Other Transaction Authority (OTA) for Space Startups
TL;DR: Other transaction authority lets the U.S. defense department fund research and prototypes through agreements that are not standard procurement contracts. For space startups, OTAs can mean faster awards, flexible terms and a path to follow-on production without a new competition. They come with conditions, so learn the participation rules, the follow-on rules and where OT opportunities appear.
Key takeaways
- Other transactions (OTs) are agreements other than contracts, grants or cooperative agreements.
- 10 U.S.C. 4021 covers research OTs; 10 U.S.C. 4022 covers prototype OTs and follow-on production.
- A prototype OT needs a qualifying condition, such as significant nontraditional or small business participation or cost sharing.
- A successful prototype can lead to follow-on production without new competitive procedures, if the statute's conditions are met.
What is other transaction authority?
Other transaction authority is the legal power to enter into "transactions (other than contracts, cooperative agreements, and grants)." Under 10 U.S.C. 4021, the Secretary of Defense and the secretaries of the military departments may use these transactions for basic, applied and advanced research projects. Under 10 U.S.C. 4022, approved officials, including the directors of DARPA and the Defense Innovation Unit and the secretaries of the military departments, may use them for prototype projects.
Because OTs are not procurement contracts, many standard contract rules do not apply in the same way. That flexibility is why the department uses them to work with commercial technology companies.
This is part of our government contracting series. If you are new to selling to the government, start with how to sell to the Space Force.
Why do OTAs matter for space startups?
- Speed. The Defense Innovation Unit says it uses OT authority under 10 U.S.C. 4022 to award prototype agreements in as few as 60 to 90 days (DIU, Work With Us).
- Commercial-friendly terms. OTs are designed to reach companies that do not usually do defense work.
- A path to production. A successful prototype can lead to a follow-on production award.
Research OTs vs prototype OTs
| Research OT (10 U.S.C. 4021) | Prototype OT (10 U.S.C. 4022) | |
|---|---|---|
| Purpose | Basic, applied and advanced research | Prototype projects relevant to mission effectiveness or to systems the department plans to acquire |
| Typical output | Research results | A working prototype |
| Follow-on production | Not the focus | Allowed under subsection (f) if conditions are met |
| Conditions | Set by the statute and agency policy | At least one participation or cost-share condition in subsection (d) |
Who can win a prototype OT?
Under 10 U.S.C. 4022(d), an agency may only enter into a prototype OT if at least one of these conditions is met:
- At least one nontraditional defense contractor or nonprofit research institution participates to a significant extent.
- All significant participants other than the government are small businesses or nontraditional defense contractors.
- At least one third of the total cost is paid from sources other than the federal government.
- The senior procurement executive determines in writing that exceptional circumstances justify an OT.
Many space startups qualify under the first or second condition because they are small or have not done much traditional defense work. Read the statute and the solicitation to confirm how your company fits.
How does follow-on production work?
Under subsection (f), a prototype OT may provide for a follow-on production contract or transaction to the participants without using competitive procedures, if:
- competitive procedures were used to select the parties for the prototype, and
- the participants successfully completed the prototype project.
DIU adds that vendors who complete a prototype to the satisfaction of the government customer receive a Success Memo, which it says lets any federal agency use the solution without re-competing. For a startup, this is the big prize: a route from prototype to production revenue.
Where do you find OT opportunities?
- Commercial Solutions Openings (CSOs). DIU competitively solicits proposals for commercial solutions through CSOs and lists its open solicitations online.
- Military department innovation units and program offices. Watch AFWERX, SpaceWERX and service program offices for prototype opportunities. Our SBIR Phase 1 guide covers how SBIR fits alongside OTs, and our SpaceWERX SBIR guide covers the Space Force side.
- Consortia. Some organizations award OTs through industry consortia. Membership rules vary, so read each consortium's terms.
- Primes. You may join a prime's OT team as a subcontractor or participant. See selling to prime contractors.
How do you prepare to win an OT?
- Have a real prototype story. Show what exists today and what the prototype will prove.
- Lead with mission impact. DIU, for example, asks for a short solution brief first and reaches out if it wants a pitch. Make the problem and the operational benefit clear in plain language. Our guide to explaining complex space technology helps.
- Know your status. Can you show you are a small business or a nontraditional defense contractor? Can you share costs?
- Plan for production. Ask how the program would buy at scale if the prototype succeeds.
- Get your basics ready. Registrations, security and export compliance take time. Our guide to SAM.gov registration covers the federal registration step, and our ITAR-safe marketing guide covers what you can say publicly.
What should you watch out for?
- Negotiated terms. Intellectual property, data rights and payment terms are negotiated. Get experienced legal advice.
- Audit access. Larger agreements can include Comptroller General access to records, with limits set in 10 U.S.C. 4022(c).
- No guarantee of production. Follow-on awards are allowed, not promised.
Where does this fit in your growth plan?
OTs are one route among several. Combine them with SBIR, direct sales and partnerships, and market your company so program offices already know your name. The space marketing guide shows how.
Frequently asked questions
What is other transaction authority?
It is the authority to enter into agreements other than contracts, grants or cooperative agreements. For the U.S. defense department, 10 U.S.C. 4021 covers research and 10 U.S.C. 4022 covers prototype projects and follow-on production.
Can a small space startup win an OTA?
Yes. A prototype OT can be used when all significant non-government participants are small businesses or nontraditional defense contractors, or when a nontraditional contractor participates to a significant extent, among other conditions.
How fast are OTA awards?
It varies. The Defense Innovation Unit says it can award prototype agreements in as few as 60 to 90 days using 10 U.S.C. 4022.
What is a follow-on production OTA?
It is a production contract or transaction awarded after a successful prototype OT. Under 10 U.S.C. 4022(f), it can be awarded without new competitive procedures if the prototype was competed and successfully completed.
Is an OTA the same as an SBIR award?
No. SBIR is a small business research program with its own phases and rules. OTs are a different type of agreement. Some companies use both on the path from research to production.
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