This is an opinion piece. And my opinion, which happens to be the correct opinion, is that OTAs are more fun to negotiate than FAR contracts. Are they faster than FAR contracts? Maybe—faster for whom? Are they better than FAR contracts? Maybe—what are you trying to accomplish and what variables do you care about?

If you have spent any time following GovCon or acquisition innovation on social media or in the news, you’ve likely heard of OTAs, also known as OTs, or Other Transaction Agreements. OTAs have become increasingly popular (to talk about) more recently, but still make up less than 10% of dollars spent in terms of vehicle used by the Government to award to third parties. So what’s the big deal?

First, let’s talk about what an OT is.

OTs were made to arm the DoD with the authorities to move with the speed and flexibility required to adopt commercial industry standards and best practices in its procurements. Depending on the type, OTs typically show preference to small or non-traditional defense contractors, although they can be used with traditional defense contractors as well. 

OTs can take several forms, based on two distinct statutory authorities that lead to three different types of OTAs: Research, Prototype, and Production.

• Research OTs: Governed by 10 U.S.C. §4021, these are aimed at basic, applied, and advanced research. They’re designed to promote dual-use R&D without the heavy load of government regulations, making them attractive for companies looking to remain competitive in both defense and commercial sectors. 
• Prototype OTs: Under 10 U.S.C. §4022, these are meant to develop and transition prototype capabilities into production. They are particularly powerful as they can move from prototype to production without the need for further competition.
• Production OTs: Authorized by 10 U.S.C. §4022(f), these follow-on from competitively awarded and successfully completed Prototype OTs. They allow for direct transition into production based on the results of the prototype phase.

So ARE OTs faster? That depends.

“Faster” is a relative term, so that assessment may depend on where you’re starting and the authorities of a particular office using FAR vs OT authorities. It also depends on the requirement and how creative the government team is, which often ties to how educated the government team (and those in their review chain) is about OTs. I have seen OTs, both when I was in government and since I’ve left, where the government either copies and pastes clauses directly from the FAR or even where they simply incorporate a FAR clause by reference. This is not the intent of these authorities. 

Likewise, a negotiation may take longer if the contractor is familiar and/or willing to push back or take time to negotiate the terms or language in the government’s proposed OT or if the government has asked the contractor to write a significant portion of the documents and either the contractor or the government are not sure what the government wants. 

However, if you consider the overall time from research to production versus the time to a single award, OTs can be considerably faster than the normal FAR process. And whether a single award might take more work or not, that work is oftentimes worth the result of a thoroughly planned, spiritedly negotiated, and well executed OT. 

So ARE they better? That also depends.

Just like you wouldn’t use a hammer to perform open heart surgery, there may be some instances where an OT isn’t appropriate. However, whether you are government or industry, having that skillset or tool in your box is critical.

Keep in mind that the majority of transactions by the federal government are still awarded using FAR, but should you come across an OT—fear not. Seek expert advice and be sure to prioritize critical areas in your review and negotiation planning such as intellectual property, payment terms and conditions, termination or cure terms, warranties, and liability. It’s also important with OTs (as it is in FAR) to consider what is NOT in the contract. The FAR inherently provides protections to the government, but it also inherently comes with protections to companies, particularly when using commercial terms and particularly to small businesses. It is critical that you read OTs thoroughly (including ALL attachments) and consider not just the legal implications, but the execution implications of what you are signing up to.

OTs are a great tool that allow for flexibility, creativity, and a more stable path for transition. While I have found plenty of ways to be creative under FAR authorities, I genuinely enjoy the OT process more and hope that we can continue to adopt a more “OT-like” mindset across the government contracting community. For more info on OTs, check out the DoD OT guide or the Strategic Institute for Innovation in Government Contracting .