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Oles Morrison Opens the Door for OTA Protests at the Court of Federal Claims

By on August 26, 2022 | Posted in

Oles Morrison sets new protest jurisdiction precedent at the U.S. Court of Federal Claims (CoFC) in Hydraulics International, Inc v. United States. Judge Holte found that the CoFC had jurisdiction to hear a protest regarding a prototype OTA for Aviation Ground Power Units (AGPUs) because the OTAs contemplated a potential follow-on production contract after performance and so initiated and were in connection with the process for determining a need for acquisition. This new precedent means that disappointed bidders can protest prototype OTA awards that are in connection with a procurement or proposed procurement.

A New Door Opens for OTA Protests

OTAs are defined as transactions other than contracts, cooperative agreements, and grants. The Department of Defense can use OTAs to carry out prototype projects to improve the mission effectiveness of the armed services. Before Hydraulics, it was unclear where post-award bid protests for the prototype OTAs could be brought since OTAs are by definition not “procurement” contracts.

The Hydraulics decision is groundbreaking because the court found the OTA prototype language, “may result in a production contract” is all that is needed for the court to have jurisdiction. This language is a part of OTA prototype awards, therefore the court’s decision opens the door for contractors to challenge OTA prototype awards to competitors at CoFC.

Proposed Procurement

The CoFC has jurisdiction for bid protests involving any “alleged violation of statute or regulation in connection with a procurement or a proposed procurement.”  28 U.S.C. § 1491(b)(1). Before Hydraulics, there were three cases that provided some guidance as to the correct forum for a prototype OTA bid protest.

In Space Exploration Techs. Corp. v. United States, the CoFC did not find jurisdiction over a challenge to the Government’s award of OTAs for launch services because the temporal disconnect between the OTAs and the future procurement contract solicitations that were contemplated indicated that the OTAs were not in connection with future procurement contracts. The CoFC transferred venue to district court.

In MD Helicopters Inc. v. United States, an Arizona district court declined jurisdiction over a challenge to the Government’s use of a prototype OTA to update its helicopter fleet. The court acknowledged that OTAs are not contracts subject to the FAR. However, the court determined that the specific prototype OTA at issue was a contract and subject to the Tucker Act because the OTA was related to a procurement in that it took place within the procurement process, and it contemplated the award of a follow-on production contract.

In Kinemetrics, Inc. v. United States, also handled by Oles Morrison, the CoFC found jurisdiction over a challenge to the Government’s use of a prototype OTA to award a project for seismic equipment utilizing a Commercial Sources Opening (CSO). The solicitation sought technical and cost proposals and contemplated a follow-on contract or other transaction. The Court differentiated the Space Exploration decision and found that the CSO OTA solicitation “had a direct effect on the award of a contract” and so found jurisdiction.

Hydraulics Background and Protest Grounds

In the Hydraulics case, the Army sought to upgrade the AGPU units that service Army helicopters. In concert with the Aviation and Missile Technology Consortium, the Army put out a Request for Enhanced Whitepapers. The solicitation contemplated the award of a prototype OTA to two bidders for the base portion with a down-select to one awardee for the option and a potential follow-on transaction or production contract.

Hydraulics filed a bid protest alleging a misevaluation of its whitepaper’s schedule and price, the waiver of a key solicitation requirement for modularity, and a resulting irrational best value decision. The Government moved to dismiss arguing that the CoFC did not have jurisdiction because the OTA was not in connection with a procurement. The Government argued that the follow-on production contract was conditional and might not even be a procurement contract as it could be another OTA. Hydraulics successfully argued that the OTA was in connection with a proposed procurement because of the possibility for the award of a follow-on production procurement contract without competition. While finding jurisdiction, the Court ultimately denied the protest grounds based on the Tucker Act’s arbitrary and capricious standard of review. The Court also found that the Army’s actions for this solicitation did not violate the OTA statute’s requirement for competition to the “maximum extent practicable.”

Prototype OTA Decision Process is Determining a Need for Acquisition

In the opinion, Judge Holte summarizes the history of OTAs and points out the OTA statute, 10 U.S.C. § 4021-22, is silent on “the Tucker Act, bid protests, judicial review, and the Court of Federal Claims.” The key jurisdictional question is whether the prototype OTA was connected to “a procurement or proposed procurement.” Relying on the definition of procurement at 41 U.S.C. § 111 and Federal Circuit precedent, Judge Holte interprets the Tucker Act as not restricting CoFC jurisdiction to “an actual procurement” but allowing disappointed bidders to protest pre-procurement decisions and other decisions that are part of the Government’s “process for determining a need for acquisition.”

The court relies on Distributed Solutions Inc. v. United States, a Federal Circuit case in which an agency issued a Request for Information (RFI) for software products. The RFI was only for research purposes but after responses were received, the agency decided to have one of its prime contractors award subcontracts to vendors who carried the necessary software. The CoFC held that it did not have jurisdiction because the contracts were with a prime contractor and so not on behalf of a federal agency. But the Federal Circuit reversed, finding that the “in connection with” prong of the Tucker Act granted jurisdiction over protests in connection with “any stage of the federal contracting acquisition process.” The agency used the RFI to inform the parameters for the eventual procurement of the software and that was sufficient to grant the CoFC jurisdiction.

Judge Holte applies the same rule to the Hydraulics matter and finds that in awarding prototype OTAs, the Army was determining the parameters for the eventual procurement or acquisition of AGPUs. The Army’s goal is to replace the current AGPU model so the OTAs here initiated the process for determining a need for acquisition and so were in connection with that process because they may result in the award of a follow-on production contract.

Conclusion: A New Door for OTA Protests

This outcome provides contractors with an avenue for post-award protests of prototype OTAs at the CoFC so long as the OTAs are connected with a stage in the procurement or federal contracting acquisition process. As stated above, the decision is new precedent because the court found the OTA prototype language, “may result in a production contract” grants jurisdiction. This language is contained in OTA prototype solicitations and awards; therefore, the court’s decision opens a new door for contractors to challenge OTA awards to competitors at CoFC.

If you would like to read the full decision you can read the full document here: HYDRAULICS opinion and order

Howard Roth has over 35 years of experience handling federal procurement and contract law matters. Howard advises and assists clients with a comprehensive approach to managing cybersecurity and establishing compliant and effective information technology safeguards. He is experienced in high-visibility cases, including complex litigation and more than 100 adversarial proceedings.Howard has represented contractors before the GAO, Court of Federal Claims, Armed Services Board of Contract Appeal (ASBCA), and CBCA. Committed to sharing his knowledge of the industry, Howard is a frequent speaker and author on issues relating to contract formation and litigation of contract disputes.

Jedidiah Blake works with clients in the government contracts and construction industries at the federal and state and local levels. Through contract review, in-depth legal research and fact analysis, and claim drafting, Jedidiah assists clients at all stages of the contract disputes process from requests for equitable adjustments to litigation before the boards of contract appeals. Jedidiah has also assisted clients on bid protests before the Government Accountability Office and the Court of Federal Claims.

For more information about OTA’s, how we can help you with your case, or questions about the article, please contact Howard Roth at (206.467.7461) or Jedidiah Blake at (206.667.0650) with the Oles Morrison Government Contracts law team..