Other Transactions (OTs): The $18.3 Billion Market Every Federal Contractor Should Understand

Over the past 18 months, the federal procurement space has experienced significant changes. Alongside rapid advances in emerging technologies and the use of artificial intelligence, we are seeing changes in how the government seeks to acquire innovative solutions. A series of executive orders has not only resulted in the Revolutionary Far Overhaul (RFO) but also encourages agencies to use acquisition methods that accelerate delivery and reduce administrative burden.  

Secretary Hegseth’s Software Acquisition Reform Memorandum, dated March 2025, directs the Department of Defense (DoD) to adopt the Software Acquisition Pathway for all software development components of business and weapon system programs. This memo further directs the use of “Commercial Solutions Openings and Other Transactions as the default solicitation and award approaches for acquiring capabilities under the SWP.”

Together, these initiatives signal a clear shift away from lengthy, compliance-driven acquisition processes and toward faster, outcome-focused procurement strategies. OTAs fit squarely within this vision. Unlike traditional FAR-based contracts, OTAs provide agencies with greater flexibility to engage innovative companies, structure agreements around mission needs, accelerate prototyping efforts, and transition successful technologies into production.

So what exactly are Other Transactions (OTs) or Other Transaction Authority (OTAs)? 

Simply put, an OT is a legal instrument issued by the federal government that is not a contract, cooperative agreement, or grant. It is a legal procurement method but is not subject to the Federal Acquisition Regulation (FAR) or other agency supplements, which allows the Government to tap into non-traditional vendors and emerging technologies and to utilize common industry business practices.

There are three types of Other Transactions:

• Research OTs – authorized under 10 U.S.C 4021– are intended to spur dual-use research and development projects and are considered a non-acquisition instrument.
• Prototype OTs – authorized under 10 U.S.C 4022– are used for prototype projects and are considered an acquisition instrument.
• Follow-on Production OTs – authorized under 10 U.S.C 4022(f) are non-competitive contracts or transactions to produce, sustain, or otherwise implement the results of successfully completed prototype projects for continued or expanded use.

The use of OTs has grown steadily over the past decade, led primarily by the Department of Defense (War), and this growth is expected to increase over the coming months as the government continues its efforts to accelerate innovation and expand access to technologies that might be used with non-traditional contractors.

Why are OTs important? OTs provide an unparalleled opportunity for companies to work with the federal government. Because OTs are typically not subject to the FAR, companies and the government are able to negotiate terms that are favorable to both. This helps reduce procurement timelines and provides flexibility in negotiating intellectual property rights, project terms, and agreements. For commercial companies, including non-traditional contractors, OTs help reduce barriers to entering the federal marketplace.

In FY25, $18.3B, or 2.3% of the total federal awards, was Other Transactions awards. While total OT obligations decreased slightly in FY25, they remain near record levels, demonstrating the continued use of OTs. Based on the FY26 YTD awards, we expect OT spending to remain strong and potentially increase given the acquisition guidance and reforms in place.

While OTs have been in use since their authorization in 1958,  only since FY16 have we seen increased use of OTs, especially by the defense agencies. As seen in the chart above, Defense agencies account for more than 98% of the total OTs.  In FY25, Defense agencies funded $17.8B in OTs compared to $395M funded by civilian agencies. With the increased emphasis on acquisition reform and commercial technology, it is expected that the DoD will remain the primary driver of OT growth.

While civilian agencies account for a minuscule amount of the total OT awards, the use of the authority has shifted over the past five years.  

The Department of Homeland Security (DHS), a long-time user of OTs, has seen the use of OTs fall from a high of $308M in FY21 to less than $3M in FY25, coming from the US Coast Guard. The Transportation Security Administration (TSA), which accounted for nearly all of DHS’s OTs, has not funded any OTs since FY23.

We see the use of OTs within the Department of Health & Human Services (HHS) increase from $19M in FY22 to $393M in FY25, driven by the National Institute of Health (NIH), which increased its funding under OTs from $223M in FY24 to $393M in FY25.

The Department of Energy has used OTs sparingly in FY22 & FY23.

The Department of Defense (War) continues to be the driving force behind the growth of OTs. Despite a fall in FY22, funding reached $17.8B in FY25.

The Army is the largest user of OTs, although its funding has declined from $10B in FY21 to $5.2B in FY25. During the same period, we see funding for OTs increase at the Air Force from $2B in FY21 to $5.2B in FY25. The Department of the Navy has also increased its use of OTs, reaching $2.3B in FY25. Additionally, DLA is using OTs, reaching $20M in FY25. In FY25, the US Army Corps of Engineers (USACE) reached $5.4M in OT funding – while small in the overall OT spend, we expect to see this amount increase over the coming years as USACE expands the use of OTs as part of its acquisition strategy.

The Department of Defense (DoD) funded more than $5B, or 28% of the OT funding in FY25, across 20 bureaus. Looking at the bureau-level data provides an understanding of where the innovation is occurring. The top 10 bureaus within the DoD account for more than 99% of the DoD funding.

The Immediate Office of the Secretary accounts for almost 40% of the FY25 funding at $ 1.9B.  DARPA follows with $1.2B in funding for research and next-gen projects. Over the past few years, several of the bureaus have seen funding for OTs increase within their agency:

• Defense Information Systems Agency (DISA) has seen its funding of OTs increase from $50M in FY21 to $340M in FY25.  
• Defense Health Agency has also seen its funding increase from $8.2M in FY21 to $300M in FY25.
• The US Cyber Command has started using OTs in FY24 and has funded more than $80M in FY25.

Analyzing OTs at the funding agency and bureau level provides an understanding of where the agencies are investing in innovation and which agencies are adopting flexible acquisition strategies, providing insights into where the future opportunities for industry lie.   

It is important to note that in FY21, the Army accounted for more than 65% of the defense agency funding of OTs, but the share declined in FY25 to 29%. During the same time period, we see the overall OT funding increase, along with a broader adoption of OTs across the various agencies and bureaus, including USACE, as these agencies accelerate the adoption of innovative technologies. This signifies the use of OTs in a mainstream procurement process rather than a niche tool.

In FY25, more than 1400 companies had transactions related to OTs. The top 10 companies include 3 consortia, namely Advanced Technology International, National Security Technology Accelerator, and the Consortium Management Group, and account for 35% of the awards.  

The top 10 companies account for 50% of the OT awards and include Northrop Grumman, L3 Harris, and Lockheed Martin. Anduril Industries, which was among the top 10 companies winning SBIRs, is also one of the top 10 companies winning OTs.

Given how OTs work, there are no NAICS codes assigned to the transaction details in FPDS/SAM.gov; however, PSC codes are assigned. Looking at the top PSC codes provides us with insights into the broad categories of work that are being acquired through OTs.

The top 10 PSC codes account for more than 75% of the total awards, with the National Defense R&D services PSC codes accounting for almost 60% of the total awards.

Typically, there is no specific solicitation for companies to respond to – they are responding to Broad Agency Announcements or Program Solicitations that are released by the agency.

In FY25, more than 73% of the awards were awarded against program solicitations, and 17% were awarded against BAAs.

In FY25:

• $496.8M, or less than 3% of OT awards, was awarded to educational institutions
• $3.5B, or 20%, was awarded to Non-Profit Organizations

In addition to tracking opportunities in SAM.gov, using keywords, and specifically tracking Broad Agency Announcements and Program solicitations, it is important to track listings on the appropriate agency website. Additionally, and especially if you are looking for opportunities within the defense agencies, MarketPlace and Tradewinds are good places to start.

Other Transactions have evolved over the years from a niche acquisition tool into a more mainstream procurement strategy for acquiring innovative technologies across industries. While they account for a little more than 2% of the total federal obligation, their importance, along with recent acquisition reforms, will likely lead to an increase in the use of OTs over the years.

While the defense agencies remain the primary driver of OT usage, we are seeing an overall wider adoption. Understanding spending and opportunities at the department level is essential for a company to succeed.

Companies need to understand which agencies are funding OTs and searching for innovative solutions. This involves not only monitoring the public data sites but also identifying the various consortia that support their solution.

Understanding the evolving landscape will be increasingly important for both traditional government contractors and commercial companies entering the federal space, as OTs are no longer an alternative acquisition method but are an integral part of the government’s acquisition strategy.

Note: Analysis is based on GovSpend’s federal platform and Fedmine’s analysis of FPDS /sam.gov spend data.