(September 22, 2022) – Teddie Arnold and Stephanie Magnell of
Seyfarth Shaw LLP examine a U.S. Court of Federal Claims ruling
that established the court has jurisdiction to hear government
contractors’ challenges to agency decisions over other
transaction agreements.
Like the James Webb telescope expanding our understanding of the
universe, the Court of Federal Claims (COFC), in Hydraulics
International, Inc. v. United States,1
expanded the government procurement community’s understanding
of the jurisdiction of the COFC over Other Transaction Agreements
(OTAs).
After initial hurdles, the court now appears prepared to hear
challenges to agencies’ OTA award decisions,2
although the government still has greater latitude (and thus
greater discretion) in its evaluation methods than in FAR-based
procurements.
Federal agencies with OTA authority are using it on an
increasing number of acquisitions, because OTAs encourage responses
from non-traditional vendors, support supporting dual-use projects,
and encourage flexible, quicker, and cheaper solution design and
execution.3 In other words, agencies view OTA authority
as ideal for acquiring solutions that depend on the ingenuity of
the marketplace.
Historically, challenges to OTAs were limited at both the
Government Accountability Office (GAO) and the federal courts.
Currently, the GAO will not consider protests challenging the
evaluation of OT awards (for the reason that OTAs are not
procurement contracts).
However, GAO will entertain protests challenging the
agency’s improper use of a non-procurement instrument
to procure goods or services. In other words, the GAO will consider
whether the agency has failed to comply with its statutory OT
authority.4
In 2019, COFC signaled that it might have jurisdiction
over an OTA. In Space Exploration Techs. Corp. v. United
States,5 the parties agreed that the phase 1
prototype OTAs were not procurement contracts, but that the phase 2
procurement would result in a procurement contract. The protester
argued that the Air Force’s evaluation and award of the phase 1
prototype OTAs were “in connection with” the phase 2
procurement contract.
The court disagreed, finding that the two OTAs were
“separate and distinct” solicitations and acquisition
strategies.” On this basis, the court concluded that COFC
lacked jurisdiction under the Tucker Act6 and
transferred the case to California federal district court.
The federal court, applying an Administrative Procedure Act
standard of review, determined that the Air Force’s actions
were not arbitrary or capricious, and denied SpaceX its requested
relief.
From Space Exploration, we can infer that where COFC
finds that an OTA is issued “in connection with” a
procurement, COFC will find it has exclusive jurisdiction under the
Tucker Act.
In 2021 protesters started to see light at COFC, when in
Kinemetrics, Inc. v. United States,7 the COFC
maintained jurisdiction over the challenge because the
“solicitation had a direct effect on the award of a
contract.” However, the Kinemetrics court limited its
review to “whether the government followed its own
process” and denied Kinemetrics’s challenges to the
agency’s evaluation.
All of these cases led to the COFC’s recent decision in
Hydraulics, in which the government again argued that the
court lacked jurisdiction because the OTA prototype
effort8 was not connected to a procurement or a
proposed procurement.9
The court denied the government’s motion and kept
jurisdiction, finding on the facts that the OTAs were connected to
determining a government need, the assessment of need was an early
step in the government procurement process, and the court had
jurisdiction over challenges in connection with a procurement or
proposed procurement.
Unfortunately for the protester, after taking jurisdiction, the
court nevertheless denied Hydraulics’s various challenges to
the agency’s evaluation and award decision, finding that the
protester had failed to show that the agency’s evaluation
lacked a rational basis. In this respect, the court’s newfound
jurisdiction remains still a small part of the bid protest
universe.
While contractors challenging FAR-based procurement contracts
have both the FAR and extensive case law as checks on the
agency’s evaluation methodology, in OTAs, agencies remain free
to write their own standards. Thus, the court’s ability to
review may not bring much relief. However, given that this area is
wide open, a disappointed contractor with good facts may wish to
raise a challenge and plant its flag.
Footnotes
1. (Fed. Cl., Aug. 8, 2022),
https://bit.ly/3QVLK8V.
2. Note: These decisions were all challenges to the
authority exercised by the relevant Department of Defense agency
under 10 U.S.C. § 4022 (which, prior to
renumbering, was 10 U.S.C. § 2371(b)). While the court in
Hydraulics did not limit its jurisdiction to challenges
under this statute, OTA
3. There are 11 federal agencies (https://bit.ly/3LwNX9T)
with OTA authority, although not all of those agencies use that
authority regularly.
4. See Oracle America, Inc., B-416061, May 31,
2018, https://bit.ly/3SgeF9r, (holding that GAO only has
“jurisdiction to hear the challenge to the Army’s exercise
of its other transaction authority,” but not to the manner of
competition, because the contract itself is not a “procurement
contract.”). See also MD Helicopters, Inc.,
B-417379, April 4, 2019, https://bit.ly/3UtgroZ (dismissing protest
challenging the agency’s evaluation of proposals and award
decision).
5. 144 Fed. Cl. 433 (2019),
https://bit.ly/30Fa7mY.
6. 14 U.S.C. § 1491.
7. 155 Fed. Cl. 777 (2021),
https://bit.ly/3mZ2vD6.
8. The Kinemetrics parties agreed that
“OTAs themselves are not procurements.”
9. 28 U.S.C. § 1491(b)(1) grants the Court
of Federal Claims and federal district courts jurisdiction over
solicitation and award challenges as well as “any alleged
violation of statute or regulation in connection with a procurement
or a proposed procurement.”
Originally Published by Thomson Reuters Westlaw
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