What Qualifies as a “Prototype” for an Other Transactions Agreement?

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What is a prototype? What seems to be a simple question with a simple answer is sometimes mysterious when trying to determine if a project falls under Other Transactions statutes. First, it is important to recognize that what the prototype statute, 10 U.S.C. 4022 (aka 2371b), authorizes is a ”prototype project.” That is the term that is defined in the DOD Guide on Other Transactions (Nov. 2018):

Prototype Project.  The definition of a “prototype project” in the context of an OT is as follows: a prototype project addresses a proof of concept, model, reverse engineering to address obsolescence, pilot, novel application of commercial technologies for defense purposes, agile development activity, creation, design, development, demonstration of technical or operational utility, or combinations of the foregoing. A process, including a business process, may be the subject of a prototype project.

Part of the inspiration for enactment of the original Other Transactions (OT) statutes was the Packard Commission (President’s Blue Ribbon Commission on Defense Management, 1986) report. In its chapter on acquisition, the report pointed out that there were several factors that made it difficult to successfully manage defense acquisition programs. In addition to recommending increased use of prototyping and advanced technology developments, other recommendations pointed out key elements for successfully managing such programs: (1) a small high-quality staff (team), (2) communication with users, (3) streamlined process with limited reporting requirements, and (4) consideration of adopting commercial capabilities.

Another important point which has been widely misunderstood is the nature of the OT statutes. Many procurement professionals seem to think OTs are a last resort, a niche authority to be used only if a traditional approach will not work. This is wrong! The OT statutes are remedial statutes. The applicable maxim of statutory construction is ”remedial statutes are to be liberally construed.” Rather than narrowly applied, OT statutes should be broadly applied within their statutory scope. In its current form, for section 4022 (2371b) this is “prototype projects that are directly relevant to enhancing the mission effectiveness of military personnel…”

The words “prototype project” imply something more than just a narrowly defined “prototype” and may include a variety of elements. An example is a DARPA project dating back to the Viet-Nam era. Several elements were necessary to project success. One element was the purchase of 1,000 commercially available AR-15 rifles along with ammunition. The rifles were then shipped to Viet-Nam. U.S. and Republic of Viet-Nam troops were trained in their use. They were used in combat for several months. Data was gathered on the test rifles as well as other weapons in use and a comparative analysis made. Eventually a report was written. The result of this was the development of the M-16 rifle, its large-scale production and adoption by the Army and other services.

Another example is Have Blue the demonstration of stealth technology. This example also helps to inform the statutory concept of successful completion of a prototype project. Barely halfway through the Have Blue project the key goals of the project were demonstrated. It was shown possible to build an aircraft with an extremely low radar signature that could be flown safely and demonstrate the feasibility of a combat aircraft with those features. Development of the F-117 (Senior Trend) was initiated while the Have Blue project was still in process. The development time for the F-117 was a fraction of other contemporary fighter aircraft despite its introduction of an entirely new capability, stealth. Black programs like Have Blue may be burdened by the baggage of added security but their low profile also allows for streamlined process and avoids layers of non-value added bureaucracy, an important lesson for prototype projects generally.

Keep in mind also the statutory language “enhancing the effectiveness of military personnel” is a broad concept. The fact that “personnel” is followed by an “and” preceding a list of various physical embodiments applicable to “prototype” emphasizes that OT prototype projects are not limited to physical objects.


Note on Prototype Authority

Prototype Other Transactions Authority was originally enacted as section 845, Public Law 103-160 (National Defense Authorizations Act of 1994). It was expressly “under the authority of section 2371” indicating it was a type of transaction not subject to procurement statutes. It addressed prototype projects relevant to “weapons or weapons systems.” The authority was granted to the Defense Research Projects Agency (DARPA) and originally limited to three years.

“Section 845 authority” as it was known was extended to the rest of DOD and granted an additional three-year extension by section 804 of NDAA 1997. By that time DARPA had, among other projects, initiated or was in the process of initiating major projects under section 845 – Global Hawk autonomous long endurance air vehicle, the Maritime Fire Support Demonstrator (Arsenal Ship) and the Commercial Operations and Support Savings Initiative (COSSI).

Section 845 was repeatedly reauthorized by Congress for nearly twenty years. Section 815 of NDAA codified and made permanent prototype OT authority as section 2371b of title 10 U.S. Code. The authority addresses prototype project relevant to “enhancing the mission effectiveness of military personnel and their supporting platforms…” etc. Authority for follow-on production after a successful prototype project originally enacted in 2002 was streamlined. NDAA 2018 added an education and training mandate related to OTs including prototype OTs (secs. 863-864) and included a reference to their applicability to the SBIR program. Congress also directed DOD to create a preference for using section 2371b, 2371 and 2373 in carrying out research and prototype projects and procurement for experimental purposes (sec. 867).

NDAA 2021 renumbered section 2371b of title 10 to section 4003. Most recently this was changed to section 4022. These changes were part of a realignment of subject matter in title 10 and did not include substantive changes to the statute. To fully understand the meaning of the statute requires an understanding of the original language of the statute, its legislative history and its interpretation and uses dating back to DARPA’s original implementation.


written by Richard Dunn