We’ve been hearing more questions from clients about alternative acquisition pathways and how they fit into federal growth strategies. With interest in CSOs, OTs, SBIR and STTR continuing to grow, we thought it was a good opportunity to share answers to some of the questions we hear most often.

1. What’s the difference between a CSO and an OT, and why do so many companies confuse them?

Bottom line up front: A CSO is how the government competes solutions; an OT is what it awards. They are often confused because a CSO solicitation can lead to an OT.

• Custom Solutions Openings (CSO): A competitive solicitation and source-selection method, generally resulting in a procurement contract. 
• Other Transactions (OT): A legal instrument other than a procurement contract, grant, or cooperative agreement. Prototype OTs support the development and demonstration of prototype capabilities, while production OTs support follow-on production after a successful prototype effort.

Defense CSO authority is grounded in 10 U.S.C. § 3458 and DFARS Subpart 212.70, while Defense OT authority runs through § 4021 for research and § 4022 for prototypes and follow-on production. Civilian CSO authority is not government-wide; GSA and DHS operate under agency-specific pilot authorities. For OTs, agencies including NASA, DHS, HHS/BARDA, DOE, and DOT rely on separately granted statutory authorities. Because an OT is not a FAR contract, standard FAR and agency clauses, data-rights rules, cost principles, and dispute procedures do not automatically apply unless required or incorporated. Confusion often arises because agencies use “CSO” to describe the front-end competition for an OT.

Authority and Governing Framework	Defense Agencies	Civilian Agencies
OT Authority	10 U.S.C. § 4021 (research) § 4022 (prototypes and qualifying follow-on production)	Agency-specific statute No common civilian-wide OT authority
CSO Authority	10 U.S.C. § 3458 DFARS Subpart 212.70	Agency-specific statute, pilot, deviation, or internal authority
Controlling Sources	Statute, delegation, policy, solicitation, and negotiated agreement	Agency statute, delegation, implementing policy, solicitation, and agreement
Practical Guidance	DAU and DoD/component OT guidance	Agency-specific guide, policy memorandum, deviation, or ordering procedures

Key Takeaway: “CSO” and “OT” answer different questions – how the opportunity is competed and what instrument will be awarded. Confirm both before committing B&P.

2. With acquisition rules changing so quickly, how can companies stay current without dedicating someone full time to policy?

Bottom line up front: You do not need a full-time policy lead; you need clear ownership and a disciplined 15-minute monthly review cadence. A capture or BD lead can manage a curated set of sources and devote a standing 15-minute segment of the monthly pipeline review to material policy changes. Changes get captured in a concise internal matrix identifying what changed, which agencies and pursuits are affected, and what action is required. Because the FAR overhaul, agency deviations, and statutory changes are advancing on separate tracks, the rule set can differ by agency and opportunity. Be sure to reconfirm the applicable authority, agency guidance, and solicitation terms at qualification and again before submission, rather than relying on a static playbook. A curated source set should include: Acquisition.gov, DAU guidance, agency-specific deviations and policy memoranda, and relevant NDAA provisions. Key Takeaway: A designated part-time owner with a disciplined cadence is more practical than a full-time hire the budget does not support.

3. How can companies shape opportunities without crossing the line, and how do you know when it’s already too late?

Bottom line up front: Help the customer understand the pathway and the market. The timing of that engagement matters as much as its substance. A sound approach is to focus on how CSOs and OTs work, what conditions apply, and what realistic timelines look like. Use public examples from other programs. Legitimate shaping helps the customer understand capabilities, commercial practices, technical limits, and implementation options. It does not include drafting criteria or solicitation language to favor one company. 

• CSO: Engage during market research, RFIs, industry days, and other exchanges before submissions close.
• OT: Engage before the request for prototype proposals through RFIs, demonstrations, white papers, industry days, or consortium exchanges. Once evaluations begin, use only official communication channels.

Signs that an opportunity may already be shaped include requirements that closely match one vendor, unusually short response windows, incumbent-specific experience, or language that appears to continue a prior pilot. No single sign is conclusive. Use the official Q&A process to test assumptions, then decide based on customer access, competitive position, and likely B&P return. Key Takeaway: If you were not engaged during market research, an RFI, an industry day, or another formal pre-solicitation forum, the opportunity may already be too mature to shape meaningfully.

4. What does it take to pursue CSOs and OTs successfully?

Bottom line up front: Build a pursuit model designed for speed and sound judgment, not a compressed version of the standard color-team process. CSO and OT opportunities often move quickly, offer less predictable qualification data, and rely on concept papers, demonstrations, or live pitches rather than a conventional multi-volume proposal. The pursuit model should therefore use fewer, faster go/no-go decisions, with leaders empowered to commit resources within days rather than weeks. The team should remain compact and senior: 

• Capture lead with strong customer insight, 
• Technical lead who can clearly articulate the solution, 
• Pricing support with authority to establish an early commercial position, and
• Contracts professional familiar with OT terms, IP, and data rights. 

Qualification should rely on different signals. Track program-office engagement, invitations to technical exchanges or demonstrations, feedback on early concepts, evidence of funding and acquisition planning, and access to any required vehicle or consortium. Advance the pipeline as customer interest, solution fit, and transition potential strengthen, not simply as an estimated RFP date approaches. A prototype may carry a lower margin than a conventional recompete, but it can establish a foothold with a new customer, validate a capability, strengthen past performance, and create access to a larger follow-on. Weigh that value against B&P, unreimbursed engineering, cost share, IP concessions, and diverted technical resources. The strongest competitors are not simply faster; they are better at deciding where speed and strategic investment are justified. Key Takeaway: Success requires a pursuit model built for speed and supported by a compact team that can weigh strategic value against the full cost of participation.

5. What should companies understand before accepting a CSO or OT award?

Bottom line up front: Before accepting a CSO or OT award, confirm the instrument, understand the negotiated terms, and determine whether the economics, IP position, participation requirements, and follow-on path are acceptable. A contract resulting from a CSO generally remains a procurement contract governed by the applicable FAR and agency-supplement framework. An OT is different: many terms that would normally come from regulation must be negotiated directly into the agreement, shaping the company’s economics, IP position, remedies, and follow-on prospects. That makes early executive alignment critical. Companies should identify background IP, decide what rights they can grant in newly developed technology, and set clear negotiating boundaries before discussions begin. Familiar FAR and DFARS defaults may not apply, and vague drafting can create rights the business never intended to provide. A successful prototype also does not guarantee production. The capture team should continue testing whether the customer has an ongoing requirement, a viable acquisition strategy, and funding to move forward. Before accepting a prototype OT, resolve the participation structure, whether through nontraditional-contractor involvement, qualifying small-business participation, nonfederal cost share, or an approved exception. Plan for limited protest remedies and the possibility of no conventional CPARS record. Document milestones, customer acceptance, measurable outcomes, and customer references throughout performance. Key Takeaway: Signing the award isn’t the finish line, it’s the start of a negotiation over rights, remedies, and strategic risk.

6. When should a company pursue a CSO or OT instead of an SBIR or STTR?

Bottom line up front: Pursue CSOs and OTs when the solution is ready for customer validation, integration, or transition to production; pursue SBIR or STTR when the technology still needs structured research and maturation.  CSOs and prototype OTs are generally a stronger fit when a company already has a credible solution or prototype tied to a defined agency need and is seeking mission access, operational validation, integration funding, or a path to production. SBIR and STTR are typically better suited to earlier-stage technologies that still require research, development, or technical maturation and can benefit from phased funding; STTR also requires a formal partnership with a qualifying research institution. Don’t choose a pathway because it appears faster or more flexible. Instead, pursue the pathway that best fits your technology, your customer, and your business goals such as:

• Eligibility
• Technology maturity
• Customer access
• Cost-share or non-traditional participation requirements
• IP implication
• Likely award value
• Transition potential
• Effort required to compete and perform

Key Takeaway: Match the pathway to the solution’s maturity and the company’s strategic objective.

7. How do you decide which alternative acquisition pathway is the right fit for your organization?

Bottom line up front: The right pathway is the one your organization is structurally prepared to pursue and perform, not simply the one attached to the most attractive opportunity. Start by asking what your company is built to do. A product company with a mature solution, flexible IP position, and appetite for rapid prototyping may be well suited to CSOs or OTs. An early-stage small business that still needs technical maturation may be better aligned to SBIR or STTR. A traditional services contractor may find some alternative pathways attractive, but only where it can support a differentiated solution rather than simply repackage labor. Before choosing a pathway, assess:

• Strategic fit: Does the pathway support the markets, customers, and capabilities the company wants to build?
• Solution maturity: Is the company offering research, a prototype, an operational capability, or production-ready technology?
• Eligibility: Does the company meet the applicable small-business, nontraditional-contractor, consortium, cost-share, or research-partner requirements?
• Operating model: Can the organization move quickly, price with limited data, negotiate nonstandard terms, and perform with a smaller, senior team?
• Economic fit: Are the likely margin, B&P, cost share, unreimbursed engineering, and opportunity cost acceptable?
• Risk fit: Can the company accept the likely IP, data-rights, accounting, security, and protest posture?
• Transition fit: Does the pathway offer a credible route to adoption, follow-on production, customer access, or reusable past performance?

Key Takeaway: Choose the pathway that fits how your company creates value, absorbs risk, and moves a solution forward. Then qualify individual opportunities within that lane.

Finding the Right Path Forward

Alternative acquisition pathways can create valuable opportunities, but they also require organizations to make informed decisions about where to compete, how to position, and where to invest limited resources. Red Team helps federal contractors evaluate opportunities and navigate the decisions that shape successful pursuits. If your organization is considering how CSOs, OTs, SBIR, STTR, or other acquisition pathways fit into your growth strategy, our team can help.