	Background

Other transaction authority was created to enhance the federal  government’s ability to acquire cutting-edge science and technology by  attracting nontraditional contractors that have not typically pursued  government contracts. The Homeland Security Act of 2002  created DHS and granted the agency the authority to enter into other  transactions for research and development and prototype projects for a  period of 5 years. The Consolidated  Appropriations Act for 2008 extended this authority until September 30,  2008. Most of the  department’s use of other transaction authority to date occurred between  fiscal years 2004 and 2005. Though it has since used this authority less  frequently, it continues to obligate funds for its earliest agreements. About  77 percent of the $443 million spent on DHS’s agreements has been on 7 of  the 37 agreements. S&T contracting representatives reported that all of  these agreements were for prototype projects. 1). DHS reported a total of 37 other transaction agreements, 30 of which were  entered into in fiscal years 2004 and 2005. 2). 3). According to S&T, all of these agreements  included at least one nontraditional contractor, most commonly as a  subcontractor. Though the acquisition outcomes related to DHS’s use of other transaction  authority have not been formally assessed, the department estimates that  at least some of these agreements have resulted in time and cost savings. However, the extent to which these savings accrue to the  government or to the contractor is unclear. Beyond these efforts, GAO  found some areas for improvement and recommended that: DHS provide  guidance on when to include audit provisions in agreements; provide more  training on creating and managing agreements; capture knowledge gained  from current agreements for future use; and take measures to help  rotational staff avoid conflicts of interest. Provide guidance:  We recommended that DHS develop guidance on  when it is appropriate to include audit provisions in other transaction  agreements. However, the guidance only addresses prototype agreements over $5  million. Provide additional training: We recommended that DHS develop a  training program for staff on the use of other transactions. Operational challenges to successfully  making use of other transaction authority include: attracting and ensuring  the use of non-traditional contractors; acquiring intellectual property  rights; financial control; and maintaining a skilled acquisition workforce.
Why GAO Did This Study

Other transaction authority was created to enhance the federal government's ability to acquire cutting-edge science and technology by attracting nontraditional contractors that have not typically pursued government contracts. The Homeland Security Act of 2002 granted the department the temporary authority to enter into other transactions for research and prototype projects for a period of 5 years. The Consolidated Appropriations Act of 2008 extended this authority until September 30, 2008. This testimony discusses (1) the extent to which DHS has used its other transaction authority, (2) the status of DHS's implementation of GAO's previous recommendations, and (3) the accountability challenges associated with the use of these agreements.

What GAO Found

DHS entered into 37 other transaction agreements between fiscal years 2004 and 2007, most of which were entered into in the first 2 years. Though it has since used this authority less frequently, it continues to obligate funds for its earliest agreements. Furthermore, about 77 percent of the dollars spent on these agreements have been for 7 of DHS's 37 agreements. Contracting representatives also told us that all of the agreements to date were for prototype projects and that each agreement included at least one nontraditional contractor. GAO plans further review of DHS's use of other transaction agreements as required by the Homeland Security Act of 2002. DHS has made efforts to improve its use of other transaction agreements and to prevent conflicts of interest. The department has taken the following steps to address prior GAO recommendations including: (1) creating guidance on when to include audit provisions in other transaction agreements; (2)creating a training program on using these agreements; (3) and improving controls over conflicts of interest. GAO also recommended that DHS capture knowledge gained from the agreements it has entered into. The department has compiled lessons learned from the Department of Defense, but the document is not related to DHS's experience. Furthermore, while DHS created guidance on when to include audit provisions in agreements, its guidance only applies to certain prototype projects and only in certain circumstances. Risks inherent with the use of other transaction agreements create several accountability challenges. These challenges include attracting and ensuring the use of nontraditional contractors, acquiring intellectual property rights, ensuring financial control, and maintaining a skilled acquisition workforce with the expertise to create and maintain these agreements.