The Project on Government Oversight (POGO) published a new asking whether the benefits of using "Other Transaction Agreements" (OTAs) are commensurate with the risks (see: Other Transactions: Do the Rewards Outweigh the Risks?). OTAs have been around for a long time but are being used more frequently these days to streamline the procurement process. POGO wonders whether the increased use of OTAs is putting the Government (and taxpayers) at undue risk.
The original idea behind OTAs is that nontraditional vendors might be interested in entering the Government marketplace with a streamlined procurement process. OTAs are not subject to FAR or DFARS, or CAS, or really, any type of Government oversight. Nontraditional contractors that were unable or unwilling to gear up to understand, implement, and comply with procurement regulations and open themselves up to Government oversight, would be willing to come to the table and bring with them innovative solutions that traditional contractors were not offering. The reality, however is that these speedy buying procedures are being leveraged by large traditional contractors that are looking to boost their bottom line by avoiding normal contract administration, oversight, and accountability protections.
The POGO report cites a number of flaws inherent in the OTA process. First, the Government is at a disadvantage with determining price reasonableness. There is no requirement to furnish cost or pricing data which means that in order to determine price reasonableness, the contracting officer must rely totally on outside sources. Second, because OTAs are not subject to FAR (and related regulations), the Government (and public) lose a degree of transparency in the process. The Government must take the word of contractors as to the propriety of claimed costs - there are no audit clauses in OTAs.
POGO argues that OTAs are not serving the stated intent of luring non-traditional contractors to the Federal marketplace. It nots that 72 percent of research OTA funding and 97 percent of prototype OTA funding went to traditional DoD contractors while a DoD IG (Inspector General) report concluded that OTAs have not attracted a significant number of nontraditional defense contractors to do business with the Government.
POGO includes some recommendations that include scaling back the use of OTAs to truly nontraditional contractors (as initially envisioned), adding a layer of oversight to ensure taxpayers are protected and renegotiate some OTA as FAR contracts.
The full report can be found here.