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An extensive set of laws, regulations, and mandated procedures govern the procurement of new weapon systems and ensure that the Department of Defense receives good value for the money spent and that government interests are protected. Some firms, especially those developing innovative technologies for the commercial market, find those rules burdensome and often refuse to work for the government. This prevents government access to the latest advances in key technologies. Congress authorized use of Other Transactions (OT) in 1994 for the development of prototypes directly relevant to weapons or weapon systems so that contractors are not required to comply with procurement-specific laws and regulations. DoD asked RAND to assess the experience of such OT projects (started between 1994 and 1998), which yielded three conclusions: new industrial resources are now participating in DoD prototype projects; benefits of OT are broad; and some risks to the government are incurred. RAND researchers believe the immediate rewards substantially outweigh the risks and if the OT authority flexibility is removed, most if not all of the benefits observed would again becomeun available to DoD.

The research described in this report was performed under the auspices of RAND's National Security Research Division unit.

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