The New OTA Authority For Military Construction

The U.S. Department of War (DOW) has long used other transaction agreements (OTAs) to move quickly in areas such as research, prototyping and defense technology. However, the use of OTAs for military construction (MILCON) has been far more limited – largely restricted to prototyping new design or construction techniques.

A recently enacted provision in Title 10 of the U.S. Code creates a new authority for defense agencies to use OTAs to carry out MILCON or repair projects.

Enacted in the fiscal year (FY) 2026 National Defense Authorization Act (NDAA), 10 U.S.C. Section 2808a, "Facility construction or repair: transactions other than contracts and grants," allows the Secretary of War or relevant military department secretary to enter into OTAs "to carry out repair and construction projects for facilities, including the planning, design, engineering, prototyping, piloting and execution of those projects."

For contractors and the Pentagon alike, the new authority is significant. DOW and U.S. military branches now have a construction-specific OTA tool that sits alongside traditional Federal Acquisition Regulation (FAR)-based MILCON authority under 10 U.S.C. Section 2802.

As MILCON OTAs are used more broadly by DOW, defense construction and repair opportunities are expected to attract a wider field of competitors. The new authority will create opportunities for nontraditional contractors, construction technology companies, design-build teams, modular construction providers and traditional federal construction firms willing to pursue opportunities outside the familiar FAR-based contracting model.

Background

The FY 2023 NDAA established a pilot program under 10 U.S.C. Section 4022(i) for using OTAs to prototype the design, development or demonstration of new construction technologies to improve military installations or facilities, permitting only two prototype projects per year. This new authority kick-started efforts to utilize OTAs for MILCON. In September 2024, the Defense Innovation Unit (DIU) and U.S. Army Corps of Engineers partnered to award the Army's first construction OTA under the new pilot authority for a barracks renovation project at Fort Campbell, Kentucky. Another recent DIU-Army partnership includes an OTA awarded in January 2026 to construct 3D-printed training barracks at Fort Bliss, Texas.

The New Authority

Section 2808a authorizes the use of OTAs for "repair and construction projects for facilities." The statutory wording is broad. It includes not only final construction execution, but also planning, design, engineering, prototyping and piloting. The authority permits the use of MILCON, operations and maintenance, as well as funding for research, development, test and evaluation to carry out projects executed under the new authority.

Notably, congressional notification is required before a defense agency may use the new authority. Not later than 14 days before entering into a MILCON OTA, the secretary concerned must submit to the congressional defense committees a notification that includes:

• the project title
• a description of the project and its location
• the estimated project cost and source of funds
• the contractor selected to execute the project, if known at notification
• the rationale for using this authority rather than the traditional MILCON authority under Subchapter I of Chapter 169 of Title 10, U.S.C.

How It Differs from Traditional Prototype OTAs

The new authority is parallel to, rather than a supplement or revision of, DOW's existing prototype OTA authority under 10 U.S.C. Section 4022. Section 2808a provides an independent, MILCON-focused OTA authority. Whereas prior construction efforts under Section 4022(i) were limited to design, development or demonstration of new construction techniques or technologies, Section 2808a can be used for any type of facility repair and construction, even if the work is not novel.

Although the new authority allows for "prototyping," this is in the context of construction projects for facilities. A construction prototype under Section 2808a might involve, for example, 3D printing, modular barracks, rapid airfield repair methods, resilient utility systems, deployable infrastructure, new construction materials, digital design integration, energy resilience systems or other facility-related innovations.

Funding and Other Threshold Questions

The statutory text does not impose an express dollar limitation on Section 2808a transactions. That is notable because the U.S. Congress has imposed dollar limits, approval thresholds and pilot-program caps in other OTA contexts. The absence of a statutory dollar cap could make the authority attractive for major facility projects, although dollar limitations may come from other sources, such as the underlying appropriation, DOW implementing policy, congressional notification requirements or project-specific fiscal law constraints.

This does not mean the authority is unlimited. Section 2808a is expressly subject to Section 2853, which limits authorized cost and scope variations for MILCON projects. The authority also operates in the broader MILCON environment, which is highly structured and closely overseen by Congress.

DOW will likely need to update existing OTA guidance to address the use of this new authority in Section 2808a. Many government and industry participants are familiar with the rules, customs and risk allocations that have developed around Section 4022 prototype and follow-on production OTAs. Section 2808a may require new templates, guidance, approval processes and training because construction projects raise issues that are different from technology prototypes, including bonding, safety, labor standards, design responsibility, inspection, acceptance, differing site conditions, warranties, real property interests, environmental compliance and long-term facility sustainment. Whether this comes in the form of stand-alone guidance or as an addendum to DOW's Other Transactions Guide remains to be seen.

Until DOW issues implementing regulations and/or policy guidance, contractors should expect variation across military departments and buying commands. Some offices may use Section 2808a cautiously at first. Others may use MILCON OTAs to obtain construction on an expedited basis. At least one Army contracting office is already taking advantage of the new authority, with a MILCON OTA for facilities modernization at Joint Base Lewis-McChord awarded this week.

Follow-On Production Opportunities

Like 10 U.S.C. Section 4022, Section 2808a also contains a follow-on production contract mechanism. A transaction entered into under the authority may provide for award of a follow-on production contract or follow-on production transaction without further competition if 1) competitive procedures were used in the original transaction and 2) the participants in the original transaction successfully completed either a complete and useable facility or a complete and useable improvement to a facility.

This feature may be important for contractors investing in innovative construction solutions. A company that successfully completes a pilot or prototype facility project may be positioned for larger and more profitable follow-on efforts.

This feature could change how construction contractors think about early-stage DOW opportunities. A pilot project may not be merely a one-off demonstration: It may be the entry point to a larger program of record, broader installation rollout or repeatable construction solution. Contractors should therefore pay close attention to whether the initial OTA includes follow-on language, what constitutes successful completion, what deliverables or performance metrics must be met, and whether the government has preserved the right to award a follow-on without further competition.

Takeaways for Government Construction Contractors

OTAs are different instruments than FAR-based construction contracts. Though they may offer flexibility, they also may omit standard clauses and protections that contractors are accustomed to seeing in federal construction contracts. Accordingly, construction contractors competing for and negotiating MILCON OTAs should be vigilant.

1. Contractors should monitor DOW implementation closely. The statute provides the authority, but policy will determine much of its practical effect. Key issues include approval levels, competition requirements, documentation standards, use of construction agents, fiscal law review, labor requirements, bonding expectations, intellectual property treatment, payment structures, dispute processes and follow-on procedures.
2. Contractors should be prepared to explain why an OTA is appropriate for a particular construction project. The strongest candidates may involve nontraditional performers, innovative construction methods, urgent mission needs, modular or repeatable designs, installation resilience, energy or utility modernization, rapid repair, advanced materials or integrated design-build solutions that do not fit neatly within standard procurement models.
3. Contractors should scrutinize risk allocation. FAR-based construction contracts come with familiar clauses addressing changes, differing site conditions, inspection, termination, payment, disputes, bonds, warranties and other construction-specific issues. An OTA may not include those protections unless the parties negotiate the terms into the agreement. Contractors should not assume that standard construction protections automatically apply.
4. Contractors should evaluate team structure early. Section 2808a may create opportunities for partnerships between traditional federal construction firms and nontraditional technology or construction innovation companies. Teams that can combine federal construction experience with new delivery methods may be well positioned.
5. Contractors should pay close attention to follow-on rights. If a pilot project may lead to a follow-on production contract or transaction, the initial OTA should be reviewed carefully for competition history, success criteria, data rights, pricing assumptions, production scope and the government's discretion to proceed.
6. Contractors should recognize that protests of MILCON OTA evaluations are more limited than protests of traditional FAR-based opportunities. The U.S. Government Accountability Office generally will not review a protest challenging an agency's evaluation of proposals and award decision for an OTA, although it will consider whether an agency is improperly using its authority. The U.S. Court of Federal Claims has been more willing to exercise jurisdiction over OTA protests, but the law remains nuanced, evolving and highly fact-specific. Contractors considering a MILCON OTA protest should consult experienced counsel early.
7. Contractors should expect oversight. MILCON remains politically and fiscally sensitive. Large-dollar use of Section 2808a will likely draw attention from DOW leadership, Congress, auditors and inspectors general. Contractors should maintain strong documentation, transparent pricing support, sound compliance systems and a clear record showing why the OTA approach serves the government's mission.

Looking Ahead

Section 2808a may become one of the more consequential recent changes in the federal construction acquisition landscape. It may benefit both traditional federal construction contractors and the government by creating a more flexible pathway for facility delivery. It could also draw new entrants into the MILCON marketplace, including firms that previously avoided opportunities in the defense construction space because of the federal regulatory regime.

If DOW uses the authority aggressively, it could open the door to faster and more innovative delivery of military facilities. If implemented cautiously, it may still provide a valuable tool for pilot projects, urgent repairs and construction technologies that do not fit comfortably within traditional procurement rules.

Either way, government construction contractors should begin preparing now. The companies best positioned to benefit will be those that understand both sides of the equation: the flexibility of OTAs and the enduring legal, fiscal and practical demands of MILCON.

Please reach out to the authors with questions on this evolving issue.