In 1994, Congress authorized use of Other Transactions (OT) for the development of prototypes “directly relevant to weapons or weapon systems.” Under this authority, projects are not required to comply with procurement-specific laws and regulations.
During the 1994–1998 time period, 72 such projects began. RAND was asked by DoD to assess the experience provided by those projects. We conducted this assessment by performing a detailed examination of 21 projects…
Our assessment of OT prototype projects, completed in March 2000, yielded three general conclusions:
Important new industrial resources are now participating in DoD prototype projects because of the freedoms inherent in the OT process. However, evidence of that cannot be found by counting “new” company names on a list of projects; we found few firms with no prior DoD contracting experience now working on DoD projects, with most of those at the subcontractor level.
The benefits of OT are broader than just the addition of new industrial resources… 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 relatively unimportant when a firm is contributing a large share of project costs.
That was a 2002 RAND report, “Assessing the Use of “Other Transactions” Authority for Prototype Projects.”
All that is old is new again. The first point, on whether OTAs helped bring in non-traditional vendors, seems to be a major point of contention. One of the problems with available data is that it is difficult to know which firms actually end up performing on work.
The fact that OTAs have been around since the 1950s and have never really seen sustained use, but instead has swung with the pendulum of acquisition reform, makes me less optimistic about their future. Developments in intellectual property, for example, would seem to point to more restrictions on Other Transactions. If time needs to be spent defining IP rights ahead of technology development, then the utility of OTAs is lessened as time to contract opens up. Another is concerns over costs and profits found usually in pricing of spares/repairs, but as sustainment takes more innovative approaches may boomerang back onto RDT&E.
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