“Other Transactions” (OT) refer to contractual instruments that are not standard procurement contracts or standard assistance instruments (grants or cooperative agreements). They may be used to support projects which are not strictly procurement or assistance; in lieu of standard assistance instruments; and, depending on specific statutory authority, for the acquisition of goods and services.
OT’s allow agencies and their contracting partners to enter into flexible arrangements tailored to the particular project and needs of the participants. OT’s present the parties with a blank page from which to begin negotiations. OT agreements may be fully funded, partially funded (cost-shared), unfunded, and under some statutory authorities funds may be paid to the agency and its appropriations reimbursed. As a general matter, agencies must possess express statutory authority to use OT’s.
What are the implications of Other Transactions?
- For program managers: The great flexibility inherent in OT’s is particularly useful in research and development (R&D). The Federal Acquisition Regulation (FAR) notes that R&D contracts are unlike contracts for supplies and services (FAR 35.002). OT’s may be less burdened by the overhead of numerous government regulations that can make government contracting unattractive to many commercial firms. They permit flexibility in crafting intellectual property (IP) provisions because those provisions can be negotiated and can differ from the language typically called for in procurement contracts.
- For legal: OT’s are generally not subject to laws and regulations specific to procurement and assistance relationships. They are, however, subject to fiscal, criminal, and other laws of general applicability. Some agencies have promulgated regulations governing the use of OT’s while others have issued guidance or relied entirely on fundamental statutory authority.
- For offerors: The flexibility of OT’s can make them attractive to firms and organizations that do not usually participate in government contracting due to the typical overhead burden and “one size fits all” rules. Traditional government contractors may also find exploring new ways of doing business attractive. OT’s can also be used to promote cooperative relationships among traditional and non-traditional contractors.
What are the benefits of Other Transactions?
Surveys of participants in OT’s have characterized their benefits as including streamlining and flexibility.
Foremost among these have been the speed and ease of making changes, particularly important in R&D
where unexpected results may suggest approaches not foreseen at the initiation of a project. Less time
devoted to auditing, flexibility in IP rights and accounting systems are other examples. Other benefits
- Performance improvements include a positive influence on team building among participants; team focus on technical aspects of the program; and simplified management and control.
- Schedule reductions have been noted in many projects. These have occurred both before the award and in project execution – aided by a minimization of administrative burden and the flexibility to restructure programs in mid-course resulting in an efficient work environment. The absence of flow-down provisions can accelerate the performance of commercial firms.
- Cost reductions compared to traditional R&D performance have been noted in OT’s. Part of this is attributable to the more timely performance noted in the preceding paragraph. Tradeoffs allowing better use of funds, fewer non-value-added activities, reduced administration and overhead burden and other reasons have also been cited. Cost reductions have been cited for both current performance cost and the cost of future acquisition of the developed product. Studies commissioned by the government have indicated that in DOD acquisition, for example, transaction costs related to mandates unique to the government can add an 18 to 20 percent cost premium. Most if not all of this added cost of doing business can potentially be avoided with OT’s.
- OT’s have also facilitated the inclusion of non-traditional performers in government programs either on their own or in combination with traditional contractors. Non-traditional firms need not adopt the typical costly government-mandated business and accounting systems and can negotiate IP provisions. In dealing with companies that have established separate divisions for government and commercial work, OT’s may allow the government access to the firm’s full technical capabilities and not just those of its government division