Infotech and the Law

Transactions authority of another kind

Jonathan Cain

Rapidly increasing defense and intelligence budgets. Congressional passion for easing procurement requirements to speed the acquisition of new technologies. An influx of new vendors looking to fill the gaps left by the collapse of dot-com and telecommunications businesses. These have all resulted in calls by Republican leaders and some vendor groups for alternatives to conventional procurements or supply schedule acquisitions.

But one existing procurement vehicle that new entrants often miss is the "other transactions" authority of the Department of Defense

This category refers to the authority granted to the Defense Department to make acquisitions through transactions other than contracts, grants or cooperative agreements. The Defense Department is authorized to award other transactions for prototype projects that are directly relevant to weapons or weapon systems proposed for acquisition or development by the department.

Other transactions allow the military to reap the benefits of research and development being done by non-defense contractors for commercial applications.

The attractive feature of other transactions for prototype projects is that they generally are not subject to federal laws and regulations, such as the Federal Acquisition Regulation and its supplements or the Competition in Contracting or Contract Disputes Acts.

The Defense Department may use the other transaction authority when there is at least one "nontraditional defense contractor" participating significantly in the prototype project.

The authority also may be used when only traditional defense contractors are participating. In this scenario, one of two conditions must be met: Either at least one-third of the project cost is paid by the contractor team, or the agency's senior procurement executive determines in writing that exceptional circumstances justify using other transaction authority.

A nontraditional defense contractor is one that has not held any contract subject to the cost accounting standards or any other contract worth more than $500,000 to carry out prototype projects or to perform research projects for a federal agency. The nontraditional defense contractor can be at the prime level, a team member, subcontractor, lower-tier vendor or "intracompany" business unit, provided the unit contributes significantly to the prototype project.

There are important limitations on situations where other transactions prototype authority may be used. Only prototype projects that are directly relevant to weapons or weapon systems proposed for acquisition or development by the Defense Department qualify for other transactions award. The transaction must result in the government acquiring something for its direct benefit. Research and development projects resulting in reports for further research are not appropriate. Prototype projects could include prototypes of weapon systems, subsystems, components or technology.

Competition is not required to make an award, and the resulting agreements are not governed by the FAR, its agency supplements, the Truth in Negotiations Act or Cost Accounting Standards. Unlike research grants, the intellectual property requirements normally imposed by the Bayh-Dole Act do not apply, and the agency can negotiate intellectual property terms and conditions different from those typically found in procurement contracts.

In the event of a dispute, the awards are not subject to the Contract Disputes Act, and each agreement incorporates its own dispute resolution procedures. These typically involve an agreement to use alternative dispute resolution procedures under the auspices of the Armed Services Board of Contract Appeals. Payment disputes can be the subject of a claim in the Court of Federal Claims.

Other transactions authority can supply a nontraditional contractor with a viable weapons-related development with a fast and "commercial-like" prototype procurement.

Jonathan Cain is a member of the law firm Mintz Levin Cohn Ferris Glovsky & Popeo PC in Reston, Va. The opinions expressed in this article are his. He can be reached by e-mail at

About the Author

Jonathan Cain is a member of law firm Mintz Levin.

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