The Rise of OTA in Defense Contracting, Part 5: Commercial Solutions Openings and NDAA FY26

In the evolving landscape of government contracting, non-FAR-based procurements, including Other Transactions Authority (OTA), have become a focal point. A key element of President Trump’s April 9, 2025, Executive Order, “Modernizing Defense Acquisitions and Spurring Innovation In the Defense Industrial Base,” emphasized reforming the Department of War’s (DOW) acquisition process by prioritizing Commercial Solutions Openings (CSOs) and OTA. In November 2025, Secretary Hegseth’s memorandum, “Transforming the Warfighting Acquisition System to Accelerate Fielding of Capabilities,” highlighted that the Under Secretary of War for Acquisitions and Sustainment (USW(A&S)) would soon mandate the use of OTA, among other non-FAR-based procurements whenever feasible. Defense contractors should also take note that the National Defense Authorization Act of Fiscal Year 2026 (NDAA FY26) suggests a broader application of CSOs, indicating Congress’s interest in expanding the use of non-FAR-based procurements like OTA and CSOs. As OTAs and CSOs are used more frequently, defense contractors will gain a competitive advantage for early adoption and greater leverage to negotiate favorable data rights and intellectual property terms outside the FAR. Please visit this link for Parts 1-4 in this series.

What is a Commercial Solutions Opening?

A CSO is a long-term solicitation seeking creative, commercially available technologies or capabilities to solve specific government problems. CSOs may result in a FAR-based procurement contract or, depending on the statutory authority, they frequently result in an OT agreement.

Under a CSO, the problems the government seeks to resolve are referred to as “areas of interest,” which can be added, changed, or removed from a CSO over time. Areas of interest broadly define a set of problems, needs, or requirements, typically inviting industry to provide approaches to solve problems as opposed to proposing to meet specific solutions as is the case with many FAR-based procurements.

For DOW, there are currently three models for structuring CSO procurements and awards:

1. The competitive procedure developed and utilized to solicit and award prototype OTs authorized by 10 U.S.C § 4022 (Prototype Other Transaction-based Commercial Solutions Openings), which is the same statutory authority governing DOW’s use of OTAs generally. 10 U.S.C § 4022 refers to CSO awards as prototype OTs.
2. The DFARS 212.70, Defense Commercial Solutions Opening, to solicit and award FAR-based procurement contracts and agreements through the authority of 10 U.S.C. § 3458.
3. A hybrid approach, blending the authority of 10 U.S.C. §§ 4022 and 3458, through a single general solicitation, to award either prototype OTs or FAR-based procurement contracts and agreements.

NDAA FY26: Expanding the Use of CSOs

The NDAA FY26 amends 10 U.S.C. § 3458, the statute which provides DOW with the authority to utilize CSOs, to expand the use of CSOs for:

1. Beyond Innovative Technologies: CSOs are no longer limited to acquiring “innovative commercial products and commercial services.” They can now be used to obtain “commercial products, commercial services, or nondevelopmental items.”
2. Flexible Reviews Options: Instead of requiring a solicitation and a peer review, DOW may now issue a solicitation coupled with either a peer review, technical review, or operational review, depending on which is most appropriate.
3. Follow-On Production: DOW now has explicit authority to issue follow-on production agreements, including OTs and sole-source contracts, resulting from a successful CSO.
4. Elimination of Written Determination: A written determination from the USW(A&D) is no longer required for contracts or agreements above $10 Million when issued under CSO authority.

Takeaways

1. Competitive Advantage: Understanding the shift towards non-FAR based procurements like OTA and CSO allows contractors to align their strategies with government priorities, enhancing their chances of securing contracts.

2. Innovation Opportunities: By leveraging the expanded use of CSOs, contractors can offer innovative solutions to government challenges, positioning themselves as key players in the defense sector’s modernization efforts.

3. Data Rights and Intellectual Property: OTA and CSOs that result in OT agreements present a unique opportunity for defense contractors to negotiate favorable data rights. Unlike FAR-based awards, OTs are not subject to the Bayh-Doyle Act (35 U.S.C. §§ 201-204), which governs the government’s rights in inventions and patents, as well as other DOW-specific requirements regarding license rights in technical data and computer software. At the outset, every defense contractor should engage legal counsel who can assist with negotiating ownership and licensing rights for data developed under OTs.

If you have questions about Other Transaction Authority, Commercial Solutions Openings, the NDAA FY26, or any other issues affecting government contractors, please contact Cy Alba, Josie Farinelli, Krissy Crallé, or another member of PilieroMazza’s Government Contracts Group.