May 17

What is an OTA?

And Why Should Entrepreneurs Care?

One of the big topics dominating the conversation in the defense industry is how to speed up the rate of acquisition of new, disruptive technologies that will allow the US to more easily stay abreast of both our allies and enemies in the ongoing race for technological advantage.

One very exciting answer to reducing the enormous amount of bureaucracy and the unconscionable delays inherent in typical Defense contracting is an OTA – Other Transaction Authority (or Agreement). This almost-magical option for working with the DoD and some other agencies is drawing lots of attention from entrepreneurs with startups hoping to work with the federal government. 

Before we examine OTAs, it is worthwhile examining some of the drawbacks of traditional defense contracts. Traditional contracts, often called FAR-based contracts, are grounded in the 1000s of pages of regulations called Federal Acquisition Regulation – FAR for short.

FAR-based contracts tend to contain discouraging conditions and complexities (1):

  • Non-commercial mechanisms for risk mitigation
  • Cost premium for compliance and oversight
  • Specialized accounting and audit systems
  • Intellectual property restrictions (see Bayh-Doyle Act)
  • Rigid funding process (with fiscal constraints)
  • Competition requirements 

On the other hand, Other Transaction Authority, which leads to Other Transaction Agreements, is a flexible and fluid mechanism developed specifically to combat “FAR” fatigue.

So, now that we have built up the suspense, what is an OTA agreement? An OTA is a legally binding instrument used to engage industry and academia in either research and development or prototyping. OTAs are specific to these activities but, luckily, they do not resemble standard government contracts, grants or cooperative agreements.

One major plus is that OTAs are not generally subject to the laws and regulations that govern federal procurement contracts. Their many advantages as compared to FAR-based contracts include a more flexible structure, far less onerous terms and conditions, custom agreements, shared intellectual property rights, flexible funding arrangements that can include some upfront monies, and they more easily lead to follow-on FAR-based contracts(1). 

Another huge plus, which applies more specifically to prototype OTAs but may be a feature of either type, is the flexibility regarding non-traditional contractors. OTA eligibility is dependent upon meeting only one of four possible conditions – with the final condition being an open invitation to even more flexibility. Either: One non-traditional contractor participates to a significant extent OR All significant participants are small, or non-traditional contractors OR At least 33% of total prototype costs are other than Federal funds OR Agency Senior Procurement Executive determines in writing that there are either: Exceptional circumstances OR A unique opportunity to expand the defense supply base (1)

What are some of the benefits of OTAs to the federal government? The government likes them because they attract commercial technology firms that might not otherwise want to work with the federal government. Private sector investments are paired with government research funds, to get more bang for the federal buck. Commercial best practices are used, which are often far more efficient than federal standards. Cooperation between government and industry is encouraged, helped along by the inherent flexibility regarding requirements and testing. (1)

New technologies can be integrated into the flow of military acquisitions more quickly and easily, and a well-placed small business can easily position itself for the prize of a sole-source follow-on contract. Most of all, and this cannot be emphasized enough, OTAs WORK. The agencies who have permission to use them – NASA, Department of Defense, Federal Aviation Administration, Department of Transportation, Department of Homeland Security, Transportation Security Administration, Department of Health and Human Services, Department of Energy – have been very happy with the functioning and the results of this mechanism and can only hope that more small businesses take advantage of it.  

During an October 19, 2017 speech, Air Force Director of IT Acquisition Process Development Maj Gen Sarah Zabel opined, “This mechanism [OTA] is just so much faster and so much more attuned to getting something quickly that we want today and not have to spend a couple years going through this huge process to get something we wanted two years ago. Everyone is very enthusiastic about OTAs.”(2)

A good place to start if you want to learn more about OTAs is your local PTAC – Procurement Technical Assistance Center, which will help you in the selling of your products or services to the appropriate government agency by offering confidential counseling at no cost. More information about the Colorado office of PTAC – located here on the Catalyst Campus – may be found here

(1) Source: Colorado PTAC Other Transaction Agreements presentation, ©2018

(2) Source:   


Lora A Premo

Lora published her first written piece at age seven, when she wrote the second-grade play for her class; she has been writing ever since. She is now the Content Manager for C-TRAC and continues to create content daily on a wide variety of subjects.