Trends in Defense Use of Other Transaction Authority, FY 2021-2023

Ever since Congress gave the Department of Defense (DOD) the authority to award Other Transaction Agreements (OTAs) for information technology (IT) a few years ago, spending via these types of procurement instruments has been rising. In fiscal year 2021, for example, the DOD spent $14.7B on OTAs for both IT and non-IT requirements. Two years later, that total had risen to $15.6B, split between $9.3B for non-IT requirements and $6.3B for IT requirements.

Today’s post takes a look at high-level trends in defense OTA spending for IT. Other articles will follow in the weeks to come that detail this spending by defense organization and technology area.

Total OTA Spending – Non-IT vs. IT Requirements

Looking back over the last three fiscal years, we can see that spending on non-IT requirements resembles a roller coaster. This is due largely to the short-term nature of most OTAs. When they are initially awarded, most OTAs are for prototypes. If the prototype proves to be successful, or is desired by the organization that procured it, a new OTA will be awarded for the production of the equipment or capability. Prototypes not making it to the production stage can lead to peaks and valleys in the total spending data.

The same situation holds true for IT requirement OTAs, but the data shows that instead of whipsawing up and down, spending on IT OTAs has been rising for the last three fiscal years. Why this happens is easy to explain: the number of OTAs the DOD is awarding for IT requirements is rising. This fact is confirmed by the data. In FY 2021, the DOD awarded 2,091 OTAs. By FY 2023, this number had risen to 2,532. Short term or not, the award of this many OTAs ensures rising year-over-year spending data.

IT OTA Spending by Defense Organization

Breaking down spending by defense organization yields the following distribution.

As has been the case for several years now, the U.S. Army spends the most on IT OTAs. Agencies that are part of the Fourth Estate also continue to rely on OTAs for IT, with the Office of the Secretary of Defense spending $1.7B between FY 2021 and FY 2023.

The Air Force and Navy continue to lag in terms of total spending on IT OTAs, but that dynamic changes when we review the data by fiscal year. Spending on IT OTAs increased in both of those military departments, from $925M for the Air Force in FY 2021 to $1.6B in FY 2023. For the Navy, the numbers are $334M in FY 2021 and $616M in FY 2023, respectively.

IT OTA Spending by Technology Area

As for spending by technology area, here is the data.

Spending on requirements leveraging cloud technology currently outpaces that for any other technology. This is a bit of a change from previous years when spending on cyber capabilities led all technology areas. The one thing that has not changed since earlier analyses of the OTA data is spending on sensor technology. This includes capabilities that fall under the rubric of command, control, and communications. Spending on modeling and simulation and artificial Intelligence/machine learning requirements has also surged in the last couple of years as defense organizations ramped up prototype-related work.

Final Thoughts

The sluggishness of ordinary defense procurement methods pretty much ensures that the DOD will continue to use OTAs for both IT and non-IT requirements. It will continue to pay, therefore, for industry partners to keep track of requirements appearing as OTA competitions, particularly those that provide R&D support.