Faster, Flexible, and Innovative: The DoD's Strategic Use of Other Transaction Agreements (OTAs)

May 12, 2025

By Marcos Gonzalez
May 7, 2025

The Soviet Union launched Sputnik on October 4, 1957, beating the United States to launch the first man-made object into orbit. This launch provided the U.S. government with a new sense of urgency that it had not had since WW2, when the U.S. Department of War was able to rapidly prototype and produce weapons systems for the war effort. At that time, the government was able to utilize acquisition strategies such as letter contracts to bring large weapon systems to production in just a few years:

The development of the high-speed jet engine B-47 bomber was initiated by a letter contract in February 1945. Even with the postwar mobilization and uncertainty of the future of the program, prototypes (XB-47) were built and flown in 1947–1948 and the first production plane was delivered in 1950, or five years from program initiation. Further engineering issues would delay initial operational capability (IOC) until 1952, but nonetheless equating to a total of 6.5 years from first contract to design, prototyping of several versions of aircraft, and to operational use.[1]

Once the space race began, the DoD and NASA began pouring money into Silicon Valley tech companies such as Texas Instruments and Fairchild Semiconductor (who developed transistors for the guidance system of the Minuteman ballistic missile). These companies benefited handsomely from federal funding. For example, in 1962, NASA announced it would utilize Fairchild’s integrated circuits in guidance computers for the Apollo mission.[2] As a result of the space race and the urgency of the arms race with the Soviet Union, the federal government was central to the early adoption and demand for Silicon Valley’s prized invention: the semiconductor.[3]

In contrast to the early days of heavy government-funded R&D, prototyping, and expedited contract efforts, the federal government has struggled to reengage tech companies. Part of the disconnect stems from the lack of need for federal funding. In contrast to the early days, tech companies today regularly develop major technological breakthroughs at independent expense solely through the commercial marketplace: artificial intelligence, commercial software, and even some weapons systems.[4] Tech companies are also understandably reluctant to manage a large compliance effort, such as the level of support required to manage onerous cost-accounting standards. Additionally, while the governance of intellectual property is less restrictive for commercial technologies, contractors are still resistant to become involved in federal efforts for fear of losing their intellectual property.[5]

The federal government has begun to reengage tech companies by increasing their use of non-FAR based procurement methods called Other Transaction Agreements (“OTAs” or “OTs”). Recent developments regarding OTAs call for a brief overview of their origin, purpose, and the current state of play. The recent announcement by DoD that they will utilize OTAs for software acquisition highlights their intended purpose: a vehicle for fast, bureaucracy-free acquisition. The larger context today is not unlike that in which OTs were developed—two great powers (now, the U.S. and China) competing for technological dominance—previously in space and now in software-driven weapons platforms. Developments in the protest landscape at the Court of Federal Claims have complicated a portion of OT transactions, making them subject to limited protests; but their use will likely increase, as evidenced by executive branch policy and geopolitical urgency.

The history of OTs dates to the space race between the U.S. and the Soviet Union. The first statute was the Space Act of 1958[6], which established NASA but also provided it with the following authority: “…to enter into and perform such contracts, leases, cooperative agreements, or other transactions as may be necessary in the conduct of its work and on such terms as it may deem appropriate…”[7] Since their statutory creation, they have been undergoing conceptual development as a fully-developed alternative acquisition vehicle; they have also been authorized at several additional agencies, including the DoD, the Department of Energy (DoE)[8], the Department of Health and Human Services (HHS)[9], the Department of Homeland Security (DHS)[10], the Department of Transportation (DOT)[11], the Federal Aviation Administration (FAA)[12], and the Transportation Security Administration (TSA)[13].

OTAs at DOD are for Either Research, Prototyping, and Production

The DoD uses OTs the most, and is authorized to utilize them for research, prototyping, and follow-on production. Each type of OT is subject to different statutory requirements, and DoD has provided a helpful guide for understanding the use and limitations of the acquisition vehicle.[14] ACCESS FULL ARTICLE