In a recent decision, Hydraulics Int’l, Inc. v. United
States, the Court of Federal Claims (“COFC” or
“Court”) exercised jurisdiction over a bid protest
challenging the award of an Other Transaction Agreement
(OTA).1
Background
At issue in Hydraulics Int’l was the Department of
the Army’s upgrade to military helicopter Aviation Ground Power
Units (APGUs), used for servicing Army helicopters when not in
flight. To achieve this upgrade, the Army selected an OTA as the
purchasing vehicle. In terms of process, the Army first awarded an
OTA to a consortium that engages industry and academia in OTA
prototype projects. In turn, the consortium issued a Request for
Enhanced Whitepapers (RWP) to members of its consortium, with the
goal of ultimately entering into separate OTAs with the contractors
selected by the Army. Of particular importance to the jurisdiction
issue, the RWP provided, pursuant to the Army’s OTA authority
under section 2371b(f) (now § 4022(f)), “Upon a
determination that this competitively awarded prototype project has
been successfully completed, this project may result in the award
of a follow-on production contract for
over 150 AGPUs without the use of competitive
procedures”2(emphasis added).
Five contractors, including Hydraulics Int’l,
submitted responses to the RWP. After the Army evaluated the
whitepaper submissions, it selected two other contractors for award
of OTAs. The protester then filed a post-award protest at the COFC,
contesting its non-selection. In particular, the protester’s
complaint alleged that the Army misevaluated its whitepaper
submission and improperly waived or relaxed key solicitation
requirements when selecting the two contractors for award.
The government moved to dismiss the protester’s complaint
for lack of subject matter jurisdiction, arguing that the protest
is not “in connection with a procurement or a proposed
procurement,” as required under the Tucker Act, 28 U.S.C.
§ 1491(b)(1). In response, while agreeing that the OTAs
themselves were not procurement contracts, the protester maintained
the Court had jurisdiction to hear the protest under the Tucker
Act. The protester argued that because the RWP established the
possibility of a follow-on production contract for 150 AGPUs
without competition, the OTAs were therefore “in connection
with a procurement.”3
Analysis
Ultimately, the Court concluded that it possessed Tucker Act
jurisdiction to hear the protest. First, the Court noted that the
Tucker Act grants the COFC “jurisdiction to render judgment on
an action by an interested party objecting to a solicitation by a
Federal agency for bids or proposals for a proposed contract or to
a proposed award or the award of a contract or any alleged
violation of statute or regulation in connection with a procurement
or a proposed procurement.” 28 U.S.C. § 1491(b)(1). The
Court then pointed out that the Court of Appeals for the Federal
Circuit has held that the operative phrase “in connection
with” is very sweeping in scope.4
Recognizing that the parties did not dispute that the OTAs in
question were not procurement contracts themselves, the Court
focused its analysis on the “connectivity” of the OTAs to
a procurement or a proposed procurement. While the Tucker Act
itself does not define “procurement” or “proposed
procurement,” the Court noted that the Federal Circuit relies
on the definition of procurement in 41 U.S.C. § 111, which
states: “The term ‘procurement’ includes all stages of
the process of acquiring property or services, beginning with the
process for determining a need for property or services and ending
with contract completion and closeout.” Further focusing its
analysis of the jurisdictional issue, the Court stated that
“if the AGPU OTAs are part of the Army’s ‘process for
determining a need for acquisition,’ then they are in
connection with a proposed procurement and this Court has
jurisdiction over plaintiff’s complaint.”5
Next, applying this standard, the Court addressed the
government’s main arguments in support of its contention that
the OTAs were not in connection with a proposed procurement: (1)
although the RWP contemplated a follow-on production contract, it
did not guarantee such a transaction; and (2) the Army reserved the
right to pursue any subsequent acquisition through non-procurement
means. Citing the Federal Circuit’s decision in Distributed
Sols., Inc. v. United States, 539 F.3d 1340 (Fed. Cir.
2008)-in which the Federal Circuit found jurisdiction over a
challenge involving an agency request for information that did not
result in a procurement-the Court explained that is was immaterial
whether the potential procurement of 150 APGUs ever occurs so long
as the government initiated the process for determining a need for
acquisition and that acquisition might occur via
procurement.6 Finally, the Court examined the record and
found every aspect of the RWP to be specifically tailored toward
determining the Army’s need for property (i.e., upgraded
AGPUs).7 For these reasons, the Court found subject
matter jurisdiction over the protest and denied the
government’s motion to dismiss.
Although this Legal Update focuses on the Court’s ruling on
the jurisdictional issue, it is worth mentioning that the Court
ultimately denied the protest allegations, applying the arbitrary
and capricious standard of review.8 Based on its review
of the record and consideration of the protester’s allegations,
the Court found that Hydraulics Int’l did not meet the
“heavy burden of showing that the award decision had no
rational basis.”9
Takeaways
The Hydraulics Int’l decision is noteworthy as it
provides a potential pathway for disappointed offerors that wish to
contest an agency’s award of an OTA. Specifically, if the OTA
competition contemplates the award of a subsequent production
contract, and that subsequent production contract could possibly
involve a procurement contract, then the
COFC could find Tucker Act jurisdiction over a protest involving
that OTA competition. On the other hand, if an OTA competition were
to disclaim the possibility of using the competition to establish a
subsequent procurement contract, such a situation might be found to
be distinguishable from the pertinent facts in Hydraulics
Int’l.
Further, until the Federal Circuit weighs in on the issue of OTA
protest jurisdiction, it is unclear to what extent other COFC
judges will choose to adopt the reasoning of Hydraulics
Int’l. Even though the landscape for OTA protests at the
COFC is not fully developed, contractors involved in OTA
competitions should take note of Hydraulics Int’l and
consider the Court’s ruling when deciding whether to contest an
agency’s award of an OTA.
Footnotes
1 Hydraulics Int’l, Inc. v. United States,
No. 22-364 (Aug. 8, 2022).
2 Hydraulics Int’l, Inc., at 3.
3 In the alternative, the protester requested that the
Court transfer the case to federal district court in the event the
Court found it lacked jurisdiction.
4 Hydraulics Int’l, Inc., at 6.
5 Hydraulics Int’l, Inc., at 8.
6 The Court also noted that the government’s position
did not align with two recent decisions, one from the COFC and one
from the District of Arizona, each holding the COFC has
jurisdiction when a disputed OTA is in connection with a
procurement or proposed procurement. Hydraulics Int’l,
Inc., at 10 (citing Kinemetrics, Inc. v. United
States, 155 Fed. Cl. 777 (2021), and MD Helicopters Inc.
v. United States, 435 F. Supp. 3d 1003 (D. Ariz.
2020)).
7 On this matter, the Court noted the government
confirmed during oral argument that the central OTA goal was to
replace the legacy AGPUs. Hydraulics Int’l, Inc., at
9. Relying heavily on the fact that the OTAs initiated a process
for determining a need for property, the Court stated that
“[s]uch activity fits squarely within the first ‘stage of
the federal contracting acquisition process.'”
Hydraulics Int’l, Inc., at 11 (quoting Distributed
Sols., Inc., 539 F.3d at 1346).
8 Describing the applicable standard of review, the Court
stated:
When this Court evaluates a
bid protest, “the inquiry is whether the agency’s action
was arbitrary, capricious, an abuse of discretion, or otherwise not
in accordance with law and, if so, whether the error is
prejudicial.” Glenn Def. Marine (ASIA), PTE Ltd. v. United
States, 720 F.3d 901, 907 (Fed. Cir. 2013); see also Sys.
Application & Techs., Inc., v. United States, 100 Fed. Cl.
687, 711 (2011), aff’d, 691 F.3d 1374 (Fed. Cir.
2012).
Hydraulics Int’l, Inc., at 6.
9 Hydraulics Int’l, Inc., at 26.
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