Leveraging Other Transaction Agreements (OTAs) for Prototyping and Rapid Development in Aerospace and Defense Tech

In the aerospace, directed energy, and defense technology sectors, speed matters. Traditional Federal Acquisition Regulation (FAR)-based contracting can deliver rigor and predictability, but it often moves too slowly for today’s rapid technology cycles. Other Transaction Agreements (OTAs) offer a powerful alternative for prototyping and early-stage development, allowing the Department of Defense to engage more quickly with both traditional and non-traditional contractors.

Regions with strong concentrations of national laboratories, Air Force research facilities, and testing infrastructure can be especially well positioned for this type of work. Albuquerque, New Mexico, is one example. Kirtland Air Force Base is home to the Air Force Research Laboratory’s Directed Energy Directorate, the Air Force’s center of expertise for directed energy and optical technologies, and the region has seen OTA activity tied to directed energy prototyping. Recently, Applied Technology Associates, based in Albuquerque, received a $17.66 million other transaction prototype project agreement for a directed energy counter-UAS prototype, with work to be performed in Albuquerque. For companies operating in similar defense technology clusters, OTAs can provide a practical pathway for engaging with government customers where speed, technical iteration, and customized agreement terms are important.

What Are OTAs and Why They Matter Now

Other Transaction Agreements are flexible instruments that are not standard procurement contracts, grants, or cooperative agreements. For DoD prototype projects, the current statutory authority is 10 U.S.C. § 4022, which permits prototype projects directly relevant to enhancing mission effectiveness or improving platforms, systems, components, or materials proposed to be acquired, developed, or used by the Department of Defense. Under specified conditions, a successful prototype OTA may also support a follow-on production contract or transaction without the use of additional competitive procedures.

Although OTAs are not governed by the FAR and DFARS in the same manner as traditional procurement contracts, they are not free from legal constraints. Statutory conditions, procurement ethics rules, fiscal controls, export controls, cybersecurity obligations, and negotiated agreement terms can still materially affect performance and risk allocation.

When OTAs Are Most Advantageous (and When They May Not Be)

OTAs tend to work best in these situations:

•           Early-stage prototyping and technology demonstration

•           Projects involving non-traditional defense contractors or commercial technologies

•           Efforts where speed and iterative development are priorities

•           Situations where customized intellectual property terms are important

They are generally less suitable when:

•           The requirement is well-defined and stable (traditional contracting may be simpler)

•           Significant production quantities are already required from the start

•           The government needs the full suite of FAR protections and standardized clauses

•           Extensive subcontracting flow-down requirements are expected

Understanding the right tool for the job is critical. Using an OTA when a traditional contract would be more appropriate (or vice versa) can create unnecessary complications later.

Key Differences from Traditional FAR-Based Contracts

OTAs differ from standard contracts in several important ways:

•           Flexibility: Terms can be tailored to the specific project rather than following rigid FAR clauses.

•           Speed: Reduced administrative requirements often allow faster award and modification.

•           Intellectual Property: Parties have more freedom to negotiate data rights and patent terms, which can be advantageous for companies bringing proprietary technology.

•           Eligibility: OTAs can more easily include non-traditional contractors who might otherwise struggle with full FAR compliance.

•           Follow-on Production: Successful prototype OTAs can transition to production without new competition under certain conditions.

These differences make OTAs particularly attractive for directed energy systems, advanced sensors, and software-defined capabilities where rapid iteration is essential.

Recent DoD Policy Emphasis on OTAs

Recent policy developments have reinforced the Department of Defense’s interest in faster and more flexible acquisition approaches, although the specific authority used will depend on the nature of the requirement. In March 2025, the Secretary of Defense issued a memorandum focused specifically on software acquisition, directing the Department to adopt the Software Acquisition Pathway as the preferred pathway for software development components of business and weapon system programs. The memorandum also directed the use of Commercial Solutions Openings and Other Transactions as the default solicitation and award approaches for those software efforts.

For aerospace, directed energy, and other defense technology companies, the practical takeaway is not that every effort should proceed through an OTA. Rather, the takeaway is that DoD is continuing to prioritize acquisition models that support speed, modularity, commercial engagement, and iterative development—especially where software-defined capabilities, digital engineering, or rapidly evolving technologies are involved.

Best Practices for Negotiating and Managing OTAs

Companies that succeed with OTAs typically follow several practices:

•           Engage legal and contracts teams early during opportunity shaping, not just after award.

•           Carefully negotiate intellectual property and data rights provisions upfront.

•           Understand the specific OTA consortium (if applicable) and its membership requirements.

•           Plan for the transition to production from the beginning, including documentation and performance metrics that will support a follow-on award.

•           Maintain strong communication with the agreements officer throughout performance.

When working through consortia, companies should also understand membership costs, decision-making processes, and how work is distributed among members.

Common Pitfalls and How to Avoid Them

Several recurring issues can undermine OTA efforts:

•           Treating an OTA like a traditional contract — This often leads to unnecessary delays or disputes over terms that could have been customized. For instance, teams accustomed to FAR-based processes may insist on standard clauses that do not apply, request extensive flow-down requirements that defeat the purpose of flexibility, or spend weeks negotiating provisions that could have been tailored from the outset. This not only slows down the award but can also create friction later when the government or consortium seeks to exercise the very flexibility the OTA was designed to provide.

•           Weak transition planning — Many prototype efforts fail to secure follow-on production because performance data and documentation were not properly captured.

•           IP and data rights misalignment — Poorly negotiated rights can limit a company’s ability to commercialize technology later.

•           Underestimating consortium dynamics — Membership and voting structures can significantly affect a company’s influence and access to work.

•           Compliance gaps — While OTAs are more flexible, certain requirements (such as export controls, ethics, and conflict-of-interest rules) still apply.

Proactive planning can help companies avoid most of these issues.

References

1.         Secretary of Defense Memorandum, “Directing Modern Software Acquisition to Maximize Lethality” (March 6, 2025).

2.         Executive Order, “Modernizing Defense Acquisitions and Spurring Innovation in the Defense Industrial Base” (April 9, 2025).