Published
An “Other Transaction” (OT) is a kind of federal contract used for research and prototypes. Congress allows certain agencies, including ARPA-H, to use OTs as a more flexible way to fund innovative work. To compress the timelines for what’s scientifically possible and speed real health impact, the agency uses this nimble funding mechanism.
Don't call it a grant
Most federal funding uses procurement contracts or financial assistance vehicles, like grants or cooperative agreements. These come with standard rules for awarding and reporting. However, these rigid vehicles can also become a blocker, especially when trying to do something innovative or higher‑risk.
An OT is a more flexible deal-making alternative for research and development work. With an OT, ARPA-H and the performer (a company, startup, university, nonprofit, etc.) can negotiate terms more like a commercial deal. It can be faster to set up an OT and easier to adjust as a project evolves, all while keeping the ARPA-H Program Manager closely involved in the work. This structure can be appealing to organizations that haven't worked with the government before.
Importantly, OTs are performance-based agreements. Funding is contingent on meeting certain milestones that are negotiated up front. Payments are disbursed as technical milestones are successfully achieved; this part of the ARPA-H model is deliberately different from grants where money is provided in an up-front lump sum. If ARPA-H performers aren’t delivering, funding will be reallocated to more promising avenues. If work exceeds expectations, the agency can double down on resources to promote that success.
Business plans that work
Resource- or cost-sharing may also be negotiated in an OT, along with intellectual property (IP) ownership. IP negotiations are especially important in cases where the performer expects commercial or other benefits as a result of the project. ARPA-H hopes to fuel American industry through our programs’ successes. But the agency cannot support projects forever. We consider transition plans from day one, and that is reflected in the structure of our agreements. Overall, OTs allow for more flexibilities regarding IP than under grants, too.
Like traditional funding vehicles, OTs do have guardrails that protect federal tax dollars. ARPA-H makes high-risk investments with intension, not recklessness. OTs therefore offer more room to tailor the agreement to the project and the performer, so innovative work can move at private sector speed. Every ARPA-H solicitation will specify what contractual mechanism is anticipated for awards. And every Program Manager carefully stewards oversight of the work.
Contracting resources at your fingertips
In short, an OT is the government’s flexible contract option for doing innovative projects rapidly and creatively. To learn more about the agency’s non-dilutive funding mechanisms, download a sample OT agreement or check out additional contracting resources on ARPA-H's Other Transaction Community webpage.