The Department of Defense buys through the military departments and defence agencies under the Federal Acquisition Regulation and the DFARS. Prototype work increasingly goes through Other Transaction agreements under 10 U.S.C. 4022, many of them awarded by the Defense Innovation Unit through its Commercial Solutions Opening. A successful prototype can lead to a follow-on production award without a new competition.
At a glance
| Standard terms | FAR and DFARS clauses for procurement contracts; Other Transaction agreements under 10 U.S.C. 4022 are negotiated outside the FAR. |
|---|---|
| How it pays | Progress payments on costs incurred (customarily 80%, 85% for small businesses) or performance-based payments; Prompt Payment Act interest on late payment. Invoices go through the Wide Area Workflow system. |
| When it can walk away | Termination for convenience at any time, with costs and a reasonable profit on work done, capped at the contract price. OT agreements set their own termination terms. |
| Assignment and transfer | Payments can be assigned once, to a financing institution or an agent for a syndicate, under the Assignment of Claims Act and FAR 52.232-23, on notice to the contracting officer. |
| Where awards are published | Solicitations and awards on SAM.gov. Contract actions above US$9m are announced each business day on the department's contracts page. |
The key terms, read across
From the United States column of procurement contracts.
Award route and challenge
FAR and DFARS for procurement contracts. Prototype Other Transaction agreements under 10 U.S.C. 4021 and 4022 sit outside the FAR, with written approvals above US$100m.
Termination for convenience
FAR 52.249-2 (fixed price) and 52.249-6 (cost reimbursement). Costs plus a reasonable profit on work done, capped at the contract price.
IP and technical data
DFARS 252.227-7013 and -7014: unlimited rights where development was funded by the government, limited rights where it was at private expense, and government purpose rights for mixed funding.
Assignment and financing consents
Assignment of Claims Act (31 U.S.C. 3727, 41 U.S.C. 6305) and FAR 52.232-23: payments can be assigned once, to a financing institution or an agent for a syndicate.
Payment and milestones
Progress payments on costs incurred (customarily 80%, 85% for small businesses) or performance-based payments, plus Prompt Payment Act interest on late payment.
Disputes and governing law
Contract Disputes Act claims go to the contracting officer, then a board of contract appeals or the Court of Federal Claims. The contractor must keep performing.
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Related
- Defense Innovation Unit: Work with us
- Guide: Office of Strategic Capital loans
- Tool: Is this government contract financeable?
General information on public law and standard terms as at 28 Oct 2026, not legal advice on any contract or transaction. Quoted wording is checked against the official text linked to it.