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I have a couple questions on OTAs and was hoping to get some feedback from the folks on this forum.

  1. Are subcontracts issued under a Prime Contractor’s OTA considered an OTA also? Some folks say we have a standard subcontract because OTAs are only let by the Government to Primes and a Prime cannot let an OTA subcontract to a subcontractor. Others say it’s an OTA subcontract because the subcontract contains OTA flowdown terms and the OTA terms are first in the order of precedence. Additionally, we will be performing 90% of the work under the OTA. Our prime is a small business who was awarded an OTA. Our prime has stated we have a subcontract under an OTA. I don’t see how we can be performing 90% of the work under an OTA arrangement and have our subcontract FAR based while our prime’s contract is not.

  2. Under an OTA, is there anything that prohibits charging direct for the government funded portion of the work (to include fee) and indirect (to IRAD) for a cost sharing contribution? CAS should not apply to an OTA, so assume the rules that you can’t charge both direct and indirect to the same cost objective also do not apply.

Appreciate your thoughts on the above matters.

Thanks!

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An OTA is a common law contract just as a grant or cooperative agreement is a common law contract.  Such common law contracts are not subject to the FAR.  The FAR only applies to procurement contracts as described in FAR 2.101.  The FAR does not apply to contractors, but only provides guidance to the government when conducting an acquisition.  Because the FAR does not apply to contractors or OTAs, subcontracts issued under an OTA are not considered subcontracts under FAR covered contracts.  Instead, they are commercial arrangements between the OTA holder and the subcontractor.

As for your second question, look at the terms of the OTA.  In any event, I believe it would be inappropriate to charge an OTA holder's cost share to IRAD based on the definition of IRAD in FAR 31.205-18 because that work is required by the terms of a "contract."

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16 minutes ago, Retreadfed said:

An OTA is a common law contract just as a grant or cooperative agreement is a common law contract.  Such common law contracts are not subject to the FAR.  The FAR only applies to procurement contracts as described in FAR 2.101.  The FAR does not apply to contractors, but only provides guidance to the government when conducting an acquisition.  Because the FAR does not apply to contractors or OTAs, subcontracts issued under an OTA are not considered subcontracts under FAR covered contracts.  Instead, they are commercial arrangements between the OTA holder and the subcontractor.

As for your second question, look at the terms of the OTA.  In any event, I believe it would be inappropriate to charge an OTA holder's cost share to IRAD based on the definition of IRAD in FAR 31.205-18 because that work is required by the terms of a "contract."

Thanks for your feedback.

The 2018 DoD OTA Guide allows an OTA performer to use IRAD as an acceptable form of resource sharing (new term for 'cost share').  How else would this be charged if not to IRAD? I'm not up to speed on accounting practices (but need to get there quickly!).

 

Thanks!

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45 minutes ago, Gemini said:

How else would this be charged if not to IRAD? I

It would be charged as a direct cost of the OTA.  It should not be charged to IRAD and allocated to contracts subject to the FAR.

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IR&D expenses (when they are legitimately IR&D expenses) meet the test for a contractor's cost-sharing contribution. The other tasks may be legitimately direct-charged and funded by the customer. The key here is to expressly designate which tasks are "required" in the performance of the agreement and which tasks the parties have agreed will be performed on IR&D. The clarity in the tasking avoids the problem that Retreadfed has (correctly) identified.

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