Federal Acquisitions: Use of 'Other Transaction' Agreements Limited and Mostly for Research and Development Activities
Released: 2016-01-07T00:00:00


Highlights: section_title: Why GAO Did This Study
paragraphs: Federal agencies use a variety of acquisition and financial assistance mechanisms, such as contracts, grants, and cooperative agreements, to help meet their missions. Some federal agencies have received authorization to use other transaction agreements, which allow an agency to enter into agreements other than traditional mechanisms, such as contracts. As a result, agencies can customize their other transaction agreements to help meet project requirements and mission needs. As GAO reported in May 2002, this authority carries risks, however, because such agreements may be exempt from the Federal Acquisition Regulation and other requirements that are intended to protect taxpayers' interests.

GAO was asked to review federal agencies' use of other transaction authority. This report describes (1) which agencies are authorized to use other transaction agreements and the extent to which agencies have guidance to implement the authority, (2) why agencies used other transaction agreements and for what types of activities, and (3) the extent to which agencies used other transaction agreements for fiscal years 2010 through 2014. GAO reviewed statutory authorizations, agencies' guidance, and information on agencies' other transaction agreements and use for fiscal years 2010 through 2014, and interviewed officials from each of the agencies authorized to use other transaction agreements.

section_title: What GAO Found
paragraphs: Congress has authorized 11 federal agencies to use other transaction agreements—which generally do not follow a standard format or include terms and conditions required in traditional mechanisms, such as contracts or grants—to help meet project requirements and mission needs. The National Aeronautics and Space Administration (NASA) first received this authority in 1958. Over the next several decades, five additional federal departments were given this authority—Defense (DOD), Energy (DOE), Health and Human Services (HHS), Homeland Security (DHS), and Transportation (DOT). Congress also granted authority to five agencies within these departments, including DOT's Federal Aviation Administration and DHS's Transportation Security Administration (TSA). The statutory authorities for most agencies include some limitations on the use of their agreements, although the extent and type of limitations vary. For example, DOT's authority limits use of other transaction agreements to research, development, and demonstration (RD&D) projects that focus on public transportation. Ten of the 11 agencies have issued guidance to implement their authority. The last agency—the National Institutes of Health (NIH)—is in the process of developing guidance.

Most agencies cited flexibility as a primary reason for their use of other transaction agreements, and used agreements mostly for RD&D activities. Officials from 7 agencies told GAO the authority allowed them to develop customized agreements that addressed concerns over requirements in traditional mechanisms that some companies viewed as potential obstacles to doing business with a federal agency. This flexibility allowed agencies to address concerns regarding intellectual property and cost accounting provisions that would otherwise need to be included when using traditional mechanisms, such as contracts. In addition, other transaction agreements allowed some agencies to tailor other terms and conditions of agreements as needed when working with other entities. Most agencies—9 of the 11—used other transaction agreements for RD&D activities for a range of projects from medical research to energy development research. Two of the 9 agencies—DOD and DHS—also used other transaction agreements for prototype activities. Three agencies, including TSA and NASA, used other transaction agreements for activities not related to RD&D or prototype development, including airport security and education and outreach.

Other transaction agreements were a small proportion of most agencies' contracting and financial assistance activities for fiscal years 2010 through 2014. Compared to traditional mechanisms, most agencies used other transaction agreements sparingly, according to officials. Most agencies had a small number of other transaction agreements—75 or fewer—in fiscal year 2010, and the number of agreements generally remained low by the end of fiscal year 2014. Officials cited budgetary and other reasons for this trend. In contrast, two agencies that used other transaction agreements for activities other than RD&D and prototypes—TSA and NASA—had larger numbers of agreements. In fiscal year 2010, TSA and NASA had about 400 and 2,220 agreements, respectively. By the end of fiscal year 2014, these agencies had increased their use to about 640 and 3,220 agreements, respectively.

section_title: What GAO Recommends
paragraphs: GAO is not making any recommendations in this report.

section_title: Letter
paragraphs: Federal agencies use a variety of acquisition and financial assistance  mechanisms, such as contracts, grants, and cooperative agreements, to  help meet their missions. In addition, Congress has authorized certain  agencies to enter into agreements under a separate authority, referred to  as “other transaction authority.” This authority allows an agency to enter  into agreements “other than” standard government contracts or other  traditional mechanisms. Agreements under this authority are generally not  subject to federal laws and regulations applicable to federal contracts or  financial assistance, allowing agencies to customize their other  transaction agreements to help meet project requirements and mission  needs. Furthermore, because fewer requirements apply, other transaction  agreements can be useful in attracting entities, such as companies that  have traditionally not done business with federal agencies. However, we  and others have previously reported that the use of other transaction  agreements carries the risk of reduced accountability and transparency,  in part because such agreements may not require compliance with  federal requirements, such as government cost accounting standards.

You asked us to review federal agencies’ use of other transaction  authority. This report describes (1) which federal agencies are authorized  to use other transaction agreements and the extent to which agencies  have guidance to implement the authority, (2) why agencies used other  transaction agreements and for what types of activities, and (3) the extent  to which federal agencies used other transaction agreements for fiscal  years 2010 through 2014.

To determine which agencies are authorized to use other transaction  agreements, we reviewed laws and other transaction authority statutes.  We also reviewed implementing regulations, and management directives,  policies, and guidance to determine which agencies have guidance to  implement their authority and to understand how agencies implemented  other transaction authority statutes. To determine why agencies used  other transaction agreements and for what activities, we reviewed agency  documentation including other transaction agreements and modifications,  and agency reports to Congress, among other things. We also conducted  semi-structured interviews with officials from each agency authorized to  use other transaction agreements to discuss the types of activities the  agency used other transaction agreements for and examples of these  activities. We did not evaluate whether agencies’ use of other transaction  agreements was in compliance with statutory requirements or how  agencies implemented their authority. To determine the extent of  agencies’ use of other transaction agreements in fiscal years 2010  through 2014, we collected data from the agencies in two ways. For  agencies that used other transaction agreements 10 or fewer times during  the period from fiscal year 2010 through fiscal year 2014, we requested  from agencies documentation on each of these agreements. For agencies  that used more than 10 other transaction agreements during the same  period, we requested that agencies provide data from their data systems  on the number of other transaction agreements used for each fiscal year  from 2010 through 2014.  For these agencies, we took steps to assess  the reliability of the data systems, including interviewing officials to gather  information on the data systems used and the specific data provided. We  determined that the other transaction agreement data we obtained were  sufficiently reliable for the purpose of reporting agencies’ extent of use of  other transaction agreements during the 5-year period reviewed. We also  conducted semi-structured interviews with officials from the agencies to  learn about their use of other transaction agreements and the reasons for  any trends in agencies’ other transaction agreement use. A more detailed  description of our objectives, scope, and methodology can be found in  appendix I.

We conducted this performance audit from January 2015 to January 2016  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.
subsections: section_title: Background
paragraphs: Several traditional mechanisms are available to carry out federal  agencies’ acquisition and financial assistance activities. These include  contracts, financial assistance mechanisms such as grants and  cooperative agreements, and cooperative research and development  agreements. Every agency has inherent authority to enter into contracts  to procure goods or services for its own use; however, agencies must  receive separate authority to provide or award funding or property to  benefit someone other than the government, such as through a grant.  The traditional mechanisms include the following:

Contracts. These are most often used for the procurement or  purchase of goods and services for the direct benefit of the  government. Under the Federal Acquisition Regulation (FAR), certain  contracts are subject to cost accounting standards and cost principles  and procedures. For example, these principles are used in  determining the costs the government will reimburse under a cost- reimbursement contract.

Financial assistance. Financial assistance mechanisms include  grants and cooperative agreements, which differ in the amount of  federal involvement in the project. Under the Federal Grant and  Cooperative Agreement Act, an agency is to use a grant agreement  when the principal purpose of the relationship is to transfer a thing of  value to the recipient to carry out a public purpose of support or  stimulation authorized by law and substantial involvement by the  agency is not expected. For grants, an agency’s involvement is  essentially administrative, which includes standard federal  stewardship responsibilities such as reviewing performance to ensure  that the objectives, terms, and conditions of the grant are  accomplished. Under cooperative agreements, an agency expects to  be substantially involved in the project through tasks such as  reviewing and approving one stage of a project before work can begin  on a subsequent stage.

Cooperative research and development agreements. First  authorized in the 1980s, cooperative research and development  agreements are written agreements between a federal laboratory and  a nonfederal partner to work together on a project; typically, the  project focuses on technology transfers. Under cooperative research  and development agreements, agencies and nonfederal partners,  such as private companies, are able to share resources, technical  expertise, and any intellectual property that emerges from the effort,  as well as increase the commercialization rate of the federally  developed technology.

In addition to these authorities, Congress established “other transaction  authority” for certain agencies through separate legislation. Under these  authorities, agencies may develop agreements that are not required to  follow a standard format or include terms and conditions that are typically  required when using traditional mechanisms. Agreements entered into  using traditional mechanisms, such as a contract, grant, cooperative  agreement, or cooperative research and development agreement, contain  terms and conditions to ensure compliance with statutory requirements  applicable to those mechanisms. Agreements entered into using other  transaction authority, conversely, are not generally subject to these  requirements, and the terms and conditions of each individual other  transaction agreement may be tailored to meet the specific situation. This  flexibility can help agencies attract and partner with entities that have not  done business with federal agencies due to concerns about standard  government requirements. Other transaction agreements may include  various funding arrangements or may be nonreimbursable, where each  party bears the costs of their participation and funds are not exchanged.  In addition, the length of an other transaction agreement is also  negotiable, with some agreements lasting a few days and others for  years.

Agencies may use other transaction agreements for a variety of projects  and activities. For example, agencies can use other transaction  agreements for research, development, and demonstration (RD&D)  projects and activities that help advance new technologies or processes.  Agencies also may use other transaction agreements for developing and  reviewing “prototypes,” or physical or virtual models that can help  evaluate the technical or manufacturing feasibility, or the military utility, of  a particular technology or process, concept, or system.

Although other transaction authority offers benefits to agencies and  entities, its use also carries risks. We and others have previously reported  that agencies’ use of other transaction authority has resulted in reduced  accountability and transparency, in part because other transaction  agreements may be exempt from the FAR and government cost  accounting standards. In addition, we have reported on the challenges  agencies face in creating and administering other transaction agreements  because these agreements do not have a standard structure based on  regulatory guidelines. Previous GAO reports have focused on individual  agencies’ use of other transaction authority. This report includes  information on all agencies with other transaction authority.

section_title: Eleven Federal Agencies Are Authorized to Use Other Transaction Agreements and Generally Have Guidance for Use
paragraphs: Congress has granted statutory authority to use other transaction  agreements to 11 federal agencies. The National Aeronautics and  Space Administration (NASA), which was granted the authority in 1958,  was the first agency to receive it (see fig. 1). Over the next several  decades, the authority to use other transaction agreements was granted  to five federal departments—the Departments of Defense (DOD), Energy  (DOE), Health and Human Services (HHS), Homeland Security (DHS),  and Transportation (DOT). Congress also granted specific authority to  use other transaction agreements to several agencies within these  departments, including the Federal Aviation Administration (FAA) within  DOT and the Transportation Security Administration (TSA) and the  Domestic Nuclear Detection Office (DNDO) within DHS. DOE’s Advanced  Research Projects Agency–Energy, commonly known as ARPA-E, was  the most recent agency to receive other transaction authority, which was  granted in 2011. In some cases, Congress also provided separate  authority to use other transaction agreements to programs within an  agency. For example, certain programs within HHS’s National Institutes of  Health (NIH) were provided separate authority, such as a program that  focuses on researching heart, lung, and blood diseases. For the purposes  of this report, we will use the term “agencies” to refer to both the federal  departments and the agencies within them that have received specific  statutory authority to use other transaction agreements. See appendix II  for a list of agencies’ statutory authorizations to use other transaction  agreements.

Since initially enacting these other transaction authorities, Congress has  expanded the authorities for 2 of the 11 agencies. In 1989, DOD first  received other transaction authority for advanced research projects  carried out by one of its components, the Defense Advanced Research  Projects Agency. Then, in 1991, Congress made this authority  permanent and extended it to the entire department. In 1993, Section  845 of the National Defense Authorization Act for Fiscal Year 1994  authorized the Director of the Defense Advanced Research Projects  Agency to use other transaction agreements for weapons or weapons  systems prototype projects. In 1996, Congress then extended the  authority to use other transaction agreements for prototype projects to the  entire department. Congress also expanded NIH’s other transaction  authority to separate programs within the agency. NIH is composed of 27  institutes and centers, each with a specific research agenda. Beginning  in 1972, NIH’s National Heart, Blood Vessel, Lung, and Blood Diseases  and Blood Resources Program was granted other transaction authority.  Subsequently, three other NIH programs also received other transaction  authority.

While most agencies have permanent other transaction authority, DHS’s  and DOE’s general authorities are temporary. Congress has extended  these temporary authorities several times since initially granting them in  2002 and 2005, respectively. As of September 2015, DHS’s authority was  set to expire at the end of fiscal year 2015 and DOE’s at the end of fiscal  year 2020. While DOD’s other transaction authority for RD&D is  permanent, its authority for prototype activities is temporary and is set to  expire at the end of fiscal year 2018. Lastly, one of NIH’s programs, the  Common Fund, also received temporary other transaction authority.  Congress has annually extended the authority through appropriations  acts since 2004, according to agency officials. As of September 2015, the  authority was scheduled to expire at the end of fiscal year 2015.

Most agencies have limitations on their other transaction authorities,  although the extent and type of limitations or requirements laid out in the  agencies’ statutory authorities vary. Seven agencies’ authorities include  specific limitations or requirements, such as limitations on the types of  projects and research for which the other transaction authority may be  used. For example, DOT’s statutory authority limits the agency’s use of  other transaction agreements to three types of RD&D projects that focus  on public transportation. DOD’s statutory authority also lays out several  requirements that must be met for RD&D and prototype projects carried  out under other transaction agreements. Specifically, to use an other  transaction agreement for a RD&D project, entities must, to the extent  DOD determines practicable, fund half of the project, and the research  being conducted must not duplicate any other ongoing DOD research.  The statute also states that DOD can only use other transaction  agreements for RD&D when traditional contracts, grants, and cooperative  agreements are not feasible or appropriate. To use an other transaction  agreement for a prototype project, DOD’s statute originally required that  the project must be directly relevant to weapons or weapon systems. It  also generally requires significant participation of a nontraditional  contractor for prototype projects and states that if this requirement cannot  be met, then an entity other than the federal government must fund at  least one-third of a project’s total costs, or agency officials must  document that exceptional circumstances justify the use of an other  transaction agreement and that use of a contract is not feasible or  appropriate. In contrast, the statutory authorities for four agencies— NASA, ARPA-E, FAA, and TSA—do not include limitations or  requirements specifying the types of projects or research that may be the  subject of the agencies’ other transaction agreements.

The statutory language for three agencies—DHS, DOE, and HHS—was  modeled on DOD’s other transaction authority; however, each of the  statutes varies slightly from DOD’s authority. The three agencies, similar  to DOD, require a cost sharing arrangement when using other transaction  agreements for RD&D projects. DOE’s and HHS’s statutory authorities  are limited to use of other transaction agreements for RD&D projects.  DHS’s statutory authority, however, specifies that the agency may use  other transaction agreements for both RD&D and prototype projects,  similar to DOD’s statutory authority. DHS’s authority also requires that  each other transaction agreement for a prototype project meet  requirements similar to those that apply to DOD, including participation of  a nontraditional contractor or a cost sharing arrangement. Unlike DOD’s  authority, DHS’s authority does not limit the types of prototype projects  that may be carried out using other transaction agreements. In addition,  DOE’s statutory authority includes a separate requirement that the  Secretary of Energy provide written approval that a standard contract,  grant, or cooperative agreement is not appropriate or feasible for the  project before the agency uses an other transaction agreement.

To implement their authority, 10 of the 11 agencies have issued guidance  to govern their use of other transaction agreements. For example, DHS  developed guidance that is used for the components within the agency  authorized to use other transaction agreements. This guidance was  updated in 2013. TSA developed its own guidance in 2011 for the  agency’s use of other transaction agreements, which was updated in  2015. While ARPA-E has a separate authority to complete other  transaction agreements, as previously discussed, the agency follows  DOE’s guidance for its use of other transaction agreements. Two  agencies—DOT and FAA—incorporated guidance on other transaction  agreements use into their agency-wide guidance on financial assistance  or contracting. NIH does not have completed guidance for its use of  other transaction authority. According to officials, the agency is in the  process of developing guidance for its other transaction authority and  currently follows the NIH Grants Policy Statement when developing its  other transaction agreements. According to a NIH official, the agency  expects to finalize its guidance in early 2016.

DOD is the only agency to issue separate guidance or regulations for its  two types of other transaction agreements activities. For RD&D projects,  DOD follows guidance laid out in its Grant and Agreement Regulations,  which were updated in 2011. For its use of other transaction agreements  for prototype projects, DOD developed separate guidance called Other  Transactions Guide for Prototype Projects, which was updated in 2002.  Since 2001, DOD’s statutory authority for use of other transaction  agreements has been amended in various National Defense  Authorization Acts. For example, in 2006, DOD’s authority was amended  to require written approval by a Senior Procurement Executive for  prototype other transaction agreements projects estimated to cost $20  million to $100 million. While DOD did not update its other transaction  agreement guidance for prototype projects to reflect the amendment, the  agency issued a policy memorandum requiring written approvals of  agreements at certain thresholds, in accordance with the statutory  change.

section_title: Other Transaction Agreements Offered Agencies Flexibility and Were Used by Most Agencies for RD&D Activities
paragraphs: Most agencies cited flexibility as a primary reason for their use of other  transaction agreements, specifically to meet the needs of the agency, or  the entities entering into these agreements with the agency. Officials from  most agencies told us the authority allowed them to develop customized  agreements that addressed concerns over requirements in traditional  mechanisms that entities viewed as potential obstacles to doing business  with a federal agency. The ability to address these issues also enabled  agencies to attract and work with specific entities, such as nontraditional  contractors. Most agencies used other transaction agreements for RD&D  activities.
subsections: section_title: Agency Officials Cited the Flexibility Other Transaction Authority Provides to Develop Customized Agreements
paragraphs: Officials at 8 of the 11 agencies told us that other transaction authority  provided flexibility to develop customized agreements with entities and  accomplish projects that they could not have achieved using traditional  contracting mechanisms. Officials cited two areas of concern for  entities—protection of intellectual property rights and compliance with  government cost accounting standards—that other transaction  agreements allowed agencies to address. According to agency officials,  some entities—particularly companies that have not typically done  business with the federal government—wished to secure greater  protection of intellectual property rights than would be possible under  traditional contracting mechanisms. Officials further noted that some  entities also viewed making their accounting systems compliant with  federal standards, which could be required with traditional mechanisms,  as too great a burden in terms of time or cost. Agencies were able to use  other transaction authority to craft agreements addressing these  concerns.

Agency officials from seven agencies told us that other transaction  authority allowed them to develop agreements that addressed entities’  intellectual property concerns. Agencies generally acquire certain rights— although not necessarily ownership—of the intellectual property produced  by others under federal research contracts, grants, and other  agreements. Entities also face requirements for research done through  federal funding, including disclosing inventions to agencies, providing the  government with rights to inventions patented, and commercializing or  developing the invention, if feasible. When agencies use other transaction  agreements, the standard intellectual property provisions and protections  that are included in traditional contracting mechanisms do not have to be  included in an other transaction agreement. For example, DHS entered  into an other transaction agreement with a company to deploy and test a  technology to detect explosives that, according to agency officials, was  created and funded by the entity. According to agency officials, the  company did not want to use a traditional contract due to concerns about  losing control over its own intellectual property. According to officials, by  using an other transaction agreement, DHS was able to test the  technology while ensuring that the company’s intellectual property was  protected.

Officials from four agencies told us that other transaction authority  allowed their agencies to develop agreements that addressed entities’  concerns regarding government cost accounting standards. We  previously reported that nontraditional contractors generally do not  operate accounting systems in compliance with cost accounting  standards, and that developing such systems can be cost-prohibitive,  according to entities and outside procurement experts. When agencies  use other transaction agreements, however, agencies do not have to  require entities to meet government cost accounting standards and do not  require entities to use accounting systems that adhere to these  standards. DOE officials cited an example in which they used an other  transaction agreement to address a company’s concerns regarding  government cost accounting standards. DOE entered into an other  transaction agreement in 2008, which is expected to continue through  2017, with a company that had not previously worked with the  government. The agreement was for the design, construction, and  operation of a biorefinery plant capable of producing large amounts of  ethanol. According to DOE officials, the company brought needed  expertise to the project but had not previously worked with the  government and did not have a government-approved cost accounting  system. DOE used the flexibility of its other transaction authority to create  an agreement whereby the company was not required to adhere to  government cost accounting standards or use a government-approved  cost accounting system. However, the agreement did include some  requirements for the company’s cost accounting system.

Agencies also developed other transaction agreements that included  terms and conditions necessary to meet the needs of both parties in a  variety of other circumstances. For example, HHS structured an other  transaction agreement that included the formation of a committee  composed of agency officials and representatives to jointly review data,  assess project risks and progress, and make funding decisions  throughout the duration of the agreement. The structure of the committee  also allowed external advisors to participate, if needed. This joint  collaboration allowed the agency to play a more active role in the project  than it would have had under a traditional contract, according to agency  officials.

section_title: Most Agencies Used Other Transaction Agreements for RD&D Activities
paragraphs: Nine of the 11 agencies used other transaction agreements for RD&D  activities for fiscal years 2010 through 2014 (see table 1). Two of these  agencies also used other transaction agreements for prototype activities.  Three agencies used other transaction agreements for other activities; of  these, one used it only for activities not related to RD&D or prototypes.  DHS’s DNDO did not use other transaction agreements during the period  we reviewed.

Agencies used other transaction agreements for a wide range of RD&D  activities for fiscal years 2010 through 2014, according to agencies’  documents and officials. These RD&D activities included DOE and  ARPA-E research on solar energy development and geothermal energy  development; HHS and NIH research on medical issues including  research into diseases, biomedical advances, and pharmaceutical  development, among others; DOD research on improving security at  military installations; DOT research to enhance oil and gas pipeline safety;  FAA research on safe unmanned aerial system operations in the national  airspace; DHS research into enhancing critical infrastructure protection,  such as protecting the chemical, dam, and water sectors; and NASA  research to evaluate new engine sensors. Specific examples of agencies’  RD&D projects carried out using other transaction agreements during the  5-year period we reviewed include the following:  In 2010, ARPA-E entered into an other transaction agreement with a  commercial oil and energy company to research and develop new  drilling technology to access geothermal energy. Specifically,  according to agency documentation, the technology being tested was  designed to drill into hard rock more quickly and efficiently using a  hardware system to transmit high-powered lasers over long distances  via fiber optic cables and integrating the laser power with a  mechanical drill bit. According to ARPA-E documents, this technology  could provide access to an estimated 100,000 or more megawatts of  geothermal electrical power in the United States by 2050, which would  help ARPA-E meet its mission to enhance the economic and energy  security of the United States through the development of energy  technologies. According to ARPA-E officials, an other transaction  agreement was used due to the company’s concerns about protecting  its intellectual property rights, in case the company was purchased by  a different company in the future. Specifically, one type of intellectual  property protection known as “march-in rights” allows federal agencies  to take control of a patent when certain conditions have not been met,  such as when the entity has not made efforts to commercialize the  invention within an agreed upon time frame. Under the terms of  ARPA-E’s other transaction agreement, march-in rights were modified  so that if the company itself was sold, it could choose to pay the  government and retain the rights to the technology developed under  the agreement. Additionally, according to DOE officials, ARPA-E  included a United States competitive clause in the agreement that  required any invention developed under the agreement to be  substantially manufactured in the United States, provided products  were also sold in the United States, unless the company showed that  it was not commercially feasible to do so. This agreement lasted until  fiscal year 2013, and ARPA-E obligated about $9 million to it.

In 2013, HHS entered into an other transaction agreement with a  pharmaceutical company to conduct research to evaluate the efficacy  and safety of the company’s portfolio of antibiotic candidates under  development for treating hospital and biological threat infections, such  as staph infections that cannot be treated with existing antibiotics.  According to HHS officials, the use of an other transaction agreement  provided the agency flexibility to work with the company even though  it did not have a government-approved federal cost accounting  system. According to officials, another advantage of the other  transaction agreement was HHS’s ability to mitigate risk by directing  funds to the most promising antibiotic candidate during the project,  which would have been more difficult and untimely under a traditional  contracting mechanism. Specifically, under the agreement, if an  antibiotic candidate was not successful, HHS and the company would  be able to move funding from the unsuccessful antibiotic candidate to  a different, more promising one without having to enter into a new  agreement. HHS officials told us that they also used other transaction  authority’s flexibility to alleviate the company’s intellectual property  concerns, while ensuring certain data rights for HHS. To date, HHS  has obligated $80 million to this agreement.

Beginning in 2004 and continuing through mid-2015, NIH used other  transaction agreements for its Nanomedicine Program that focused on  conducting and applying biological and medical research to develop  technologies and treatments for disease, according to agency  documents and officials. Under this program, NIH entered into other  transaction agreements with 23 universities. For example, an  agreement with one university was to research and then engineer  cells or cell-like devices to perform “smart” therapeutic functions— such as repairing tissue or treating microscopic tumors or  cardiovascular lesions—with the aim to be able to recognize and  distinguish cancer cells from normal cells and to be able to respond  with precise therapeutic action, such as targeted cell killing or anti- cancer responses. Due to scientific uncertainty associated with the  project’s goal of translating fundamental research into clinical  applications, a NIH official told us that other transaction agreements  provided flexibility to address the uncertainty by allowing NIH to adjust  the project’s strategy over time based on research results. For  example, NIH was able to add and remove collaborators, and, in  some cases, eliminate funding to entire projects, according to officials.  According to a NIH official, the use of other transaction agreements  allowed the agency to direct the course of the research to a greater  extent than would have been possible using traditional contracting or  grant mechanisms, where a project’s strategy is more certain at the  start. NIH obligated $73.6 million for fiscal years 2010 through 2014 to  the Nanomedicine Program.

In addition, according to NASA officials, the agency uses other  transaction agreements to partner with entities on collaborative RD&D  projects that further the state of research on a topic but do not directly  benefit the agency. For example, NASA partnered with a private company  to jointly conduct communications technology research, according to  officials. Officials explained that for RD&D services that directly benefit  the agency, NASA uses contracts, rather than other transaction  agreements.
subsections: section_title: Two of the Nine Agencies Also Used Other Transaction Agreements for Prototype Activities
paragraphs: Two agencies that used other transaction agreements for RD&D—DOD  and DHS—also used agreements for prototype activities. These activities  included DOD’s military technology activities and DHS’s energy security  activities. Specific examples of these agencies’ prototype projects that  used other transaction agreements for fiscal years 2010 through 2014  include the following:   In 2011, DOD entered into a 2-year other transaction agreement with  a nontraditional contractor for the development of a new military  sensor system. According to the agreement documentation, this  military sensor system was intended to demonstrate DOD’s ability to  quickly react to emerging critical needs through rapid prototyping and  deployment of sensing capabilities. By using an other transaction  agreement, DOD planned to use commercial technology,  development techniques, and approaches to accelerate the sensor  system development process. The agreement noted that commercial  products change quickly, with major technology changes occurring in  less than 2 years. In contrast, according to the agreement, under the  typical DOD process, military sensor systems take 3 to 8 years to  complete, and may not match evolving mission needs by the time the  system is complete. According to an official, DOD obligated $8 million  to this agreement.

In 2008, DHS entered into an other transaction agreement, expected  to last until May 2017, with a company that worked with two  nontraditional contractors to develop, design, and deploy a new type  of superconductor electric cable system. According to the agreement  and DHS’s Other Transaction Authority: Fiscal Year 2012 Report to  Congress, this system could be used to rebuild the nation’s electric  power grid and better protect it from power surges and potential  blackouts. During the first phase of the project, the companies worked  to develop the cable technology. The second phase of the project  involves the companies installing and testing the technology through a  pilot demonstration. According to the DHS report, an other transaction  agreement was used because it is generally not appropriate for the  agency to use a traditional contract or other financial assistance  arrangement for consortia relationships with multiple parties. Because  of the flexibility of an other transaction agreement, the company and  the nontraditional contractors were able to share the burden of  financial and technical risk with industry partners during the  development of the technology in exchange for commercialization  opportunities, according to an agency document. The DHS report also  noted that the agreement’s flexibility allowed DHS to address the  nontraditional contractors concerns over regulatory and statutory  requirements, intellectual property, licensing rights, and audits.  Additionally, according to the DHS report, the agreement supported  more collaborative team dynamics between the company and the  nontraditional contractors, which strengthened the commercialization  opportunities. DHS obligated about $34 million to this agreement.

section_title: Three Agencies Used Other Transaction Agreements for Activities Other Than RD&D or Prototype Activities
paragraphs: In all, three agencies used other transaction agreements for non-RD&D or  prototype activities. Officials from two agencies—TSA and NASA—told us  the agencies used other transaction agreements for fiscal years 2010  through 2014 for an array of activities that were not related to RD&D or  prototype activities. According to agency officials, both agencies used  other transaction agreements for activities that could not be  accommodated through their traditional contracts and other financial  assistance mechanisms. TSA used other transaction agreements for  various programs, such as programs to enhance airport security. NASA  used other transaction agreements for several purposes, including  education and outreach, providing entities access to unused or  underused NASA facilities, and supporting the International Space  Station. Officials at one other agency—FAA—told us that, while the  agency’s primary use of other transaction agreements was for RD&D  activities, the agency also used agreements for activities not related to  RD&D.

TSA’s primary use of other transaction agreements for fiscal years 2010  through 2014 was to partially or fully reimburse airport authorities and  municipalities for costs of participating in various TSA transportation  security programs. According to agency officials and data, airport and  aviation security is a large portion of TSA’s other transaction agreement  use. The agency’s policy notes that other transaction agreements are  “best suited for situations where an entity is not a traditional contracting  partner…if there are cost sharing mechanisms that require the recipient to  contribute to the overall cost of the effort, or if the recipient must recoup  all costs from third party user fees.” TSA officials stated that the agency  cannot use a traditional contracting mechanism for these transportation  security programs because TSA does not own the airport or transit  property. In addition, agency officials stated that TSA cannot enter into a  contract with an outside organization to perform work on property owned  by another organization and, therefore, must use other transaction  agreements in these instances. According to officials, TSA used other  transaction agreements for 13 programs, including reimbursing airport  authorities for utility costs incurred by TSA’s electronic baggage  screening and checkpoints, providing training on improvised explosive  recognition for transportation industry and related security personnel, and  providing programs to enhance airport security. Three of TSA’s programs  that use other transaction agreements for airport and aviation security  include the law enforcement officer program, the canine program, and the  checked baggage program, described below.

TSA operates a law enforcement officer program that uses other  transaction agreements to reimburse airports for the costs of local law  enforcement officers who provide security services for TSA. For each  officer’s work in the law enforcement officer program, TSA reimburses  the airport a portion of the per hour labor costs. As of September 30,  2014, 310 airports where TSA provides airport security were  participating, including 25 of the 28 largest airports, such as Chicago’s  O’Hare International Airport, according to TSA data. Many smaller,  regional airports were also participating. According to TSA officials,  these officers provide for the safety and security of people and  property against crime, as well as support TSA’s screening  operations.

TSA operates a canine program that uses other transaction  agreements to fund local and state participants who provide law  enforcement officers to serve as dog handlers at airports, mass transit  systems, and maritime and other facilities. Under these agreements,  TSA provides the dogs and training for the handlers, among other  things. TSA reimburses airports a flat amount per dog handler per  year for qualified expenses, including payroll expenses for dog  handlers, as well as dog-related costs, such as dog food and  veterinary costs. As of the October 2014, there were 78 airports  participating in the canine program, including 28 large airports and  some smaller, regional airports, and 23 mass transit systems, such as  the Metrorail in Washington, D.C.

TSA’s checked baggage program uses other transaction agreements  to reimburse airports for costs associated with the infrastructure  required to help the agency install, update, or replace checked  baggage screening systems. This includes items such as demolition  costs, electrical and communications infrastructure costs, and design  and construction management costs. In general, according to agency  documentation, TSA will reimburse large and medium airports up to  90 percent of allowable costs and smaller airports up to 95 percent of  allowable costs. In some instances, TSA has fully reimbursed the  airports for allowable costs.

According to officials, NASA used other transaction agreements for  several other types of activities for fiscal years 2010 through 2014. First,  according to officials, NASA used other transaction agreements for use  permits, which allowed the agency to rent certain unused or underused  facilities to entities to offset the cost of maintaining those facilities for  future agency use. NASA officials explained that shifts in the agency’s  programs, such as ending the Space Shuttle Program, have resulted in  the agency increasing its efforts to leverage its existing resources. A  second type of activity was to set up reimbursable funding scenarios  whereby entities use NASA goods, services, facilities, or equipment to  advance the entities’ own interests. In these other transaction  agreements, NASA’s costs associated with the undertaking are fully or  partially reimbursed by the entity. According to officials, a third type of  activity was to work with international partners to support collaborative  activities, such as the International Space Station. The fourth type of  activity was outreach and education efforts, according to officials. For  example, NASA partnered with public high schools through an agency  program that provided hands-on projects for students to complete that  may be later used for NASA programs and projects. Lastly, NASA officials  told us the agency used other transaction agreements to facilitate the  commercial use of space. Officials cited an example where the agency  entered into an agreement to stimulate the development of space  capabilities that did not directly benefit NASA, but may be used by  commercial customers or the government in the future. For example,  according to officials, NASA used other transaction agreements for its  Commercial Orbital Transportation Services that helped industry develop  privately operated space transportation systems. According to officials,  these activities help NASA meet its mission and goals.

Three specific examples of NASA’s use of other transaction agreements  for fiscal years 2010 through 2014 are as follows:

Beginning in 2009 and lasting until April 2010, NASA and a company  had an other transaction agreement that allowed the company to use  NASA’s Supersonic Wind Tunnel in Cleveland, Ohio, according to  NASA documents and officials. The company used the wind tunnel to  test a full-sized missile to determine flight characteristics at very high  speeds, according to officials. NASA received about $1.4 million  under this agreement, which was used to help pay NASA’s costs to  keep the wind tunnel operational, including electricity and  maintenance costs, according to NASA officials.

In 2010 and 2011, NASA entered into a series of other transaction  agreements to fund five companies’ efforts to design and develop  system concepts, key technologies, and capabilities that could  transport commercial crew and cargo in space. In 2012, NASA  entered into other transaction agreements with three of the five  companies to fund related projects to design and develop  transportation systems for spacecraft and launch vehicles, among  other things. We reported that as of 2014 NASA had spent over $1  billion on these efforts.

Beginning in 2000 and lasting until 2015, NASA had an other  transaction agreement to collaborate with the French National Center  for Space Studies to develop, launch, and operate a laboratory for the  International Space Station. Specifically, under the agreement, NASA  provided launch and return capabilities for transporting laboratory  equipment to the International Space Station and for on-orbit  accommodations for the laboratory, as well as other resources.  According to NASA officials, both the NASA and French teams  worked on multiple projects under the agreement and shared scientific  data with each other. According to a NASA document, information  learned from the laboratory may help in the design and processing of  a new material that could ultimately result in manufacturing advances.  No funds were exchanged between NASA and the French National  Center for Space Studies for activities carried out under the  agreement.

Officials from FAA said that, while the agency primarily used other  transaction agreements for RD&D activities, the agency occasionally  used its authority for other activities during the 5-year period under  review. Specifically, FAA officials estimated that about 10 percent of the  agency’s other transaction agreements use was for other purposes. For  example, FAA used an other transaction agreement to provide training for  air traffic controllers in Afghanistan, according to an official. According to  the official, in most instances, training for air traffic controllers in the  United States is typically conducted by federal employees or is funded  through contracts.

section_title: Other Transaction Agreements Were a Small Proportion of Most Agencies’ Contracting and Financial Assistance Activities, and the Number of Agreements Was Generally Low
paragraphs: Most agencies used other transaction agreements sparingly compared to  traditional contracting and other financial assistance mechanisms,  generally because they identified few situations that justified or  necessitated the use of other transaction agreements, according to  officials. In addition, most agencies managed a small number of other  transaction agreements in fiscal year 2010, and the number of  agreements remained steady or declined by fiscal year 2014. TSA and  NASA, in contrast, had larger numbers of other transaction agreements in  fiscal year 2010, and these numbers increased by the end of fiscal year  2014.
subsections: section_title: Officials Noted the Use of Other Transaction Agreements Was a Small Proportion of Most Agency’s Annual Contracting and Financial Assistance Activities
paragraphs: Most agencies used other transaction agreements sparingly compared to  traditional mechanisms, according to officials. Specifically, officials from  10 of the 11 agencies—all except TSA—said that dollars spent on other  transaction agreements accounted for 5 percent or less of their agencies’  total expenditures on all mechanisms over the 5-year period from fiscal  year 2010 through fiscal year 2014. Furthermore, officials told us that  the number of other transaction agreements they used each year during  the period was small compared to the number of traditional mechanisms  used. For example, FAA officials told us they use contracts and grants  with much greater frequency than they use other transaction agreements.  Similarly, officials from one of DOD’s components that used other  transaction agreements during this period estimated that it used 10 times  as many contracts as it did other transaction agreements.

Other transaction agreements made up a small proportion of most  agencies’ contracting and financial assistance activities because  agencies identified relatively few situations that justified or necessitated  its use, according to officials. Agency officials generally told us they used  other transaction agreements only when contracts, grants, and other  mechanisms were not suitable, and that in most cases traditional  mechanisms, rather than other transaction agreements, were able to  meet the needs of a project or activity. For example, FAA officials said  that they have generally found contracts and grants able to meet their  needs, and that they only considered using other transaction agreements  after ruling out the use of contracts or grants due to special intellectual  property or other needs. In addition, officials from one of DOD’s  components said that they used other transaction agreements for the  handful of times that contracts and grants did not meet the needs of a  project, such as when a nontraditional contractor sought an agreement  containing special intellectual property provisions. In most cases, they  said, traditional contracts and grants allowed the agency to meet its  needs. Officials from most agencies said that even though they used  other transaction agreements sparingly, the authority allowed them to  carry out activities that they otherwise would not have been able to do.

DOE officials said that the agency’s relatively low use of other transaction  agreements is in part a result of its regulations governing its use of other  transaction authority. These regulations stem from DOE’s adoption in  2005 of DOD’s regulations on the use of other transaction agreements for  RD&D activities. According to some agency officials, DOE’s  regulations—because they are based on DOD’s regulations—include  requirements that limit DOE’s use of other transaction agreements. For  example, DOE’s regulations requiring entities to fund a portion of an other  transaction agreement project may limit the participation of small  businesses in DOE other transaction agreements, according to officials.  Officials told us they plan to seek approval from the Office of  Management and Budget to modify the agency’s other transaction  regulations to better reflect DOE’s mission, consistent with its statutory  authority. According to DOE officials, if the changes are approved, DOE  may increase its use of other transaction agreements.

According to officials from two agencies, infrequent use of other  transaction agreements resulted in the agreements being more time- consuming and challenging to establish. In particular, officials told us that  because they seldom used other transaction agreements, developing  agreements took longer than developing traditional contracting  mechanisms. Officials from one of the DOD components that used other  transaction agreements for fiscal years 2010 through 2014 told us that  because this component rarely used agreements compared to traditional  mechanisms, officials had relatively little experience developing the  agreements. As a result, each of the component’s agreements took a  long time to develop. Similarly, NIH officials said that since other  transaction agreements were used infrequently, they faced challenges in  making officials involved in the agreements aware of the flexibilities  afforded by other transaction authority.

Unlike most agencies, one agency—TSA—has programs that used other  transaction agreements for a large proportion of work with outside  entities. For example, officials from TSA’s canine and law enforcement  officers programs told us their programs spent about 50 percent and  nearly 100 percent, respectively, of annual obligated federal dollars on  other transaction agreements for fiscal years 2010 through 2014.  Similarly, officials from the agency’s checked baggage program told us  that, in most years during this period, the program spent more than 40  percent of its annual obligated federal dollars on other transaction  agreements. According to officials, other transaction agreements are  appropriate for a large proportion of these programs’ work with outside  entities because the programs are obtaining indirect benefits by having  airports and other entities participate in TSA security programs, rather  than direct benefits that would be expected through a contract.

section_title: The Number of Other Transaction Agreements Used Remained Low for All but Two Agencies
paragraphs: Most agencies managed a small number of other transaction agreements  in fiscal years 2010 through 2014. Specifically, 9 out of 11 agencies  managed 75 or fewer other transaction agreements in fiscal year 2010,  and the number of agreements used remained low by the end of fiscal  year 2014 (see table 2). DNDO was the one agency with other  transaction authority that did not enter into any agreements during this  period.

Of the nine agencies that managed 75 or fewer other transaction  agreements in 2010, eight agencies—all except FAA—had generally flat  or declining numbers of agreements by the end of fiscal year 2014.  Officials from these eight agencies cited budgetary changes and other  reasons for having a flat or declining number of agreements during this  period. For example, DOE officials said that the agency’s use of other  transaction authority was flat after fiscal years 2011 and 2012 because it  used American Recovery and Reinvestment Act funding in 2011 and  2012 to establish new other transaction agreements; it has not entered  into any new agreements since its budget levels returned to normal.  Temporary authorization to use other transaction agreements also  affected at least one agency’s use of its authority during this period.  Specifically, DHS officials told us that the temporary nature of its other  transaction authority made planning other transaction agreements use  difficult. As a result, officials said that use of other transaction authority  had declined during the 5-year period. In the case of FAA, the number of  other transaction agreements increased over the 5-year period. One  reason cited by officials for this trend was that in fiscal year 2014, FAA  entered into eight new other transaction agreements to meet a  congressional mandate to develop standards for using unmanned aerial  systems.

In contrast, TSA and NASA—two agencies that used other transaction  agreements for projects and activities other than RD&D and prototypes— had the largest number of other transaction agreements in fiscal year  2010. In fiscal year 2010, TSA and NASA had about 400 and 2,220  agreements, respectively. By the end of fiscal year 2014, these agencies  had increased their use to about 640 and 3,220 agreements, respectively.  TSA’s increased use of other transaction agreements was mostly driven  by its checked baggage program, which provides funding through  agreements to airports to design and construct the infrastructure needed  to install equipment for screening checked baggage. TSA officials told us  that electronic screening equipment installed in the years immediately  after the attacks of September 11, 2001, reached the end of a 10-year life  cycle starting in 2012, resulting in the agency entering into new  agreements to facilitate TSA’s recapitalization of the screening  equipment, which included updating equipment. NASA officials  attributed the agency’s increased use, in part, to changes in  programmatic priorities, such as the retirement of the Space Shuttle,  which allowed a greater number of agency resources to be made  available to outside entities. Agency officials told us they sought to  better leverage these resources and offset certain costs by entering into  other transaction agreements with outside entities that share interests  with NASA and are willing to reimburse it for the use of NASA goods,  services, facilities, or equipment.

section_title: Agency Comments
paragraphs: We provided the Secretaries of Defense, Energy, Health and Human  Services, Homeland Security, Transportation, and the Administrator of  NASA with a draft of this report for their review and comment. The  Department of Defense and the Department of Energy had no comments  on our report. The Department of Homeland Security, the Department of  Health and Human Services, the Department of Transportation, and  NASA provided technical comments, which we incorporated as  appropriate.

We are sending copies of this report to the appropriate congressional  committees, the Secretaries of Defense, Energy, Health and Human  Services, Homeland Security, Transportation, and the Administrator of  NASA, and other interested parties. In addition, the report is available at  no charge on the GAO website at http://www.gao.gov.

If you or your staff members have any questions about this report, please  contact me at (202) 512-3841 or neumannj@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this report. Key contributors to this report are listed in  appendix IV.

section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: The report describes (1) which federal agencies are authorized to use  other transaction agreements and the extent to which agencies have  guidance to implement the authority, (2) why agencies used other  transaction agreements and for what types of activities, and (3) the extent  to which federal agencies used other transaction agreements for fiscal  years 2010 through 2014. We chose this time period because it  represented the most recent 5-year time period.

To determine which agencies are authorized to use other transaction  agreements, we reviewed laws and other transaction authority statutes.  We also reviewed laws and statutes to identify any limitations on or  requirements for agencies’ use of other transaction authority. We  reviewed agencies’ implementing regulations, and management  directives, policies, and guidance to determine which agencies have  guidance to implement the authority and to understand how agencies  implemented other transaction authority statutes. We conducted semi- structured interviews by telephone and in-person with agency officials  from April through June 2015 to learn about agencies’ use of other  transaction authority, including agencies’ guidance for other transaction  authority use and when, if at all, the guidance had been last updated,  among other things. Prior to conducting the interviews, we pretested the  interview questions with three of the agencies authorized to use other  transaction agreements. We conducted pretests to make sure that the  questions were clear and unbiased and that they did not place an undue  burden on officials. We made appropriate revisions to the content and  format of the questionnaire after the pretests.

To determine why agencies used other transaction agreements and for  what types of activities, for each agency we reviewed agency  documentation, including examples of other transaction agreements and  modifications, federal financial reports, agency reports to Congress, and  information related to other transaction agreements on agency websites.  During our semi-structured interviews with officials from each agency, we  also discussed types of activities for which the agency used other  transaction agreements, including specific examples of projects and the  reasons why other transaction agreements, rather than traditional  mechanisms, were used in these situations. We did not evaluate whether  agencies’ use of other transaction agreements was in compliance with  statutory requirements.

To determine the extent of agencies’ use of other transaction agreements  for fiscal years 2010 through 2014, we collected data from the agencies in  two ways. First, for the four agencies that used 10 or fewer other  transaction agreements during the 5-year period we reviewed, we  requested agencies’ documentation for all of these other transaction  agreements, including copies of the agreements and any modifications,  as well as related agreement documentation, such as federal financial  statements. The four agencies were the Department of Energy (DOE),  Advanced Research Projects Agency-Energy (ARPA-E), the Department  of Health and Human Services (HHS), and the National Institutes of  Health (NIH). We did not collect any data or agreement documentation  from the Domestic Nuclear Detection Office (DNDO), as the agency did  not enter into any other transaction agreements during this time period,  according to officials. Second, for the six agencies that used more than  10 other transaction agreements during the period from fiscal year 2010  through fiscal year 2014, we requested that agencies provide data on  other transaction authority use from the data systems they use to capture  and store this information. The six agencies were the Department of  Defense (DOD), the Department of Homeland Security (DHS), the  Department of Transportation (DOT), the Federal Aviation Administration  (FAA), the National Aeronautics and Space Administration (NASA), and  the Transportation Security Administration (TSA). Specifically, we  requested that these agencies provide data on the number of active other  transaction agreements in each fiscal year from 2010 through 2014 that  agencies classified as either new or ongoing. We defined a new  agreement as one that began during a fiscal year, and an ongoing  agreement as one that was continuing during the fiscal year. For  example, if an agreement began in fiscal year 2010 and lasted for 3  years, it would be considered a new agreement in fiscal year 2010 and an  ongoing agreement in fiscal years 2011 and 2012. To assess the  reliability of agencies’ data systems for each agency from which we  requested data, we interviewed agency officials regarding their data  systems and the internal controls in place for these systems. We also  reviewed agency documentation for the data systems, such as  procedures for using the data systems. We found the other transaction  agreement data sufficiently reliable for the purpose of reporting the  relative use of other transaction agreements by the six agencies. We  conducted semi-structured interviews with officials from the agencies to  gather additional information about the data each agency tracks on other  transaction agreements, the extent of each agency’s use of other  transaction agreements per fiscal year, and the reasons for any trends in  agencies’ other transaction agreement use during the period we  reviewed.

We conducted this performance audit from January 2015 to January 2016  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.

section_title: Appendix II: Agencies Authorized to Use Other Transaction Agreements and their Statutory Authorities
paragraphs: Pub. L. No. 101-189, § 251 (1989)

Pub L. No. 103-160, § 845 (1993)

Pub. L. No. 109-58, § 1007 (2005)

Advanced Research Projects Agency-Energy  (ARPA-E)

Pub. L. No. 111-358, § 904 (2011)

Department of Health and Human Services  (HHS)

Pub. L. No. 109-417, § 401 (2006)

Pub. L. No. 92-423, § 3 (1972)

Pub. L. No. 108-199, div. E, title II, § 221,  118 Stat. 256 (2004)

Pub. L. No. 109-482, § 105 (2007)

Pub L. No. 111-148, § 10409 (2010)

Department of Homeland Security (DHS)

Pub. L. No. 107-296, § 831 (2002)

Domestic Nuclear Detection Office (DNDO)

Pub. L. No. 109-347, § 501 (2006)

Transportation Security Administration (TSA)

49 U.S.C. § 114(m)

Pub. L. No. 107-71, § 101 (2002)

Pub. L. No. 105-178, § 3015 (1998)

49 U.S.C. § 106(l)

Pub L. No. 104-264, § 226 (1996)

51 U.S.C. § 20113(e)

Pub. L. No. 85-568, § 203(c) (1958)

section_title: Appendix III: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact

section_title: Staff Acknowledgments
paragraphs: In addition to the individual named above, Janet Frisch (Assistant  Director), Dawn Bidne, Richard Burkard, Greg Campbell, Heather Dowey,  Katherine Killebrew, and Shana Wallace made key contributions to this  report.


Question-summary annotations: questions: question: Why are other transaction agreements used?
answer: Most agencies cited flexibility as a primary reason for their use of other transaction agreements, and used agreements mostly for RD&D activities.
child_questions: question: How do other transaction agreements provide flexibility?
answer: Officials from 7 agencies told GAO the authority allowed them to develop customized agreements that addressed concerns over requirements in traditional mechanisms that some companies viewed as potential obstacles to doing business with a federal agency.
child_questions: question: What issues did this flexibility resolve?
answer: This flexibility allowed agencies to address concerns regarding intellectual property and cost accounting provisions that would otherwise need to be included when using traditional mechanisms, such as contracts. In addition, other transaction agreements allowed some agencies to tailor other terms and conditions of agreements as needed when working with other entities.

question: How are other transaction agreements used?
answer: Most agencies—9 of the 11—used other transaction agreements for RD&D activities for a range of projects from medical research to energy development research. Two of the 9 agencies—DOD and DHS—also used other transaction agreements for prototype activities. Three agencies, including TSA and NASA, used other transaction agreements for activities not related to RD&D or prototype development, including airport security and education and outreach.

questions: question: How commonly are other transaction agreements used?
answer: Other transaction agreements were a small proportion of most agencies' contracting and financial assistance activities for fiscal years 2010 through 2014. Compared to traditional mechanisms, most agencies used other transaction agreements sparingly, according to officials. Most agencies had a small number of other transaction agreements—75 or fewer—in fiscal year 2010, and the number of agreements generally remained low by the end of fiscal year 2014.
child_questions: question: Why are other transaction agreements not commonly used?
answer: Officials cited budgetary and other reasons for this trend.

question: What agencies widely use other transaction agreements?
answer: In contrast, two agencies that used other transaction agreements for activities other than RD&D and prototypes—TSA and NASA—had larger numbers of agreements.
child_questions: question: To what extent do the TSA and NASA use other transaction agreements?
answer: In fiscal year 2010, TSA and NASA had about 400 and 2,220 agreements, respectively. By the end of fiscal year 2014, these agencies had increased their use to about 640 and 3,220 agreements, respectively.

questions: question: What acquisition methods do federal agencies make use of?
answer: Federal agencies use a variety of acquisition and financial assistance mechanisms, such as contracts, grants, and cooperative agreements, to help meet their missions.
child_questions: question: To what extent are other transaction agreements used?
answer: Some federal agencies have received authorization to use other transaction agreements, which allow an agency to enter into agreements other than traditional mechanisms, such as contracts.
child_questions: question: Why is this beneficial for agencies?
answer: As a result, agencies can customize their other transaction agreements to help meet project requirements and mission needs.

question: What are potential downsides of these other transaction agreements?
answer: As GAO reported in May 2002, this authority carries risks, however, because such agreements may be exempt from the Federal Acquisition Regulation and other requirements that are intended to protect taxpayers' interests.

questions: question: What was GAO asked to review?
answer: GAO was asked to review federal agencies' use of other transaction authority.
child_questions: question: What does this report cover?
answer: This report describes (1) which agencies are authorized to use other transaction agreements and the extent to which agencies have guidance to implement the authority, (2) why agencies used other transaction agreements and for what types of activities, and (3) the extent to which agencies used other transaction agreements for fiscal years 2010 through 2014.

question: How did GAO collect information for this report?
answer: GAO reviewed statutory authorizations, agencies' guidance, and information on agencies' other transaction agreements and use for fiscal years 2010 through 2014, and interviewed officials from each of the agencies authorized to use other transaction agreements.