	Introduction

The Department of Defense (DOD) obligates more than $300 billion annually to pay for goods and services (including research and development). Most of these acquisitions are governed by numerous statutes and regulations found in Title 10 of the United States Code, the Federal Acquisition Regulation (FAR), and the Defense Federal Acquisition Regulation Supplement (DFARS). Other transactions are legally binding contracts that are generally exempt from federal procurement laws and regulations such as the Competition in Contracting Act and the Federal Acquisition Regulation. DOD's other transaction authorities are found in two sections of law:
10 U . S . C . 2371b permits the use of other transactions to conduct prototype projects and follow-on production. OTs can only be used for prototypes if one of the following applies:
at least one nontraditional defense contractor significantly participating in the project; all significant participants are small businesses or nontraditional defense contractors; at least one-third of the total cost of the prototype project is provided by nongovernment participants; or the senior procurement acquisition official provides in writing an explanation of the exceptional circumstances justifying an OT. Follow-on production can only be conducted when 
the underlying prototype OT was competitively awarded, and the prototype project was successfully completed. OT authorities grant government officials the flexibility to include, amend, or exclude contract clauses and requirements that are mandatory in traditional procurements (e.g., termination clauses, payments, audit requirements, intellectual property, and contract disputes). OTs can be structured in numerous ways, including a direct relationship between a single government agency and a single provider; joint ventures; partnerships; multiple agencies joining together to fund an agreement encompassing multiple providers; or through a consortium. They are, however, bound by standard contract and other select laws and regulations. Potential Benefits

Some of the potential benefits to OTs highlighted by analysts and officials include
providing a mechanism to pool R&D resources with industry to facilitate development of, and obtain "the latest state-of-the-art, dual use technologies"; attracting nontraditional contractors with promising technological capabilities to work with DOD; lowering costs by eliminating requirements associated with the Federal Acquisition Regulations (i.e., costs associated with required reporting and administrative activities) or sharing costs with industry; and "speeding up" the acquisition process. A number of experts argue that OTs provide a unique mechanism for DOD to invest in, and influence the direction of, technology development even when the end result is not directly tied to a military capability. Potential Risks

Along with the potential benefits come potential risks, including that of diminished oversight and exemption from laws and regulations designed to protect government and taxpayer interests. A number of analysts and officials have raised concerns that if DOD uses OTs in ways not intended by Congress—or is perceived to abuse the authority—Congress could clamp down on the authority. DOD Currently Lacks Sufficient Data to Measure and Evaluate the Use of Other Transaction Authority

DOD lacks authoritative data that can be used to assess OT effectiveness and better understand broader trends associated with these agreements. According to FPDS-NG, in FY2017, DOD obligated $2.1 billion—and received $360 million in cost-share contributions—on prototype other transaction agreements, representing less than 1% of DOD's total FY2017 contract obligations (approximately $320 billion). 2358 (granting the authority to use OTs) to 10 U.S.C. (2) The authority of this section-
(A) may be exercised for a transaction (for a prototype project) that is expected to cost the Department of Defense in excess of $100,000,000 but not in excess of $500,000,000 (including all options) only upon a written determination by the senior procurement executive for the agency as designated for the purpose of Section 1702(c) of Title 41, or, for the Defense Advanced Research Projects Agency or the Missile Defense Agency, the director of the agency that-
(i) the requirements of subsection (d) will be met; an d
(ii) the use of the authority of this section is essential to promoting the success of the prototype project; and
(B) may be exercised for a transaction (for a prototype project) that is expected to cost the Department of Defense in excess of $500,000,000 (including all options) only if-
(i) the Under Secretary of Defense for Acquisition, Technology, and Logistics determines in writing that-
(I) the requirements of subsection (d) will be met; an d
(II) the use of the authority of this section is essential to meet critical national security objectives; and
(ii) the congressional defense committees are notified in writing at least 30 days before such authority is exercised.
The Department of Defense (DOD) obligates more than $300 billion annually to buy goods and services, and to support research and development. Most of these acquisitions are governed by procurement statutes and regulations found in Title 10 (and parts of other select titles) of the United States Code, the Federal Acquisition Regulation (FAR), and the Defense Federal Acquisition Regulation Supplement.
Under certain circumstances, DOD can enter into an other transaction (OT) agreement instead of a traditional contract. OT agreements are generally exempt from federal procurement laws and regulations. These exemptions grant government officials the flexibility to include, amend, or exclude contract clauses and requirements that are mandatory in traditional procurements (e.g., termination clauses, cost accounting standards, payments, audit requirements, intellectual property, and contract disputes). OT authorities also grant more flexibility to structure agreements in numerous ways, including joint ventures; partnerships; consortia; or multiple agencies joining together to fund an agreement encompassing multiple providers.
Other transaction agreements are legally binding contracts; they are referred to as agreements to distinguish them from the traditional procurement contracts governed by the FAR and procurements laws. Other transaction authorities are set forth in two sections of law:
10 U.S.C. 2371—granting authority to use OTs for basic, applied, and advanced research projects. 10 U.S.C. 2371b—granting authority to use OTs for prototype projects and follow-on production. Under this authority, a prototype project can only be conducted if at least one nontraditional defense contractor significantly participates in the project; all significant participants are small businesses or nontraditional defense contractors; at least one-third of the total cost of the prototype project is provided by nongovernment participants; or the senior procurement acquisition official provides a written justification for using an OT. Follow-on production can only be conducted when the underlying prototype OT was competitively awarded, and the prototype project was successfully completed.
OTs have the potential to provide significant benefits to DOD, including
attracting nontraditional contractors with promising technological capabilities to work with DOD, establishing a mechanism to pool resources with other entities to facilitate development of, and obtain, state-of-the-art dual-use technologies, and offering a unique mechanism for DOD to invest in, and influence the direction of, technology development.
A number of analysts warn that along with the potential benefits come significant risks, including potentially diminished oversight and exemption from laws and regulations designed to protect government and taxpayer interests.
In FY2017, DOD obligated $2.1 billion on prototype OT agreements, representing less than 1% of contract obligations for the year. However, the use of OTs is expected to grow at a rapid pace, due in part to recent statutory changes expanding other transaction authorities.
A number of analysts and officials have raised concerns that if DOD uses OTs in ways not intended by Congress—or is perceived to abuse the authority—Congress could clamp down on the authority. Generally, DOD lacks authoritative data that can be used to measure and evaluate the use of other transaction authorities.