What an other transaction is
Other transactions are a statutory alternative to the FAR contract. The Secretary of Defense and the secretaries of the military departments may enter into transactions other than contracts, cooperative agreements and grants to carry out basic, applied and advanced research projects 1.
A second authority covers prototypes. The Director of DARPA, the Director of the Defense Innovation Unit, the secretary of a military department, or another official the Secretary of Defense designates may carry out prototype projects directly relevant to enhancing the mission effectiveness of Department of Defense personnel 2.
The statutory gate for a prototype project
A prototype other transaction comes with a gate. The Secretary of Defense must ensure that no official enters into one unless at least one of the conditions the statute lists is met 3.
Three of those conditions are about who takes part and who pays. At least one nontraditional defense contractor or nonprofit research institution participates to a significant extent in the prototype project 4. Or all significant participants other than the government are small businesses, including small businesses in the SBIR and STTR programs, or nontraditional defense contractors 5. Or at least one third of the total cost of the prototype project is paid from sources other than the Federal Government 6.
Nontraditional has a precise meaning. A nontraditional defense contractor is an entity that is not currently performing, and has not performed, any DoD contract or subcontract subject to full coverage under the cost accounting standards, for at least the one-year period before DoD solicited sources 7. A company that held no fully CAS-covered DoD contract or subcontract in that year can qualify; check your own history against the definition rather than assuming.
What counts as a prototype project
The statute reads "prototype project" broadly. It includes a proof of concept, model or process, including a business process 8; reverse engineering to address obsolescence 9; and a pilot or novel application of commercial technologies for defense purposes 10. A commercial product adapted for a military user can therefore be a prototype project, not only new hardware.
The prize: follow-on production
A prototype other transaction may provide for the award of a follow-on production contract or transaction to its participants 11. That follow-on may be awarded to the participants without the use of competitive procedures 12 if competitive procedures were used to select the parties for the prototype 13 and the participants successfully completed the prototype project 14.
The DFARS recognises the same path. Follow-on production contracts for products developed under the other transactions authority of 10 U.S.C. 4022 are excepted from DFARS part 206 when the contracting officer receives sufficient documentation from the agreements officer 15.
Finding other transaction opportunities
Bids2Bank's SAM.gov search can filter by notice type, including Special Notice 16.
Worked example. Contractor G, a software firm with no CAS-covered defense work, teams with Contractor H, a large integrator, on a prototype for a military department. Their agreement gives Contractor G the core software development and test, so its participation is significant, and states the completion test as a field demonstration with named acceptance criteria. When the demonstration passes, the agreement's follow-on language lets the agreements officer move to production without a new competition.
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