From 2016 to 2024, Pentagon obligations for prototyping and production agreements through the Other Transaction Authority (OTA) increased tenfold, reaching over $18 billion in 2024.
What the Other Transaction Authority does to procurement
OTAs were created in 1958 for NASA to pursue “research, development and exploration.” Over decades the authority broadened: elements of the Pentagon now use OTAs not only for research and development, but for weapons prototyping and production. Under OTAs, contractors are exempt from key Federal Acquisition Regulation (FAR) rules — including competition standards, cost and pricing data requirements, and accounting principles intended to protect the government from unreasonable expenses. The practical effect, according to the source, is that OTA contracts let contractors “set prices on military contracts practically unilaterally,” while foreclosing some typical government recourse if price gouging occurs.
Major programs moving on OTAs: Golden Dome and DAWG
The administration has used OTAs to advance high-visibility programs. The Biden administration used the authority to kickstart a program called “Replicator,” later renamed the Defense Autonomous Warfare Group (DAWG) by the Trump administration. The White House has also relied on OTAs to advance components of the president’s theoretical missile defense shield, Golden Dome. Earlier this year the Pentagon announced up to $3.2 billion in OTA agreements for a Space-Based Interceptor program and $6.5 billion in OT agreements to develop a Space-Based Airborne Moving Target Indicator program and the Space Data Network.
SpaceX has received a combined total of $6.5 billion in OT agreements tied to the Space-Based Moving Target Indicator program and the Space Data Network. Twelve companies were awarded OT prototyping work for Golden Dome’s Space-Based Interceptors; a third of those are identified as prime contractors: General Dynamics Mission Systems, Lockheed Martin, Northrop Grumman and Raytheon (a business unit of RTX). Other named recipients include Anduril and Booz Allen Hamilton.
The source notes a sharp budget escalation for DAWG: in FY27 the Trump administration requested nearly $55 billion for the program, up from $225 million in FY26 — funds whose underlying costs and profitability, the author warns, may be obscured if OTA vehicles are used.
Your town's IT department is one person. Maybe.
Ransomware crews target small municipalities because nobody's watching. Nubivance gives Maine and New Hampshire towns a security program sized to a town budget.
Protect the town officeGAO findings: data gaps, consortia opacity, and "non‑traditional" claims
The Government Accountability Office (GAO) has raised repeated concerns about the Pentagon’s use of OTAs. The department does not track how quickly production OT agreements deliver capabilities compared with traditional FAR-based contracts, and GAO has called past Pentagon findings about which prototyping OT awards transitioned to production “unreliable and inaccurate.”
From 2021 to 2024, half of OT obligations flowed through consortia — arrangements in which a lead manager receives an award and then distributes work among vendors. GAO reported in 2025 that the Pentagon cannot fully account for which vendors are carrying out work on consortia-funded OT awards, and that the department lacks department‑wide aggregated data on whether OTA awardees are non‑traditional defense contractors (NDCs), the obligations NDCs have received, and their contributions to OTA projects.
Despite those limitations, the department claimed that in FY24 93 percent of OT obligations were awarded to companies in which non‑traditional contractors “significantly participate.” GAO’s assessment calls that claim into doubt because of the department’s limited analytic tools and incomplete data.
Cost Accounting Standards, the FY26 NDAA, and what the change means
The legal definition of “non‑traditional” hinges not on company size but on whether a firm has received a Pentagon contract subject to certain accounting principles in the prior year. Those accounting principles — the Cost Accounting Standards — define how contractors allocate costs to government work. The source argues that without these standards contractors can assign unrelated costs to government contracts.
Congress exempted non‑traditional contractors from the Cost Accounting Standards in the FY26 National Defense Authorization Act. According to the source, that exemption expanded the number of contractors counted as non‑traditional without broadening the legal definition — a statutory outcome the author characterizes as a problematic mismatch.
Recent policy moves and recommended fixes
Policy momentum has pushed the Pentagon toward greater OTA usage. In 2025 Defense Secretary Pete Hegseth issued two memorandums directing maximal use of OTAs and establishing them as a default contracting approach; following the first memo, Space Systems Command increased the number of OT agreements by at least 470 percent. From 2016 to 2024, prototyping and production OTA obligations jumped dramatically — a shift the author describes as a turn from exception to predominant approach.
Julia Gledhill, the Stimson Center analyst who authored the source piece, recommends three concrete corrective steps for lawmakers and the department: limit OTA usage to research and development only; repeal the FY26 NDAA’s non‑traditional exemption from the Cost Accounting Standards to narrow who qualifies as non‑traditional; and require the Pentagon to track how quickly OT agreements deliver capabilities compared with traditional FAR‑based contracts. The author warns that without those changes the department risks “rubberstamping billions of dollars of Pentagon waste,” legalizing otherwise opaque overcharging, and forfeiting insight into costs and profitability for components of major programs.
The record in the source is stark: rapid growth in OTA use, large multi‑billion dollar awards tied to flagship programs, and official audits that find the department cannot reliably document who is doing the work or how quickly capabilities reach the field. The choice for Congress is concrete and technical — narrow an authority once meant for research, or leave open a contracting pathway that the author argues has already outgrown its original purpose.
