The U.S. Court of Federal Claims, in Hydraulics International, Inc. v. United States, recently held that the court had jurisdiction over a bid protest challenging an Other Transaction Authority (OTA) award made in connection with a potential future procurement. Key facts and takeaways from this noteworthy and welcome decision — which has the potential to open the floodgates to OTA protests — are discussed below.
The protest involved an upgrade to military helicopter aviation ground power units (AGPU) used for servicing Army helicopters. To accomplish the AGPU upgrade, the government selected an OTA as the purchasing vehicle. OTAs are transactions “other than contracts, cooperative agreements, and grants” that are generally used for advanced research projects (10 U.S.C. §§ 4021-22). The Army’s objective in using an OTA was to avoid obstacles related to the regulation of procurements and “reduce cost and risk” for the overall project. The Army first awarded an OTA to the Aviation and Missile Technology Consortium (AMTC), which engages academia and industry in OTA prototype projects. AMTC, in turn, is managed by Advanced Technology International (ATI).
In January 2021, ATI issued a request for enhanced whitepapers (RWP), inviting whitepaper submissions for various projects. The RWP provided that, “[u]pon 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.”
Hydraulics International, Inc. (HII) submitted a whitepaper in response to the RWP but was not selected. Thus, in March 2022, HII filed a bid protest with the court, challenging the Army’s evaluation.
The government moved to dismiss HII’s complaint for lack of subject matter jurisdiction because the complaint allegedly was not “in connection with a procurement or a proposed procurement,” as required under 28 U.S.C. § 1491(b)(1). Specifically, the government argued that the OTAs at issue are not in connection with a proposed procurement because any “follow-on production” from the OTAs is conditional and may never occur, and even if it were to occur, may still not be a “procurement.”
The court rejected the government’s jurisdictional challenge, noting 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 the court thus has jurisdiction over HII’s protest. The court went on to note that OTA’s exception from certain federal laws and regulations does not necessarily mean that they are exempt from the court’s jurisdiction under the Tucker Act.
Next, the court found that two recent decisions, one from the court and one from the District of Arizona, “do not align with the government’s interpretation” of the OTA statutes and the Tucker Act. In Kinemetrics, Inc. v. United States, the court held that it has protest jurisdiction over an OTA, so long as the OTA “ha[s] a direct effect on the award of a [procurement] contract.” In MD Helicopters Inc. v. United States, the district court dismissed a claim against the Army for an OTA prototype project because the OTA “took place within the ‘process of determining a need for acquisition’ of advanced helicopters.” Based on these decisions, the court in Hydraulics International Inc. found that “where an OTA can result in the exclusion of a bidder for consideration of a follow-on production contract, the OTA is in connection with a procurement or a proposed procurement.”
The court went on to distinguish the court’s previous decision in SpaceX v. United States, noting that the OTA competition in that case was not for goods or services, and the phase two procurement was predetermined to be a separate FAR-based competition, fully open to those excluded from the OTA competition.
Accordingly, the court held that the AGPU OTAs at issue were part of the Army’s “process for determining a deed for acquisition,” and are thus in connection with a proposed procurement giving the court jurisdiction under the Tucker Act.
The court’s recent decision in Hydraulics International Inc. is both noteworthy and welcome in that it is seemingly part of a broader movement by the court to be skeptical of the government’s jurisdictional arguments in the OTA context. This decision is significant in that it is the most recent in a line of cases that have begun to reveal, with some clarity and consistency, the contours of the court’s jurisdiction over OTA protests. It is now apparent that the court views its jurisdiction in the OTA context as extending to those instances where an OTA can result in the exclusion of a bidder from consideration for a follow-on production contract.
In addition, the decision is noteworthy because the court found that the OTA language at issue — i.e., “may result in a production contract” — is sufficient for the court to possess jurisdiction. Such language is fairly standard in the OTA context, and thus, the court’s decision may have the effect of opening the floodgates to future OTA protests. This, too, is a welcome development in that review by the court is a necessary check and balance that helps ensure transparency and accountability in the OTA context.
If you have any questions about this noteworthy decision, or about OTA protests in general, please do not hesitate to contact Aron Beezley or Gabby Sprio.