The Defense Department issued a rule that provides for government audit access to the General Accounting Office under “other transaction” agreements for prototypes projects  relevant to new weapons or weapons systems that exceed $5 million.  The audit access rule, which provides for inclusion of an audit access clause in the agreements, does not apply to OTs for research and development.  OTs are frequently used agreements authorized by Congress to lessen the government-unique regulatory requirements to encourage participation by companies who usually refuse to do business with the government.  Recognizing the need to attract such companies, the rule provides an exemption to OT participants who have not entered into any other contract, grant, cooperative agreement or OT agreement in the year prior to the date of agreement.  (Editor’s Note.  For a discussion of OT agreements see the GCA DIGEST Vol. 2 No. 3)

In an unrelated matter, DCAA is establishing a database of government contractors currently participating in OT agreements in order to prevent established government contractors from violating either CAS 402, “Consistency in Allocating Costs Incurred for the Same Purpose” or the Credits cost principle.  If contractors account for OT costs differently than its other contract costs, it is vulnerable to a CAS 402 violation.  Similarly, if it fails to establish a credit to its research and development pool(s) for the revenue it earns from participating in R&D other transaction projects, it would violate the FAR cost principles related to credits.

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