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. 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.