OTA Needs ALLOT of Work
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Other Transaction Authority was supposed to be different. Clean sheet. Blank page. The Pentagon's answer to Silicon Valley speed, designed to cut through the bureaucratic sludge that keeps America's most innovative companies from working with our military.
Why should a brilliant AI startup have to navigate 2,000 pages of Federal Acquisition Regulations when China's military can cut deals in conference rooms? Why should the next breakthrough in hypersonic technology die in procurement hell while our adversaries move at the speed of ambition?
Enter OTA, and in the span of eight years, Other Transaction Authority exploded from $1.8 billion to $18 billion annually—a 900% increase that makes crypto's best bull run look modest.
Here's what we got for our money: Microsoft and Big Pharma.
The Numbers Don't Lie
The Government Accountability Office dropped the receipts. Of the top 10 companies receiving OTA awards—the program supposedly designed for "non-traditional" defense contractors—exactly two qualify as non-traditional.
Two.
Those revolutionary disruptors changing the face of warfare? Microsoft and AstraZeneca. The first got there through pandemic vaccine development—hardly a repeatable innovation strategy. The second is, well, Microsoft.
The other eight slots belong to the usual suspects: Lockheed Martin, Raytheon, Boeing, and consortium management organizations that serve as middlemen for the military-industrial complex.
This isn't innovation. This is theater.
The Consortium Shuffle
Here's where it gets interesting. Nearly half of all OTA spending flows through consortium management organizations. These are supposed to be the bridge between the Pentagon and scrappy innovators, the connective tissue that helps small companies navigate defense procurement.
Instead, they've become black boxes. When $10 billion gets awarded to a consortium, that money vanishes from public tracking. As GAO director Mona Sehgal explained in our recent interview: "If you look at the numbers and you say $10 billion going to a consortia, it doesn't mean that it went to the organization that's managing it. It eventually has to trickle down and go to the companies that are members. But that visibility is not quite there for DOD in how they track."
The Pentagon defends this opacity by pointing to improved data collection. They're right—they can now track about 80% of consortium transactions. That's like bragging about finding four-fifths of the money you lost. The remaining 20% represents billions in taxpayer dollars with destinations unknown.
Innovation?
The failure runs deeper than accounting tricks. Of 18 major defense programs studied by the GAO, 10 never moved from prototype to production. More than half.
Think about that. The Pentagon spent billions developing prototypes for weapons systems, then decided the technology wasn't ready for prime time. That's not the valley of death—that's a mass grave of taxpayer-funded R&D.
From my experience running R&D programs, this isn't entirely surprising. When you're working with cutting-edge technology, many prototypes don't make it to production. That's the nature of innovation. But a 56% failure rate suggests something more systemic—either we're funding the wrong projects, or we're not building proper bridges from research to deployment.
The survivors tell an equally troubling story. When programs do transition from prototype to production, they overwhelmingly abandon OTAs for traditional contracts. Why? Because when you're spending serious money on complex weapons systems, you want the guardrails that come with proper oversight.
As one GAO official noted, "DOD does not know the extent to which these prototype OTAs directly resulted in production awards." We're running the world's most expensive science fair with no mechanism to measure success.
The Speed Problem
I know this game intimately. As an acquisitions officer for the Air Force, I ran the Kill Chain Integration Branch at Hanscom Air Force Base, managing over $82 billion in contracts. Our mission: solve classified problem sets with unclassified technology. My team of engineers and I weren't naive—we knew the best tech comes from startups that can move quickly, not defense primes that move like glaciers.
That's why we worked closely with MIT startups and graduate teams in the Boston area, along with Silicon Valley companies. The innovation was there. The speed was there. What wasn't there was a procurement system that could match the pace of the problems we were solving.
The central question haunted every project: "How do I put a company on contract fast enough to actually solve the problem we're working on?" We didn't have 6 to 18 months to compete something publicly every time we wanted to work with a new innovative company. Meanwhile, the big primes became the default choice—not because they were better, but because they were already on contract or sitting on government-wide acquisition vehicles that let us task them relatively easily.
This is the speed trap that OTAs were supposed to solve. And it's a real problem that demands a real solution.
But here's what the GAO report reveals: We've built a system that creates the illusion of speed while maintaining the same power structures.
The Training Bottleneck
Behind every failed government program lies a human bottleneck. For OTAs, it's the shortage of "agreements officers"—contracting specialists trained to manage these flexible arrangements.
How many people does the Pentagon train per class? Fewer than 20.
The entire program's expansion depends on scaling human expertise that currently fits in a small conference room.
This matters because OTAs require judgment calls that traditional contracting doesn't. They're "basically blank sheet of paper," as GAO director Mona Sehgal explains in our full interview (available on the GovClose YouTube channel). Without experienced professionals crafting these agreements, the flexibility becomes a liability—either nothing gets done, or taxpayers get fleeced.
As Sehgal put it: "You need a lot of experience to be able to say, here are the things that we think are really important to include here, to get the capabilities we are looking from the contractor." A blank sheet of paper can be terrifying for someone without that experience.
The Microsoft Exception
Let's talk about the one genuine success story: Microsoft's Integrated Visual Augmentation System. The company modified commercial AR headsets for military use, landing a potential $21.9 billion contract.
Then reality hit. Technical problems. Software glitches. Hardware failures. The Army scaled back the program and plans to recompete the contract. As of April 2025, they've spent $1.4 billion on a program that hasn't delivered operational capability.
Even the poster child for OTA innovation can't escape the fundamental tension between Pentagon requirements and commercial technology. The military wants systems that work in 130-degree heat, -40-degree cold, after being dropped from aircraft and soaked in mud.
The Real Game
What's actually happening here isn't innovation—it's regulatory arbitrage. Large defense contractors have figured out how to game OTA requirements while maintaining their dominance. They partner with small companies, check the "non-traditional contractor" box, then proceed with business as usual.
The rules require either: (1) participation by non-traditional contractors, (2) small business involvement, or (3) cost-sharing by traditional contractors. Guess which option gets used most often? Big primes like Boeing and Lockheed simply agree to split development costs with the government, maintaining access to the fast-track procurement they couldn't otherwise access.
It's brilliant, really. They get the speed benefits of OTAs while avoiding the actual disruption those authorities were designed to create.
The China Question
While we're playing procurement games, China isn't. They're building hypersonic missiles, quantum computers, and AI systems through a defense innovation base that moves at commercial speed. Their military-civil fusion strategy eliminates the barriers between civilian tech companies and defense contractors.
We're spending $18 billion on a program that has managed to attract exactly two non-traditional contractors in its top tier. Meanwhile, China has integrated its entire technology sector into national defense planning.
The comparison isn't perfect—authoritarian systems can move faster when they ignore inconvenient things like democratic oversight and contract law. But the Pentagon has its work cut out for it addressing these procurement problems.
The Path Forward
The solution isn't to scrap OTAs—it's to fix them. Real reform requires acknowledging both the legitimate speed problem and the current system's failures.
Data transparency. Every dollar of consortium spending must be trackable to its final destination. The GAO recommends systematic tracking of all OTA transitions to production contracts. This isn't revolutionary technology—it's basic accounting.
Scale the human infrastructure. Training 20 agreements officers per year won't support an $18 billion program. The Pentagon needs to treat workforce development with the same urgency it applies to weapons development.
Build proper bridges. The transition from prototype to production needs deliberate engineering, not hope. Too many good technologies die in the handoff because no one planned for manufacturability, supply chains, or sustainment.
Streamline where it matters. The upcoming Federal Acquisition Regulation reforms could help, but only if they address the core speed problem: How do you put an innovative small company on contract quickly enough to solve the problem you're working on?
Measure what matters. Success should be measured by capability delivered, not contracts awarded. How many OTA technologies actually reached the battlefield? How much faster did they arrive compared to traditional procurement? Right now, nobody knows.
If the goal is actually attracting non-traditional contractors, then track how much money they receive, not just whether they participate. Participation without payment is performance art.
Bottom Line
The Pentagon's Other Transaction Authority has become another transaction with the same contractors. Despite $18 billion in annual spending and 900% growth, the program has failed its basic mission: diversifying the defense industrial base.
Instead of breakthrough innovation, we got regulatory arbitrage. Instead of Silicon Valley speed, we got Pentagon bureaucracy with different paperwork. Instead of attracting disruptive technologies, we've created new avenues for business as usual.
But the opportunity remains. After leaving government, I started a consulting business helping companies navigate federal procurement—the same speed traps and complexity barriers I fought against as an acquisitions officer.
The companies that succeed aren't necessarily the best—they're the ones that understand how the system actually works versus how it's supposed to work. That knowledge gap represents billions in missed opportunities and misdirected innovation investment.
For defense contractors, startups, and government professionals who want to master this system rather than be mastered by it, we've built GovClose—a comprehensive program that teaches the art of government contracting from data analysis to deal execution. It's designed for account executives at major defense companies, tech startups entering the federal market, and veterans transitioning to the private sector.
Because fixing broken systems starts with understanding them.
With proper oversight, workforce development, and measurement systems, OTAs could fulfill their promise. Without reform, they'll remain an expensive reminder that changing the process without changing the power structure just creates more sophisticated ways to maintain the status quo.
The choice is ours. We can fix this system, or we can continue spending billions on the illusion of change while our competitors build the weapons of tomorrow.
This analysis is based on GAO-25-107546, "Other Transaction Agreements: Improved Contracting Data Would Help DOD Assess Effectiveness," September 2025, and an exclusive interview with GAO Director Mona Sehgal. Watch the full interview on the GovClose YouTube channel for deeper insights into the Pentagon's procurement challenges.
About the Author
Richard C. Howard, Lt. Col. (Ret.) managed $82 billion in Air Force contracts before founding Federalytics and GovClose. Recognized as Air Force Analyst of the Year, he's produced hundreds of Federal Market Blueprints guiding companies from Silicon Valley startups to Wall Street investors in scaling federal revenue. His market intelligence reaches audiences across the GovClose YouTube channel and podcast.
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