Many defense experts have remarked that the U.S. military is on the fast track to losing its technological edge. Consequently, the Pentagon has tried to be proactive about launching new initiatives to adopt new technologies for national security, and it is bridging gaps between the public and private sectors to do so. One such tool is the other transaction authority.
OTAs offer expedited avenues for incorporating commercial technologies that could help the U.S. military regain its technological edge. If the Department of Defense can apply more precise metrics for success in the OTA process, reevaluate the current intellectual property standards for OTAs and adjust the definition of nontraditional defense contractors, then tangible results should be apparent during the current administration.
OTAs, originally established during the Eisenhower administration to support NASA in its space race with the Soviets, are designed to allow nontraditional contractors to overcome traditional Federal Acquisition Regulation, or FAR. In the decades that followed, their use was sparse and limited; yet from 2018 to 2019, OTA obligations saw a 75 percent increase, and their use is only expanding further since Congress expanded OTAs to comprise prototyping programs and follow-on projects.
DoD program managers, using an OTA contracting vehicle, have scored remarkable wins. For example, the team that developed the Stand-Off Precision Guided Munition was able to prototype and field the GBU-69B small guide munition 75 percent faster than the original FAR contract timeline. The program office for the SOPGM project was also able to lower the cost by 90 percent compared to past acquisition timelines.
Yet, there are several critiques of OTAs that merit real attention. If these criticisms are not heeded, OTAs could be abused by those willing to exploit the perceived lack of red tape to cut corners for the sake of faster reporting and cheaper technological turnarounds.
One valid criticism of OTAs is that there is simply not enough data on them. Although OTAs have existed for over half a century, concrete statistics about the degree to which they have improved defense innovation are lacking. The DoD also lacks a set of tangible metrics to gauge how OTAs help the U.S. military incorporate vanguard technologies. As a result, we cannot be sure how effective they have been when it comes to making the most out of American taxpayer dollars.
Moreover, due to their flexible framework, it can be difficult to monitor OTA funding against government priorities. OTA arrangements between private companies and federal entities more closely resemble private sector business deals than traditional government contracts. It is common for program managers to discover better design options or conceptual flaws during the research phase that could necessitate changes to the program budget or agreement — a far more painful process under FAR.
Such issues are addressable if the DoD establishes an enterprisewide coordinating office for OTA utilization, designed to promote accountability and best practices. While the Government Accountability Office handles legal matters, there is a gap in the market for a coordinating office that constructively works with government agencies seeking their own OTAs. This office could validate their need for an OTA versus a standard FAR contract, align supporting acquisition sponsorships and agreements officers, and provide standardized metrics not only to the armed services but also the undersecretary for research and engineering, who is responsible for all technologies deployed to the battlefield.
The DoD should also take care to establish attainable metrics for success other than speed to contract or the amount of consortium management fees paid. Yes, speed is good, but the DoD should follow the recommendations of the IBM Center for the Business of Government report about OTAs; the percentage of participation by nontraditional contractors should not just be measured in dollars. Such analyses must go further to reflect how nontraditional contractors contribute to the provision of new subsystem technologies.
Getting intellectual property policy right is another challenge that must be solved in order for OTAs to support the goal of protecting U.S. national security interests. The broad liberties enjoyed by contractors to retain their IP rights in the OTA process poses potential national security risks. If the whole purpose of using more OTAs is to improve the U.S. military’s technological advantage, then we could end up paradoxically hurting ourselves by allowing cutting-edge, OTA-developed products to be sold to malicious actors.
While reduced participation by nontraditional contractors might be seen by many as a main issue with OTAs, it detracts from perhaps a bigger issue, which is the very broad definition of “nontraditional contractor” as defined by Congress. As a 2020 paper by the Chertoff Group has pointed out, the definition of a nontraditional contractor is such that too many entities fall within that category, including those that already work exclusively with the DoD. On top of that, the current definition of nontraditional contractors does not emphasize the importance of academia. The involvement of institutions in OTA consortia is vital for bridging the theoretical sciences and the actual technologies that could transform the U.S. military.
OTAs offer an attractive lack of bureaucratic red tape, but this does not mean contractors and DoD buyers can throw responsible handling of IP, bidding practices and prototyping efforts to the wayside. This is why improving OTAs will need to abide by the Goldilocks principle of getting it just right. The DoD must avoid bringing about “FAR creep,” whereby the incorporation of more regulations could scare away innovative new entrants to the defense market. When it comes to working through the kinks of OTAs, the DoD must walk a very fine line — one that it can certainly do.
Olivia Letts is an associate at One Defense, where Stephen Rodriguez is managing partner. Rodriguez is also a senior adviser at the Atlantic Council.