United States: The Army's Newest $21 Billion Contract Is Not Your Typical Government Contract

Last week the Army awarded Microsoft the Integrated Visual Augmentation System (IVAS) contract, a potentially $21 billion undertaking by the Army to develop next-generation night vision and "situational awareness capabilities" in a Heads Up Display. Unlike Microsoft's last multi-billion dollar contract award, the Joint Enterprise Defense Infrastructure (JEDI), which is still pending before the Court of Federal Claims more than a year after Amazon filed its bid protest challenging the award in November 2019, IVAS is unlikely to experience the same fate. Why? Because IVAS was awarded under the Army's Other Transaction authority (OTA) and is not subject to the same FAR rules as the JEDI contract.

What makes an OTA different?

An OTA is commonly defined as what it isn't: it isn't a procurement contract, cooperative agreement, or grant. An old contracting vehicle first approved by Congress during the Space Race, OTAs provide the government maximum flexibility in procurements because they are generally exempt from the FAR and other acquisition regulations.

The goal behind OTAs was to encourage small businesses with cutting edge technologies to do business with the government. OTAs tend to closely resemble commercial agreements and do not require significant federal contracting know-how or costly compliance measures that would otherwise be involved with more traditional government contracts. While originally geared towards small, non-traditional government contractors, the government has largely expanded its use of OTAs to quickly acquire innovative products and services from all types of contractors, including larger, more experienced contractors, like Microsoft.

Coincidentally, because OTAs are not procurement contracts, OTA awards are more difficult to challenge via a bid protest. The Competition in Contracting Act generally does not apply to them, which means that protests at GAO are limited to pre-award protests of whether an agency is properly using an OTA. GAO will not review the merits of the award itself. The Court of Federal Claims has similarly concluded it will not review OTA awards because these fall outside its jurisdiction under the Tucker Act. The end result is that OTAs, like IVAS, tend to be less susceptible to successful protest challenges.

Are there any limits on the government's use of OTAs?

OTAs are not available to every agency. Only a handful of agencies, like NASA and DOD, have the requisite statutory authority from Congress. OTAs are also limited to prototype projects at some agencies.

Most agencies also are strongly encouraged not to use OTAs because of the absence of the normal FAR provisions. DOD's OTA statutes-10 U.S.C. §§ 2371 and 2371b-requires the participation of non-traditional defense contractors, one-third of the total cost to be paid by sources other than the government, or a written justification by the senior procurement executive for the use of the OTA.

What does the IVAS award mean for OTAs in the future?

While it remains to be seen how much the Army will actually spend on the IVAS contract, the sheer size of this OTA will certainly bring renewed attention to this contracting vehicle. The government certainly sees the appeal in the flexibility of OTAs, and it is probably reasonable to assume the government will continue to its practice of using OTAs to acquire new and emerging technologies from contractors of all sizes and experience levels.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.