Military construction contractors now have a path to build and repair Defense facilities through other transactions, outside the Federal Acquisition Regulation, with no statutory dollar cap or per-service project limit. The change comes from 10 U.S.C. 2808a, "Facility construction or repair: transactions other than contracts and grants", which the FY26 National Defense Authorization Act (Pub. L. 119-60) added when it was signed on Dec. 18, 2025. The authority covers transactions entered into on or after that date.
The new section replaces a narrow pilot that had given MILCON contractors only a limited ability to perform under OTAs. In an Oct. 20 analysis, the sixth part of its "Rise of the OTA in Defense Contracting" series, the law firm PilieroMazza called the shift a door-opener for the industry. "Critically, the FY26 NDAA also removed the previous limit of two prototype construction OTAs per military service per year by enacting 10 U.S.C. § 2808a, which opens the door for DOW to use OTA for military construction (MILCON) on a larger scale," wrote attorneys Cy Alba, Josie Farinelli and Krissy Crallé.
From a $300 Million Prototype Pilot to Open-Ended Construction OTAs
Before 2808a, contractors could pursue construction work under an OTA only through the pilot program in 10 U.S.C. 4022(i). That pilot let each service use OTAs to prototype the design, development or demonstration of new construction technologies. Each service could take part in no more than two projects a year, and the combined value of all OTAs under the pilot could not exceed $300 million, according to PilieroMazza.
The pilot also limited what could be built. PilieroMazza says it covered only "prototype projects" tied to new construction techniques or technologies to improve military installations or facilities. Section 2808a is not confined to that kind of project.
Its core grant of authority reads: "Subject to the requirements of section 2853 of this title, the Secretary concerned may enter into transactions (other than contracts, cooperative agreements, or grants) to carry out repair and construction projects for facilities, including the planning, design, engineering, prototyping, piloting, and execution of such repair and construction projects."
PilieroMazza reads that language as covering any facility repair or construction project. The statute still mentions prototyping, and the firm notes that innovations such as 3D printing remain in scope, but innovation is no longer a precondition. The firm also notes that the new authority "no longer imposes a dollar cap or limits the number of OTA projects the military may undertake."
Which Appropriations Can Pay for a 2808a Project?
Subsection (b) gives the services three pots of money to draw on. The Secretary concerned may fund projects with amounts available for military construction, operation and maintenance, or research, development, test, and evaluation, "notwithstanding chapters 221 and 223 and section 2851(a) of this title."
That flexibility means a project need not be funded only from line-item MILCON dollars. The statute lets O&M and RDT&E amounts flow into an OTA vehicle for facility work. It does not override other limits. PilieroMazza cautions that, like any MILCON procurement, a 2808a transaction remains subject to available funding, applicable fiscal law, DOW policy and 10 U.S.C. 2853.
How the Follow-On Production Award Works
Subsection (c) carries over one of the most valuable features of prototype OTAs. PilieroMazza likens the process to the follow-on mechanism in 10 U.S.C. 4022(f), where an initial OTA can progress into a larger program. A transaction may provide for a follow-on production contract or transaction to the same participants "without further competition," if two conditions are met. First, competitive procedures must have been used to select the participants in the original transaction. Second, those participants must have successfully completed "a complete and useable facility" or a complete and useable improvement to a facility.
For a contractor, this means that winning the first competed project can lead to more work without a second competition. It also makes the definition of successful completion a key negotiating point, since that definition determines whether follow-on eligibility exists at all. PilieroMazza advises negotiating favorable follow-on language with clear standards for deliverables and performance metrics.
The 14-Day Congressional Notice and 180-Day Report
The broader authority comes with oversight requirements. Under subsection (d), "Not later than 14 days before entering into a transaction for a project under this section, the Secretary concerned shall submit to the congressional defense committees a notification of the intent to use this authority in an electronic medium pursuant to section 480 of this title."
Each notice must list the project title, a description of the project and its location, the estimated cost and source of funds, the recipient or contractor selected to execute the project if known at the time, and the rationale for using 2808a instead of the process for military construction projects under subchapter I of chapter 169 of title 10.
Subsection (e) adds a recurring report. The Secretary of Defense must report to the congressional defense committees within 180 days of enactment and biannually after that. The report must cover the military department or Defense Agency carrying out each project, its total cost and the source of the funds obligated, its scope, purpose and location, any observed differences in delivery timelines or execution speed, an assessment of cost savings, efficiencies or risk reductions, and lessons learned and recommendations to improve implementation, oversight or scope.
Those reports will give Congress a record of how often the services actually use the authority and whether OTAs change delivery times and costs compared with the traditional MILCON process.
What It Means for Contractors
PilieroMazza says the authority creates "meaningful opportunities for both established MILCON contractors and nontraditional firms," giving the Department of War a tool to move construction and repair projects beyond the traditional FAR framework. It also warns that flexibility "does not eliminate risk: congressional notice is required, implementation will vary across programs, and each transaction may allocate compliance, performance, and financial obligations differently."
The firm's practical advice centers on positioning. Contractors should present projects as suitable for an OTA, for example by offering innovation from nontraditional performers, meeting critical and urgent warfighter needs, or advancing modernization. They should also evaluate solicitation and agreement terms closely, "particularly the standards for successful completion and eligibility for follow-on awards."
Three points stand out for capture teams:
- Negotiate completion terms early. Because the follow-on award depends on delivering a complete and useable facility, the agreement's definition of completion directly affects future revenue.
- Expect uneven adoption. The statute does not require the services to use 2808a instead of standard MILCON, and each must give Congress its rationale for doing so at least 14 days before signing. PilieroMazza tells contractors not to expect programs to implement the section uniformly.
- Track the funding source. Because the statute allows O&M and RDT&E amounts as well as MILCON funds, a project could be funded outside the line-item MILCON account that many business development teams watch.
