Section 4022 of Title 10 (formerly 10 U.S.C. § 2371b, renumbered by the Title 10 reorganization effective January 1, 2022) is the Department of Defense’s prototype “other transaction” (OT) authority. It lets designated DoD officials carry out prototype projects directly relevant to enhancing mission effectiveness or improving platforms, systems, components, or materials.
Appropriate-use conditions (subsection (d))
A prototype OT may be entered only if one of four conditions is met:
- at least one nontraditional defense contractor or nonprofit research institution participates to a significant extent;
- all significant non-federal participants are small businesses or nontraditional contractors;
- at least one-third of total project cost is paid from non-federal sources; or
- the senior procurement executive determines in writing that exceptional circumstances justify innovative business arrangements.
Approval thresholds (subsection (a)(2))
Prototype OTs expected to cost over $100M (up to $500M) require a written head-of-contracting-activity determination; those over $500M require a senior-procurement-executive determination plus 30-day congressional notice. These approval authorities may not be delegated.
Follow-on production (subsection (f))
A prototype OT may provide for a follow-on production contract or transaction — awardable without further competition — if competitive procedures were used to select participants and the participant successfully completed the prototype project. This provision is the engine behind OT-to-production pathways and the subject of leading protest decisions.