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Other Transaction (OT) Guide

Other Transactions (OT) Guide

Purpose

The Other Transactions Guide for Prototype Projects (version 1.2.0, dated January 2017) is rescinded in its entirety and replaced by this guide. 

This guide is issued by the Office of the Under Secretary of Defense for Acquisition and Sustainment (OUSD(A&S)), the organization responsible for promulgation of policy for Other Transactions (OTs). This guide provides advice and lessons learned on the planning, publicizing, soliciting, evaluating, negotiation, award, and administration of OTs, to include all three types of OT agreements: Research, Prototype, and Production (See Myth 1). While this document includes references to the controlling statutory and policy provisions for DoD OT authority, the document itself is not a formal policy document. Activities seeking to award OTs should consult with legal counsel for interpretation of statutory, regulatory, and formal policy requirements. If a strategy, practice, or procedure is in the best interest of the Government and is not prohibited by law or Executive Order, the Government team should assume it is permitted.

Audience

This guide is intended for two primary audiences:

  1. The Government team, to include Project Managers, Agreements Officers (AOs) A warranted individual with authority to enter into, administer, or terminate OTs. To be appointed as an AO, the individual must possess a level of responsibility, business acumen, and judgment that enables them to operate in the relatively unstructured environment of OTs. AOs need not be Contracting Officers, unless required by the Component’s appointment process. , Agreements Specialists, Systems Engineers, Small Business representatives, Legal Counsel; and
  2. Government partners, to include Industry, Academia, other Federal agencies, and State and Local authorities seeking information on OT best practices and DoD’s objectives in leveraging OT authority.

Definitions

Some terms in this guide require a closer look, further explanation and/or examples. Underlined terms throughout the guide provide a glossary definition.

Myths

The flexibility of OT agreements, and their limited use across the Department of Defense (DoD), has led to misunderstandings as well as a number of myths. A list of common OT myths along with a discussion of the facts are identified by (See Myth #) which links to the OT Myths and Facts page.

Purpose of OTs

The OT authorities were created to give DoD the flexibility necessary to adopt and incorporate business practices that reflect commercial industry standards and best practices into its award instruments. When leveraged appropriately, OTs provide the Government with access to state-of-the-art technology solutions from traditional and Non-Traditional Defense ContractorsAn entity that is not currently performing and has not performed, for at least the one-year period preceding the solicitation of sources by DoD for the procurement or transaction, any contract or subcontract for the DoD that is subject to full coverage under the cost accounting standards prescribed pursuant to section 1502 of title 41 and the regulations implementing such section (see 10 U.S.C. 2302(9))., through a multitude of potential teaming arrangements tailored to the particular project and the needs of the participants.

OTs can help:

  1. Foster new relationships and practices involving traditional and NDCs, especially those that may not be interested in doing FAR based contracts with the Government
  2. Broaden the industrial base available to Government
  3. Support dual-use projects
  4. Encourage flexible, quicker, and cheaper project design and execution
  5. Leverage commercial industry investment in technology development and to partner with industry to ensure DoD requirements are included in future technologies and products
  6. Collaborate in innovative arrangements

OTs are NOT:

  1. FAR based procurement contracts (see Myth 3)
  2. Grants
  3. Cooperative Agreements
  4. Cooperative Research and Development Agreements (CRADAs)

The determination of whether OTs are subject to DoD Instruction (DoDI) 5000.02 depends upon the acquisition pathway selected by the program office. OTs are neither inherently subject to, nor exempt from DoDI 5000.02. Instead, the selection of the award instrument should be considered a separate, but complementary decision.

Therefore, any program executed under the DoDI 5000.02 pathway is subject to DoDI 5000.02 policy once this pathway is selected, regardless of whether an OT or traditional contract is used.  Similarly, any program executed under the Middle Tier of Acquisition (MTA) pathway in accordance with Section 804 of the National Defense Authorization Act for Fiscal Year 2016, is subject to MTA policy.

Case Study: Robotic Servicing of Geosynchronous Satellites (RSGS)

Robotic Servicing of Geosynchronous Satellites (RSGS) is DARPA’s first public-private partnership in the Space Servicing Domain.  The requirement is for RSGS in Geosynchronous Earth Orbit (GEO).  High-cost GEO satellites are regularly discarded when there are no feasible options for upgrade, modification, or repair. RSGS will change that by providing dexterous robotic servicing technologies in GEO. The long-term goal is to have regular, reliable, and responsive robotic servicing capabilities in GEO, operated by a commercial entity, which services both Government and commercial satellites. As a result of this new GEO activity, a new marketplace may emerge where both Government and private industry pay a fraction of the satellite’s remaining value to a commercial firm to service, upgrade, modify, or repair the satellite to maintain its operability. Industry will provide the “bus” or space-lift vehicle for delivery into space for a fee. In turn, Government (or another commercial client(s)) will provide the “payload” or servicing robotic satellite to launch into space and/or update, modify, or repair other satellites.

Implementation and Execution:

DARPA conducted extensive market research with public and private entities in the space, launch, and satellite industries over a two-year period. DARPA posted the solicitation in May 2016 and awarded a Prototype OT in April 2017, which has a period of performance through the first quarter of CY 2022. Evaluations followed a four-step process:

  1. Executive Summary to Determine Eligibility,
  2. Full Proposal Submission,
  3. Oral Presentations and Negotiations, and
  4. Final Evaluation and Award.

Outcomes and Lessons Learned:

  1. Collaboration and Risk-sharing: This is vital, as RSGS involves technological disruption and the creation of a new marketplace for space-based satellite servicing. Executing a Prototype OT allowed DARPA to team with a commercial partner that shares the vision of transforming space robotics and satellite servicing and is willing to share in the investment by providing significant funding with qualified and creative talent.
  2. Cost sharing and recoupment: The flexibility of Prototype OTs allowed unique cost sharing and special business arrangements to include $15 million in incentive-based payments and recoupment of Government payload costs which would not have been possible with traditional Government contracting.
Types of OTs

OTs can be structured in a variety of ways. There are two different OT statutory authorities that can result in three different types of OT agreements: Research, Prototype, and Production.

Research OTs

Research OTs (sometimes referred to as “original” or science and technology (S&T) OTs) are authorized under 10 U.S.C. §2371 for basic, applied, and advanced research projects. These OTs were intended to spur dual-use research and development (R&D), taking advantage of economies of scale without burdening companies with Government regulatory overhead, which would make them non-competitive in the commercial (non-defense) sector. Traditional defense contractors were also encouraged to engage in Research OTs, particularly if they sought to adopt commercial practices or standards, diversify into the commercial sector, or partner with NDCs.

**When using Technology Investment Agreements (TIAs), be sure to read this guide in conjunction with the DoD Grant and Agreement Regulations  (DoDGARs) — see Part 21 of Title 32 of the Code of Federal Regulations (32 CFR Part 21).

Prototype OTs

Prototype OTs (sometimes referred to as “2371b” or “prototype project” OTs) are authorized under 10 USC §2371b to acquire prototype capabilities and allow for those prototypes to transition into Production OTs. Both dual-use and defense specific projects are encouraged under section 2371b. Per statute, successful Prototype OTs offer a streamlined method for transitioning into follow-on production without competition (See Myth 4). The solicitation and original Prototype OT agreement shall include notice that a follow-on Production OT is possible to allow greater flexibility to those Government organizations planning to leverage production efforts without re-competing (see Appendix E for recent policy documents and links).  This should also increase competition and reduce the risk of future protest.

Production OTs

Production OTs are authorized under 10 U.S.C. §2371b(f) as noncompetitive, follow-on OTs to a Prototype OT agreement that was competitively awarded and successfully completed. This statute requires that advanced consideration be given and notice be made of the potential for a follow-on OT; this is a necessary precondition for a follow-on Production OT. As such, solicitation documents and the Prototype OT agreement shall include notice that a follow-on Production OT is possible (See Myth 5).

 

Research OT

Prototype OT

Applicability

  • Basic, applied, and advanced research
  • Prototype Project
  • Directly relevant to enhancing mission effectiveness of military personnel, supporting platform, systems, components, or materials to be acquired by DoD, or improvements thereto

 Conditions for Use

  • No duplications of research to maximum extent practicable (generally non-issue)
  • 50/50 Cost Share to the extent practicable
  • Competition to maximum extent practicable (see DoDGARS 37.400 for TIAs)
  • Standard contract, grant, CA not feasible/appropriate (generally non-issue)
  • Review DoDGARS Part 37-Technology Investment Agreements (TIA), Appendices A&B for applicability.*If TIA complies with Bayh-Dole Act, a Cooperative Agreement (CA) shall be used.  If TIA patent provision varies from what is possible under Bayh-Dole Act, the TIA should be awarded as a Research OT
  • All participants small or non-traditional; or
  • At least one non-traditional defense contractor or non-profit research institution must participate to a significant extent in the prototype project; or
  • At least 1/3 of total costs must be paid by parties to the OT other than the Government; or
  • Senior procurement executive for the agency determines, in writing, that exceptional circumstances justify the use of an OT
  • Cost share not required (if non-traditional contractor participates); fee/profit negotiable
  • Competitive procedures to maximum extent practicable

Production OT

  • Follow-on contract or transaction may be awarded without the use of competitive procedures if:
    • Competitive procedures were used in the Prototype OT, and
    • The prototype project in the transaction was “successfully completed”

Note: “practicable” and “maximum extent practicable.” If cost sharing aids in pushing the project forward it is practicable. If it proves an obstacle, it is not.

Case Study: AOC Pathfinder

The Air Operations Center (AOC) Pathfinder Program purposefully structured its acquisition strategy to leverage flexible and innovative processes and procedures.  The initial project executed a proof of concept designed to implement a modern, dynamic web-based application to schedule air refueling operations, which replaced an antiquated handwritten-whiteboard-on-the-wall system.  This application resulted in fuel savings of approximately $200,000 per day based on more efficient use of available assets.  Using the Commercial Solutions Opening (CSO)A competitive solicitation process with three-phases focused on being ‘fast, flexible, & collaborative’ for innovative prototype projects.  process, the Defense Innovative Unit (DIU) through Army Contracting Command-New Jersey (ACC-NJ) awarded a Prototype OT on behalf of the Air Force AOC program office, to build software applications which allowed faster integration of user feedback into future iterations.

Implementation and Execution:

The DoD leveraged the Prototype OT to solve a capability gap through “…a scalable software development and production platform to enable continuous integration, delivery and operation of new applications…”  DIU and the AOC Program Office collaborated to tailor a problem statement that provided an opportunity for companies to leverage commercial best practices to deploy software originally conceived under a traditional waterfall approach. ACC-NJ awarded the prototype OT from proposal receipt to award in only 129 days.  The Air Force declared success after executing this methodology while developing and deploying four unique applications.  In May 2018, the Air Force awarded a sole-source, follow-on Production OT for the scaling and employment of the initial prototype methodology and platform licenses across additional USAF software development teams and throughout the geographically dispersed AOC.

Outcomes and Lessons Learned:

  1. Allow Industry to be Innovative: The initial problem statement did not outline a detailed specification. This provided commercial companies an opportunity to propose their own unique and/or innovative solution sets. The competitively selected Prototype OT was ultimately predicated on leveraging a methodology, whereas other vendors focused on prototyping through other means.
  2. Follow-on Production Award without competition: Although ACC-NJ awarded the prototype, the Air Force chose to award its own sole-source, follow-on Production OT, which allowed requirements owners to have full situational awareness as the program moved into execution.
  3. Teaming and collaboration: AOC Pathfinder was leveraged throughout DoD to accomplish critical aspects of the initial Prototype OT, resulting in schedule efficiencies. For example, it leveraged a separate Services contract to hire software developers.  They also performed a data call to users to enable face-to-face collaboration. Additionally, the program office transformed its structure to accommodate this new paradigm wherein the Government was responsible along with its contractors for software development in lieu of a more traditional outsourcing business model.

A PDF version of the OT Guide is available here.

This prototype reflects current policy as of 12/3/18 and was developed for USD(A&S) by MITRE.