How Alternative Contracting Vehicles Like CSOs and OTAs Are Reshaping the Federal Marketplace

• GovCon often features complex regulations and lengthy acquisition timelines
• But agencies are embracing alternative contracting mechanisms like OTAs and CSOs
• These operate outside many traditional procurement rules and have proponents and critics

Government contracting for years has been defined by a complex framework of regulations, lengthy acquisition timelines and compliance requirements that often discouraged innovative companies from pursuing federal business. But a growing emphasis on speed, innovation and access to emerging technologies is driving agencies toward alternative contracting mechanisms that operate outside many traditional procurement rules.

Commercial solutions openings, other transaction authorities and a range of non-traditional acquisition approaches have become increasingly prominent across the federal landscape, particularly within the Department of War. Advocates argue these tools are helping agencies access cutting-edge technologies faster while expanding opportunities for startups, commercial technology firms and other non-traditional contractors. Critics, meanwhile, caution that the rapid growth of these authorities raises questions about transparency, competition and oversight.

Regardless of where stakeholders fall in the debate, one thing is clear: alternative contracting methods are transforming how government agencies buy technology and how contractors compete for federal business.

A Shift Away From Traditional Procurement

Federal acquisition has long relied on the Federal Acquisition Regulation, or FAR, a comprehensive set of rules designed to ensure fairness, competition and accountability in government spending. While the FAR remains the backbone of federal procurement, many agencies have struggled to use traditional acquisition methods to keep pace with rapidly evolving commercial technologies.

Technology cycles measured in months often collide with procurement timelines that can stretch for years. By the time a contract is awarded through traditional channels, some solutions may already be outdated.

This challenge has become particularly acute in areas such as AI, cybersecurity, autonomous systems, quantum computing, space and advanced communications technologies. Government leaders increasingly recognize that innovative companies operating in these sectors often lack the resources, patience or familiarity required to navigate conventional procurement processes.

As a result, agencies have expanded their use of contracting authorities that allow greater flexibility and faster engagement with commercial firms. The White House, for its part, embarked on the Revolutionary FAR Overhaul on Sept. 29 to make small business access to the federal market more manageable and help the government better access talent to meet mission demands.

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The Rise of Commercial Solutions Openings

One of the most notable developments has been the growing use of CSOs, competitive acquisition processes designed to identify and acquire innovative commercial products, technologies or services. Unlike traditional solicitations, CSOs focus heavily on solution-based evaluations rather than rigid compliance requirements.

What Are Commercial Solutions Openings?

CSOs allow agencies to evaluate technologies through streamlined procedures. They often involve demonstrations, prototypes and iterative engagement between government and industry.

The DOW has emerged as one of the largest users of CSOs, particularly through organizations such as the Defense Innovation Unit, AFWERX, the Army Applications Laboratory and other innovation-focused entities. The Golden Dome missile defense system has extensively leveraged CSOs as part of its development strategy.

The appeal is straightforward. Rather than issuing lengthy requirements documents that dictate how a solution should be developed, agencies can describe a mission challenge and invite companies to propose commercially driven solutions.

For startups and commercial technology providers, this model is often far more accessible than responding to a traditional request for proposal. Instead of assembling large proposal teams and navigating hundreds of pages of compliance requirements, firms can focus on demonstrating the effectiveness of their technology.

As a result, CSOs have become an important gateway for companies that may have never previously done business with the federal government.

OTAs Continue Expanding Across Government

Perhaps no alternative acquisition authority has generated more attention in recent years than the OTA.

What Are Other Transaction Authorities?

Other transaction authorities allow federal agencies to enter into agreements that are not procurement contracts, grants or cooperative agreements. Originally developed to support research and development efforts, OTAs have expanded significantly over the past decade, particularly with the Pentagon.

Congress has repeatedly broadened OTAs as policymakers sought to accelerate access to emerging technologies and attract non-traditional vendors. Unlike FAR-based contracts, OTA agreements provide agencies with substantial flexibility in negotiating terms and conditions.

Intellectual property rights, payment structures, milestone requirements and other provisions can often be tailored to the specific project. This flexibility has proven attractive to technology firms that are accustomed to commercial business practices and reluctant to accept traditional GovCon strategies.

OTA use by the Pentagon has grown rapidly over the years, from 496 other transaction actions in FY 2017 to 4,391 in FY 2022, according to the Congressional Research Service.

What Capabilities Are OTAs Often Used For?

OTAs are commonly used for prototype projects involving advanced technologies. These include AI applications, unmanned systems, space capabilities, cybersecurity tools and next-generation communications applications. Electronic warfare and signals intelligence technologies are also increasingly receiving additional non-traditional acquisition strategies.

Another advantage of OTAs for the government is that they make small businesses prove they can do the work.

“They’re really cool, but they’re also risky because you have to actually have the goods to demonstrate that you can do it,” said Chad Kim, Bcore CEO and a past Potomac Officers Club speaker. “As a private company, you have to do it profitably so you don’t lose a lot of money.”

Many OTA projects are executed through consortium-based structures that bring together government organizations, large defense contractors, startups, academic institutions and research organizations. The consortium model has become especially popular because it enables agencies to rapidly identify potential solutions from a broad network of participants while reducing administrative burdens.

For many emerging technology companies, joining an OTA consortium has become one of the most practical entry points into the federal market. The Space Force has been one of the most forward-looking agencies with consortiums as it has been using its Space Enterprise Consortium, or SpEC OTA, to issue OTAs. Maj. Gen. Stephen Purdy, former acting Air Force assistant secretary for space acquisition and integration, another past POC guest, has said that 87 percent of SPeC OTA awards have been non-traditional and have been contracted in 58-155 days.

Attracting Non-Traditional Contractors

A central goal of alternative acquisition approaches is expanding participation among non-traditional defense contractors.

Why Does the DOW Want to Attract Non-Traditional Companies?

Federal officials frequently express concern that the defense industrial base has become increasingly concentrated among a relatively small number of large contractors such as Lockheed Martin, Northrop Grumman, Boeing, RTX and General Dynamics. While these firms remain critical partners, policymakers worry that excessive reliance on traditional suppliers may limit government access to innovative technologies.

Non-traditional contractors typically include companies that have not recently performed significant government contract work or are not accustomed to complying with traditional cost-accounting and regulatory requirements.

Many commercial technology firms view government procurement as overly burdensome. Compliance obligations, security requirements, lengthy award cycles and complex reporting expectations can create substantial barriers to entry. Alternative acquisition authorities seek to reduce these barriers.

The results have been significant as DOW officials regularly report increased participation from venture-backed startups, software developers, AI companies and emerging technology firms. These companies, otherwise, might avoid federal opportunities altogether.

This trend aligns with broader national security concerns. As technological innovation increasingly originates within the commercial sector rather than government-funded research programs, agencies are under pressure to engage with companies that historically operated outside the federal marketplace.

The Speed Advantage

One of the primary arguments supporting CSOs, OTAs and other non-traditional contracting methods is speed. Traditional acquisitions can require extensive documentation, source selection procedures and compliance reviews.

While these processes provide important safeguards, they often extend procurement timelines. Alternative contracting authorities allow agencies to move more quickly from problem identification to prototype development and testing.

In some cases, OTA prototype awards can be made within months rather than years. CSOs can similarly accelerate evaluations by emphasizing demonstrations and commercial capabilities, rather than lengthy proposal submissions.

Speed is increasingly viewed as a strategic necessity for agencies confronting rapidly evolving threats. Pentagon leaders frequently argue that adversaries are not constrained by federal procurement regulations. The ability to identify, test and field new technologies quickly has therefore become a competitive advantage.

This urgency has been especially evident in areas such as cybersecurity, EW, autonomous systems and AI, where technological advances occur at a rapid pace.

New Opportunities for Contractors

The expansion of alternative contracting methods presents both opportunities and challenges for industry. For startups and commercial firms, the opportunities are substantial. Companies that previously viewed federal procurement as inaccessible may find that CSOs and OTAs provide more manageable pathways into government business.

Successful prototype efforts can also lead to follow-on production opportunities. Under certain circumstances, OTA prototype projects may transition directly into production agreements, creating a potential growth path for innovative firms.

Traditional GovCons are also adapting. Many large defense companies have become active participants in OTA consortia and increasingly partner with startups. This allows them to combine innovative technologies with established government contracting expertise.

The result is a more diverse and collaborative ecosystem than many traditional procurement environments. However, success still requires contractors to understand government missions, security requirements and acquisition processes. Alternative authorities may simplify some aspects of procurement, but they do not eliminate the need for strategic engagement with agency customers.

A great way to understand government missions, security requirements and acquisition processes is attending Potomac Officers Club’s monthly roster of premier GovCon summits. Get top-level investment insights from leading federal officials from the Department of War, intelligence community and federal civilian agencies. Dig into the details on the most critical emerging technologies during our tech-focused panel discussions led by the brightest minds in industry. Spark collaborations with other GovCon executives and score that big contract. Sign up today!

What Are Some Concerns With OTAs?

Despite their popularity, alternative acquisition authorities have not escaped criticism. Some acquisition experts and oversight organizations like the Project on Government Oversight have raised concerns regarding transparency, competition and accountability.

Because OTAs operate outside many traditional procurement rules, critics argue that agencies must ensure appropriate safeguards remain in place. Questions have emerged regarding award selection processes, performance measurement and visibility into government spending.

Others worry that rapid expansion could lead agencies to rely on alternative authorities even when traditional procurement methods may be more appropriate. Congress and oversight bodies have responded by increasing scrutiny of OTA usage and seeking additional reporting requirements. Congress, for its part, has passed measures to increase OTA accountability and transparency, including quarterly reports to the House and Senate appropriations committees and annual reports to Congress on OTA use for prototype projects.

Most acquisition leaders acknowledge these concerns while emphasizing that flexibility and accountability must coexist. The challenge for agencies is maintaining transparency without undermining the speed and innovation benefits that make alternative authorities attractive in the first place.

How Are Non-Traditional Acquisition Methods Shifting Federal Procurement?

The growing use of CSOs, OTAs and other non-traditional contracting methods reflects a broader shift in federal acquisition strategy. Rather than replacing the FAR-based procurement system, these authorities are increasingly viewed as complementary tools designed for specific mission needs.

Traditional contracts will continue to play a central role in major acquisition programs and long-term operational requirements. At the same time, agencies are likely to expand their use of flexible authorities for research, prototyping and emerging technology adoption.

For traditional GovCons, understanding alternative acquisition pathways is becoming just as important as understanding traditional procurement vehicles. Companies that can navigate both environments will be best positioned to capitalize on future opportunities.

Alternative contracting mechanisms are likely to remain a defining feature of the GovCon landscape as federal agencies seek to modernize operations, strengthen national security and accelerate innovation.  Their continued growth signals a fundamental recognition that acquiring tomorrow’s technologies may require acquisition approaches that look very different from those of the past.

The evolution is far from complete, but the direction is unmistakable. CSOs, OTAs and other flexible acquisition tools are reshaping how the government buys innovation and how industry delivers it.