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OTAs for Flexible Research and Development

By Nancy Brown, KY APEX Accelerator Executive Director


This article was originally published in our monthly KY APEX Accelerator Newsletter. If you have any questions about this topic, your KY APEX Accelerator consultant is here to help! Not a client? Sign up here.

Through the use of “Other Transactional Authority,” federal agencies have the option to use Other Transaction Agreements (OTAs) to collaborate with nontraditional contractors, including small businesses, start-ups and academic institutions, for research and development (R&D) activities. Unlike regular procurement contracts, OTAs provide a more efficient and adaptable process for working with innovative companies and organizations, leading to quicker decision-making, less administrative work and more opportunities for creativity and experimentation.

Initially authorized under the Defense Production Act of 1950, OTAs allow the Department of Defense (DoD) to enter into agreements that are not subject to standard procurement regulations. Over time, other federal agencies such as the Department of Energy (DoE), the National Aeronautics and Space Administration (NASA) and the Department of Homeland Security (DHS) have also been authorized to use OTAs.

OTAs are advantageous due to their flexibility. Unlike regular procurement contracts, OTAs are not bound by the Federal Acquisition Regulation (FAR) and other standard procurement rules. This means that agencies can customize the terms of the agreement to suit their specific requirements, such as negotiating intellectual property rights, funding structures and performance metrics. Furthermore, agencies can grant OTAs to nontraditional contractors without expecting them to have the same financial or technical abilities as traditional defense contractors.

Recently, OTAs have gained popularity, especially in the field of research and development for emerging technologies like artificial intelligence, quantum computing and biotechnology. In 2019, for example, the DoD awarded Microsoft a $10 billion contract for cloud computing services using an OTA, thus bypassing traditional procurement methods. This decision caused controversy regarding the fairness of the selection process.

Although OTAs offer many advantages, they have received backlash from certain lawmakers and watchdog groups for their lack of transparency and accountability, making them susceptible to misuse by agencies or contractors. To address these concerns, some agencies have introduced additional oversight and reporting requirements for OTAs, while others have demanded more legislative oversight of these agreements.

In summary, OTAs offer federal agencies a fantastic chance to collaborate with nontraditional contractors and to accelerate innovation. However, it is crucial to strike a balance between flexibility, accountability and transparency when issuing OTAs to ensure that taxpayer funds are utilized effectively and efficiently, just like with any other contracting mechanism.

If you have questions about OTAs or other government procurement topics, please connect with your KY APEX Accelerator regional procurement consultant for assistance. If you are not sure how to connect with your regional consultant, you can request assistance by contacting us at kyapex@kstc.comor by registering as a client on our website.


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