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  • Question

    OTAs - Does the Cost Plus Percentage of Cost Prohibition of contract type apply to OTA awards?


    Answer

    The DoD OT guide dated Nov 2018 is the current DoD guide for OTs, see the below link. This current guide does not specifically address contract types, nor does 10 U.S. Code § 2371b. The OT Guide for prototype projects from 2002 (now rescinded) listed statutes that applied to procurement contracts, but not necessarily OTs for prototype projects. One of those statutes is still in effect, 10 U.S. Code § 2306(a), but it applies to contracts. It states "The cost-plus-a-percentage-of-cost system of contracting may not be used." 

    Since there is nothing in writing that restricts this contract type for OTs, it is recommended to talk to your procurement team and legal counsel to determine the best contract type for the requirement. The current OT Guide does say "Activities seeking to award OTs should consult with legal counsel for interpretation of statutory, regulatory, and formal policy requirements. If a strategy, practice, or procedure is in the best interest of the Government and is not prohibited by law or Executive Order, the Government team should assume it is permitted"; see page 3. Applying good business acumen would be needed to determine if this contract type would it be in the best interest of the Government.

    https://www.dau.edu/guidebooks/Shared%20Documents/Other%20Transactions%20(OT)%20Guide.pdf

     

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