Other Transactions continued growing in FY21, but will it soon level off?

Contracts using other transaction authority saw another year of growth in the Department of Defense, but only when excluding awards for COVID-19. Obligations unrelated to COVID-19 went from $7.6 billion in fiscal 2019 to $8.6 billion the year after, and $11.5 billion in 2021. OTAs identified with COVID-19 were $7.7 billion in 2020 and $3.1 billion the last year.

DoD Other Transactions (OT) contracts FY2016 – FY2021

Encouragingly, production OTAs have grown from $339 million to $1.1 billion in 2021, spread across a wide range of offices from all the services. High ceilings have also been awarded for the Space Enterprise Consortium ($12 billion) as well as the Army’s Integrated Visual Augmentation System ($22 billion) and Future Vertical Lift ($18 billion) programs.

That analysis was from me in a Federal News Network article, OTAs and beyond: Scaling innovation in Defense contracting. Though there are good signs of OTA growth, there are reasons to think OTAs may soon start leveling off.

Funding offices have pulled back further, with nearly half decreasing OTA obligations in 2021. Of the $2.9 billion in total OTA growth, 96% came from the top five funding offices, while 350 other offices netted the remaining 4% of growth.

OTA growth in part depends on budgetary growth for the advanced component development and prototypes account, which has doubled from $14 billion in 2016 to $28 billion in 2021. The President’s budget requested another 11% increase for 2022. Budget increases cannot be an enduring source of growth for OTAs.

While OTAs I think still have room for growth, the point of the article was that many of the barriers to adoption are cultural rather than regulatory. The FAR itself has many flexibilities, as we at Mason GovCon examined in our Acquisition Next playbook. Here’s a slice:

Multiple-award IDIQs can have other features of OTAs. Awards under $25 million are not subject to bid protests. When using fixed-price tasks, they are exempt from the six business system requirements including for cost accounting. Moreover, intellectual property statute favors specially negotiated rights, and non-traditionals may receive commercial data rights without a commercial item determination.

Read the whole thing!