the OT
process and also advocate for its further use.”117
While the results of the RAND study are encouraging regarding the use of OT authority, some
would suggest that the conclusions are not robust and cannot be generalized to other OTs. (The
authors of the study did not attempt to generalize their results or conclusions.) As the authors
noted, they were not able to use quantitative data (that is, metrics), but, instead, used qualitative
data. The sources were “program managers and agreement officers in both government and
industry,” who probably are the most knowledgeable personnel about OTs, but who also are
stakeholders in the use of OT authority. Finally, the study focused on one federal agency and
included only prototype OTs.
Other reports that comment on the use of OT authority are similar to the RAND report in that
they do not include quantitative data and they present a generally favorable assessment of other
transactions. In 1996, GAO offered a generally positive assessment of DOD’s use of other
transactions (and cooperative agreements):
Cooperative agreements and other transactions appear to have provided DOD a tool to
leverage the private sector’s technological know-how and financial investment. The
instruments have attracted firms that traditionally did not perform research for DOD by
enabling more flexible terms and conditions than the standard financial management and
intellectual property provisions typically found in DOD contracts and grants. Thus, the
instruments have contributed to reducing some of the barriers between the defense and
civilian industrial bases. These instruments also appear to be contributing to fostering new
relationships and practices within the defense industry, especially under projects being
undertaken by consortia. By sharing the costs of projects, DOD has partially offset its own
costs while generally enabling recipients to expand the scope of the projects undertaken.118
Another GAO report noted that “DOD reported to Congress that Section 845 agreements
provided numerous benefits, though DOD generally offered no quantified measures of the
116 Ibid., pp. viii-ix. (Boldface and italics in original.)
117 Ibid., pp. 9 and 31.
118 U.S. General Accounting Office, Acquiring Research by Nontraditional Means, pp. 3-4.
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reported benefits or the extent that such benefits were derived from individual agreements....”119
GAO also mentioned that its own work and work conducted by the DOD IG had “found that
Section 845 agreements have achieved mixed results in attracting commercial firms at either the
prime or subcontract level.”120 Consistent with the reports on DOD’s use of OT authority, DHS’s
chief procurement officer testified that his department has a favorable view of OTs, but
interjected that it is “too soon” to assess the results. An excerpt from his testimony is as follows:
Though the acquisition outcomes related to DHS’s use of other transaction authority have
not been formally assessed, the department estimates that at least some of these agreements
have resulted in time and cost savings. According to an S&T contracting representative, all
of its current agreements are for development of prototypes, but none of the projects have yet
reached production. Therefore, it is too soon to evaluate the results. However, the department
believes that some of these agreements have reduced the time it takes to develop its current
programs, as compared to a traditional FAR-based contract. In addition, DHS has stated that
its two cost-sharing agreements for development of its Counter-MANPADS technology have
resulted in savings of over $27 million and possibly more. However, the extent to which
these savings accrue to the government or to the contractor is unclear.121
It appears that a favorable consensus exists regarding the use of OT authority, which seems to be
based largely on the experiences and observations of individuals who participate, or have
participated, in OTs. Yet, because of the nature of OTs and the types of work performed pursuant
to them, it also appears that no one has been able to devise, let alone conduct, a study that has the
methodological features and rigor sufficient for producing reliable and valid results.
Additional Considerations for Evaluating OTs
Evaluating how an agency uses OT authority and whether a particular OT was successful could
involve additional factors and issues, including how “success” is defined or interpreted. A
comprehensive evaluation would be a complex, challenging undertaking, as demonstrated by the
work done by RAND. The following questions are examples of other possible avenues of inquiry
regarding the use of OT authority:
• What does each company or organization bring to the project in terms of
technology, manufacturing, or engineering resources?
• Excluding government agencies, to what extent do OT participants’ resources
reside in, or take advantage of, the commercial market?
• What methods, if any, are agencies using to detect fraud, waste, and abuse in
OTs?
• What unintended consequences, if any, have agencies experienced as a result of
using OTs?
119 U.S. General Accounting Office, DOD’s Guidance on Using Section 845 Agreements Could Be Improved, p. 12.
120 Ibid., p. 13.
121 U.S. Government Accountability Office, Status and Accountability Challenges Associated with the Use of Special
DHS Acquisition Authority, p. 7.
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• How do agencies and their OT partners address certain elements of other
transactions, including intellectual property rights, cost accounting standards, and
oversight?
• Does the acquisition workforce in agencies that have OT authority have the
requisite skills, training, and experience to develop and administer OTs?122
• Has the “[l]ack of [government] ownership of the intellectual property resulting
from OT development activities” adversely affected innovation or cost “because
of limits on licensing the technology?”123
• For OTs that have been completed, did the terms and results of the transactions
match the rationale for, and expected benefits of, the transactions?
• Has OT authority enabled agencies to acquire research, technologies, and
prototypes that they would not have been able to acquire otherwise?124
Is OT Authority Used Appropriately?
For some agencies, the use of OT authority is permitted only if agency personnel have determined
that a contract, grant, or cooperative agreement will not work. For example, under 10 U.S.C.
2371, DOD may use an OT “when the use of a standard contract, grant, or cooperative agreement
for such project is not feasible or appropriate.”125 GAO has determined that its bid protest
authority does not include non-procurement vehicles (such as OTs), but it will review “a timely
protest that an agency is improperly using a cooperative agreement or other non-procurement
instrument ... where a procurement contract is required....”126 The purpose of the review is “to
ensure that an agency is not attempting to avoid the requirements of procurement statutes and
regulations.”127
122 In the following passage, the Department of Homeland Security’s chief procurement officer, while noting that OTs
are useful, cautions that they are appropriate in only certain situations and emphasizes the necessity of having capable
personnel administer OTs: “OTs, however, are not right for every situation, as the rights provided to the Government
under an OT differ significantly from those provided under a traditional contract. While OTs are an extremely useful
tool, they should only be used in appropriate situations by personnel that are knowledgeable of the advantages and
disadvantages of OTs versus contracts and who are able to make informed decisions regarding which method is
anticipated to provide better value to the Government.” (U.S. Congress, House Committee on Homeland Security,
Subcommittee on Emerging Threats, Cybersecurity and Science and Technology, “Other Transaction Authority:
Flexibility at the Expense of Accountability?” statement of Thomas W. Essig, chief procurement officer, Department of
Homeland Security, unpublished hearing, 110th Cong., 2nd sess., Feb. 7, 2008, p. 8.) Regarding the need for
experienced, skilled acquisition personnel to establish and administer other transactions, GAO wrote: “The unique
nature of other transaction agreements requires staff with experience in planning and conducting research and
development acquisitions, strong business acumen, and sound judgment to enable them to operate in a relatively
unstructured business environment.” (U.S. Government Accountability Office, Improvements Could Further Enhance
Ability to Acquire Innovative Technologies Using Other Transaction Authority, p. 14.)
123 Smith, Drezner, and Lachow, Assessing the Use of “Other Transactions” Authority for Prototype Projects, p. 3.
124 The source of some items in this list was the following: U.S. Congress, House Committee on Homeland Security,
Subcommittee on Emerging Threats, Cybersecurity, and Science and Technology, statement of L. Elaine Halchin,
unpublished hearing, 110th Cong., 2nd sess., Feb. 7, 2008, pp. 8-9.
125 10 U.S.C. §2371(e)(2).
126 U.S. Government Accountability Office, Exploration Partners, LLC, GAO bid protest B-298804, Dec. 19, 2006, p.
5.
127 Ibid.
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The Army’s Future Combat Systems (FCS) program is an example of a project in which, initially,
the use of OT authority was considered appropriate, but, as the project progressed, questions
arose, and, ultimately, the OT was replaced by a contract. The project began in May 2003, when
the Army and Boeing entered into an ‘other transaction agreement’ for the system
development and demonstration phase of the FCS program.... The Army’s rationale for using
such an agreement was to encourage innovation and to use its wide latitude in tailoring
business, organizational, and technical relationships to achieve the program goals.128
Concerned about the continued use of an OT for the FCS program, Senator John McCain, then
Chairman of the Subcommittee on Airland, Senate Armed Services Committee, expressed his
views at a hearing in 2005:
Since [the passage of the National Defense Authorization Act for 1994, which extended OT
authority to prototype projects], DOD officials and industry have repeatedly requested that
we extend “Other Transaction Authority” to production contracts. Congress has consistently
refused to do so, because we have taken the view that with hundreds of millions or even
billions of dollars at stake, the taxpayer needs the protections built into the traditional
procurement system. While we recognize that there may be [a] need to continue doing
business with non-traditional contractors in the production phase of a program, we have
preferred to address this issue through targeted waivers that are limited to those companies
who need them. Now, the Army has put forward a program that uses ‘Other Transaction
Authority’ for a $20 billion contract, a figure much greater than the Congress intended and
[it is] unprecedented.129
Initially, the Army continued to defend its use of OT authority, but eventually concurred with the
Senator McCain. As reported by Federal Contracts Report, the Assistant Secretary of the Army
for Acquisition, Logistics and Technology “defended the Army’s use of OTA for FCS, explaining
that DARPA initially used OTA to define an FCS concept for the Army, and that the Army had
continued to use OTA because it ‘allows us to attract the best and brightest of our nation’s
industry and their subcontractors in this endeavor.’”130 Several weeks later, following a meeting
with the Secretary of the Army, Senator McCain issued the following press release, which
described the resolution of the issue:
In a March 31, 2005 letter to the Army Secretary, I outlined concerns about whether
taxpayers’ interests were adequately protected in the Army’s Future Combat Systems (FCS)
program. In a meeting today, the Army Secretary indicated to me that he completely agreed
with my concerns. In so doing, the Army Secretary presented an aggressive strategy centered
around reconstructing the ‘other transaction authority’ (OTA) agreement supporting this
multi-billion dollar program. Most notably, the Army indicated that it would convert the
OTA to a FAR-based contract, with provisions typically used to protect taxpayers’ interests
and help prevent fraud, waste and abuse specifically included.131
128 U.S. Government Accountability Office, Role of Lead Systems Integrator on Future Combat Systems Program
Poses Oversight Challenges, GAO-07-380, June 2007, p. 4.
129 Senator John McCain, “Opening Statement of Senator John McCain, Chairman, Subcommittee on Airland, Army
Transformation and the Future Combat System,” Mar. 16, 2005, available at http://mccain.senate.gov/public/
index.cfm?FuseAction=PressOffice.FloorStatements&ContentRecord_id=8E05F19E-3521-4789-BC59-
379C19F8CC29.
130 “McCain Questions Army’s Use of OTA as FCS Contracting Vehicle,” Federal Contracts Report, Mar. 22, 2005,
available at http://www.bna.com, p. 297.
131 Senator John McCain, “Statement from Senator John McCain on the Future Combat Systems Program,” Apr. 5,
(continued...)
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As reported by GAO, “[i]n March 2006, the Army definitized a FAR-based contract with Boeing
for the remainder of FCS development.... All of the work performed from May 2003 through
September 2005 is accounted for under the prior other transaction agreement, and all work after
September 2005 is included under the new contract.”132
It is unclear whether other OTs, if any, have been used when a contract (or cooperative agreement
or grant) should have been used. The visibility of the FCS program may have aided in identifying
the possible misuse of OT authority.
Policy Options
Evidence of congressional interest in the use of other transaction authority includes a
congressional hearing in 2008 on DHS’s use of OT authority and, since the 104th Congress, the
enactment of legislation that has provided OT authority to six specific agencies. Additionally,
under P.L. 108-136, most, if not all, federal agencies may use OT authority under certain
circumstances.
The inapplicability of the FAR, government cost accounting standards, and certain procurement
statutes to other transactions may contribute, in part, to congressional interest in OT authority.
Some might view the inapplicability of requirements and procedures designed to safeguard the
government’s interests and provide for transparency as a cause for concern, although individual
OTs might incorporate measures designed to protect the government.133 The challenges involved
in developing and implementing a methodologically rigorous evaluation program for OTs, which
was discussed above, might also contribute to congressional interest. In addition to maintaining
the status quo, other policy options include the following:
• Eliminate OT authority for some or all agencies that now have the authority.
While the elimination of this authority would address some critics’ concerns,
proponents might argue that the termination of OT authority could affect the
ability of agencies to obtain, or advance, needed research, technologies, and
prototypes.134
(...continued)
2005, available at http://mccain.senate.gov/public/
index.cfm?FuseAction=PressOffice.PressReleases&ContentRecord_id=48146F40-7C53-4589-9185-963198F356FC.
132 U.S. Government Accountability Office, Role of Lead Systems Integrator on Future Combat Systems Program
Poses Oversight Challenges, p. 4.
133 For example, the Department of Homeland Security used firm-fixed price agreements with payable milestones in 44
of the 53 other transactions GAO reviewed for its 2008 report on DHS’s use of OT authority. The use of such
agreements helps to mitigate financial and program risks because “the costs are fixed at the time the agreements are
established.” Another example from DHS is the department’s guidance on when to include financial audit provisions in
OTs. (Ibid., pp. 3 and 11.)
134 The following excerpt from a 2002 Texas Intellectual Property Law Journal article summarizes one argument for
OT authority: “... the need for new weapon systems has increased: a modern generation of enemies (like Al Qaeda)
requires different military responses and the speed of technological innovation has meant that legacy systems become
obsolete at an increasingly rapid pace. In addition, the Department of Defense in recent years has suffered from a
declining budget, and thus has financial incentives to outsource as much work as possible. This means that there are
more outside contractors performing functions once performed by the government. Thus, while the defense community
is growing smaller, the Department of Defense has become increasingly reliant on contractors, and the commercial
sector in general, to fulfill its needs. Within the world of defense research and development, these same forces are at
(continued...)
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• Depending upon whether an agency’s statutory authority for using OTs includes a
sunset provision, add, or continue, a sunset provision. Inclusion of a sunset
provision could trigger a periodic review of each applicable agency’s use of OT
authority and the associated benefits and challenges. On the other hand, agencies
whose statutory authority does not include a sunset provision might argue that the
possibility of not having their OT authority renewed (via a subsequent sunset
provision) could affect the willingness of private sector partners to engage in
OTs.
• Identify other agencies that might benefit from engaging in other transactions,
and provide OT authority to them. This option could involve establishing a pilot
program for one or more agencies. If feasible, the pilot program could be
designed to facilitate the evaluation of the use of OT authority.
• Require all OTs to include at least one nontraditional contractor. Part of the
argument for OT authority is that the government needs to be able to work with
companies or organizations that are unable or unwilling to comply with the FAR
and certain procurement statutes, which suggests that the inclusion of at least one
nontraditional contractor in each OT might be a reasonable requirement.
However, it is possible that this requirement could preclude the government from
engaging in OTs that do not attract any nontraditional contractors.
• Develop accounting standards and intellectual property rights regulations
specifically for other transactions. Ideally, OT-specific accounting standards
would be less burdensome than the existing cost accounting standards while
helping to ensure that there is a greater degree of accountability and transparency
than might currently exist. IP regulations developed specifically for OTs would
address the concerns of OT participants while helping to protect the
government’s interests.135
• Similar to the preceding option, develop a hybrid procurement vehicle that would
incorporate some of the safeguards found in the FAR and certain procurement
statutes (modified to be less burdensome than current requirements and
procedures), yet would retain the desirable features of other transactions.
• Similar to the Commercial Activities Panel (CAP), which was convened by GAO
to examine the government’s competitive sourcing policies and procedures,
establish a panel to examine the government’s use of other transaction
authority.136
(...continued)
work. The need for new weapons systems has required more government-sponsored research and development. At the
same time, as the number of government laboratories is reduced, there are fewer and fewer internal sources to which
the Department of Defense can turn for advanced weapons systems. It is for this reason that the Department of Defense
is increasingly interested in attracting new commercial partners.... Simply put, the federal government can no longer
rely on traditional government contractors to perform all of the functions that it requires. In order to cope with this new
scenario, the Department of Defense has actively recruited new contractors to produce its weapons systems—to fill the
void left by the vanishing traditional contractors.” (David S. Bloch and James G. McEwen, “‘Other Transactions’ with
Uncle Sam: A Solution to the High-Tech Government Contracting Crisis,” pp. 208-209.)
135 Although some agencies with OT authority might already incorporate accounting standards or IP rights provisions in
their other transactions, this policy option might, if implemented, ensure that all OTs include cost accounting standards
and IP rights provisions.
136 See Commercial Activities Panel, Improving the Sourcing Decisions of the Government (Washington: U.S. General
(continued...)
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• Establish a government website where agencies would disclose OT opportunities
and provide information about established OTs.137 This website would be similar
to two of the government’s procurement websites: Federal Business
Opportunities (FedBizOpps), where agencies post solicitations; and the Federal
Procurement Data System (FPDS), where agencies post information about
contract actions.138 A related option would be to modify FedBizOpps and FPDS
to accommodate information regarding other transactions.
• Require agencies to submit reports on a regular basis to appropriate
congressional committees regarding their use of OT authority, including benefits
and challenges. While this option might ensure that Congress is provided
regularly with information regarding agencies’ use of OTs, this requirement
might impose a burden on agencies.
• Similar to a requirement found in 10 U.S.C. §2371 note, link the level of
approval authority for OTs within an agency to the expected cost of the other
transaction.
In 2002, DOD’s deputy inspector general offered a series of recommendations, which are as
follows:
• If civilian agencies receive OT authority, the “legislation [should] be tailored so
that the other transactions vehicle is only used to attract companies which have
not traditionally done business with the Government and for technologies,
research capabilities or other processes which are needed by the federal agency
and are not available through traditional acquisition vehicles.”
• “For research other transactions ... the agency head [should] be required to make
a determination that an other transaction is necessary to induce a nontraditional
contractor to provide technologies, research capabilities, or other processes
which are needed by the agency.”
• “Other transactions for prototype[s] should be limited to developing items which
are ripe for development as the result of research conducted pursuant to a
research other transaction.”
• “...[A]udit access rights [should] be given to the Government, to include the
Comptroller General, the agency Inspectors General, and departmental contract
audit agencies, such as the Defense Contract Audit Agency.”
• “If enacted, other transaction authority for civilian agencies should be provided
as a pilot program of limited duration to ascertain whether it actually attracts
significant numbers of nontraditional government contractors, whether it results
(...continued)
Accounting Office, 2002), available at http://archive.gao.gov/f0502/a03209.pdf.
137 The Department of Homeland Security has updated its own procurement database “to include some information on
other transaction agreements.” However, “the capacity to capture information on nontraditional contractors is limited.”
(U.S. Government Accountability Office, Improvements Could Further Enhance Ability to Acquire Innovative
Technologies Using Other Transaction Authority, p. 3.)
138 The two websites are http://www.fbo.gov and https://www.fpds.gov, respectively.
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in the acquisition of needed technologies and services, and whether additional
safeguards should be enacted.”139
Conclusion
Other transaction authority originated in 1958, but it has been expanded greatly in recent years, as
seven specific agencies were also given statutory authority to engage in OTs. Although little, if
any, information is publicly available regarding some agencies’ use of OT authority, articles and
reports that comment on DOD’s and DHS’s use of OTs indicate that both of these agencies
consider OT authority to be a valuable, useful tool. The authors of a RAND study appear to have
reached the same conclusion yet, at the same time, they acknowledge and describe the
methodological challenges involved in evaluating the use of OT authority. Thus, while some
embrace OTs as useful to the federal government, it does not appear that anyone has yet devised a
reliable method for conducting an evaluation that would yield quantifiable, objective data.
Author Contact Information
L. Elaine Halchin
Specialist in American National Government
ehalchin@crs.loc.gov, 7-0646
139 Lieberman, “The Services Acquisition Reform Act (SARA) of 2002,” p. 12.
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