The provision dates back to the early years of the space race, when NASA was looking to quickly acquire technologies from the commercial technology world. The Defense Department under President Trump has made prolific use of such agreements, citing the need to move faster in some cases.
The agreements play into a broader national security strategy that is focused on shifting the U.S. military’s resources away from fighting terrorism and toward preparing for an all-out war with a “near peer” competitor such as Russia or China.
The Other Transaction Authority provision is meant to prioritize small businesses or “nontraditional” defense contractors that do not usually work with the government. Traditional defense contractors can also be eligible when they meet certain criteria, meaning industry giants such as Lockheed Martin and Raytheon can benefit as well.
The Army is using Other Transaction Authority agreements to buy its next fleet of attack helicopters, awarding an initial set of contracts to companies that include Bell and Lockheed Martin.
It also recently finalized a $384 million deal with Raytheon for six missile defense radars called LTAMDS, designed to replace the Patriot missile defense radar. The new LTAMDS radar is supposed to have a stronger signal and enhanced accuracy, thanks to the use of a substance called gallium nitride.
Executives said the alternate process allowed them to significantly speed up the acquisition.
“The streamlined OTA rapid prototyping acquisition process gets capability to the warfighter more quickly,” Doug Burgess, program director for Raytheon’s LTAMDS radar, said in an email.
A recent report from the Center for Strategic and International Studies found that the Defense Department’s use of Other Transaction Authority agreements has increased by about 350 percent since President Trump took office, totaling about $26.8 billion last year. That activity has been led by the Army, with an 86 percent increase last year alone.
An Army spokesman said all of the agreements go through an approval process to ensure they conform to a specific set of legal requirements.
“Prior to each OTA award, every proposed agreement is documented and approved to ensure these conditions are met and the OTA instrument is in fact the appropriate method for procurement,” spokesman Vinston Porter said.
Defense analysts said such tools could be useful for accelerating the Defense Department’s technology. They are favored because they provide a catchall solution to what many regard as a broken acquisition system, analysts said.
“Contractors and the government alike don’t really like the [federal acquisition] regulation. It costs money to comply with all of it,” said Franklin Turner, a government contracts attorney with the D.C. law firm McCarter & English. “On the other hand, regulations are there for a reason: to ensure full and open competition, to ensure everyone is playing by the rules.”
Some analysts are concerned that the Defense Department could overuse the provision.
Dave Drabkin, a defense consultant who led the congressionally mandated Section 809 Panel, a group that provides recommendations on streamlining the federal acquisition process, called the Other Transaction Authority provision an “incredibly important tool” for maintaining the U.S. military’s competitiveness.
He said he is worried, however, that Congress could one day take away that tool if the Defense Department uses it inappropriately.
“What the data shows is that a lot of OTAs are being awarded to traditional manufacturers for whom the traditional purpose of OTAS was not intended,” Drabkin said.
Mandy Smithberger, an analyst with the nonprofit organization Project on Government Oversight, said there are “a lot of reasons to be skeptical” of such arrangements.
With an OTA contract, “there’s less transparency, less ability to assess the fairness of pricing, less control over pricing,” Smithberger said, adding, “I would say that we’ve seen them used questionably.”
In one case from 2018, the Defense Department tried to use an Other Transaction Authority agreement to award a contract with a $950 million ceiling to an Amazon Web Services partner called Rean Cloud. (Amazon founder Jeff Bezos owns The Washington Post.)
Facing criticism and a bid protest from Amazon’s rivals, the Pentagon abruptly slashed the maximum value of the contract from $950 million to no more than $65 million, and it dramatically limited the scope of work. A government auditor later ruled that the Pentagon “did not properly exercise authority granted to it.”
Correction: An earlier version of this story misidentified a company with an OTA agreement for the next fleet of Army attack helicopters. It is Lockheed Martin, not a Lockheed Martin-Boeing team.