On February 24, Judge Armando Bonilla of the Court of Federal Claims (COFC) declined to dismiss a challenge to a $648 million award under a Missile Defense Agency (MDA) development deal, finding that the court had jurisdiction to review Other Transaction (OT) Authorities like the one at issue. For years, unsuccessful offerors have found it difficult to challenge OT award (OTA) decisions because both the GAO and COFC have found they have limited jurisdiction over these types of agreements.
The recent decision may change that, as Judge Bonilla held that COFC has jurisdiction over OTAs whenever the government demonstrates an intent to procure goods or services. We discuss recent decisions related to jurisdictional questions around OTAs, the background of the procurement at issue, and the merits of the recent decision below.
OTA Background
OTAs are non-traditional acquisition vehicles authorized for use by a number of agencies primarily for innovative research and development or the production of prototype products. The OTA concept was first used in the NASA enabling legislation because the drafters realized that the new agency might need flexibility when acquiring cutting-edge technology for the U.S. space program.
Therefore, OTAs are not governed by the Federal Acquisition Regulation (FAR) or Defense Acquisition Regulation Supplement (DFARS). Similarly, these procurements do not have to comply with Competition in Contracting Act (CICA) requirements.
As a result, both the COFC and GAO have long held they have limited jurisdiction to hear protests of OTA awards, something we previously wrote about here. For example, in MD Helicopters, Inc., GAO stated its jurisdiction is limited to reviewing whether an “agency has failed to comply with its statutory OTA authority.”
Similarly, in Space Exploration Technologies Corporation [SpaceX] v. United States, COFC concluded that the prototype development agreement at issue was not a procurement contract and therefore fell outside the court’s jurisdiction. However, it suggested for the first time that it might have jurisdiction over protests of OTAs, stating in an order granting the government’s motion to dismiss and the protester’s motion to transfer venue that —
The Court does not reach the issue of whether other transactions generally fall beyond the Court’s bid protest jurisdiction under the Tucker Act. The Court simply concludes that the specific facts in this case show that the [OTAs] at issue are not procurement contracts and therefore, the Air Force’s decisions related to the award of these agreements may not be reviewed by the Court pursuant to the bid protest provision of the Tucker Act.
The court differentiated between agency decisions made “in connection with” a procurement and those that more broadly “related to” a procurement. The court looked at three factors:
- The “separate and distinct” nature of the solicitation seeking the prototype development and the potential future procurement.
- The different types of acquisition strategies employed (i.e. OTA vs. FAR-based contract).
- The prototype development agreements awarded “did not involve the procurement of any goods or services by the Air Force.”
Ultimately, the court said that while SpaceX may have been disadvantaged by the inability to participate in the development agreement, it would have had the opportunity to participate in the anticipated procurement through full and open competition.
Since then, COFC has found it had jurisdiction over OTA disputes but distinguished the OTAs at issue rather than announcing a general jurisdictional rule. For example, in Kinemetrics, Inc. v. United States, COFC found the court to have jurisdiction over a post-award bid protest challenging the award of an OTA to acquire seismic equipment.
The court was struck by language that tended to connect the solicitation and the contract award. For example, the solicitation “invited [i]nterested partes [to] submit a complete technical and cost proposal,” rather than announce “a call for white papers” and the agency rejected the plaintiff’s proposal for not being worthy of “a contract award,” even though it was “technically acceptable.”
In addition, in United States v. Independent Rough Terrain Center, LLC (ITRC), the court held that while OTAs may not be contracts, cooperative agreements, or grants, and although they are not governed by the FAR, they may fall under COFC’s bid protest jurisdiction, which is not limited to only FAR-based contracts. The court stated that to determine jurisdiction, you must look beyond the contract label and to the substance of the solicitation to determine whether the government was seeking to acquire actual property or services.
We wrote about the ITRC decision in more detail here.
Background on the Procurement at Issue
For many years, Congress has pushed the Department of Defense (DoD) to develop advanced missile defense capabilities and tasked the MDA with developing the necessary technologies. In response, MDA issued a Special Topic Broad Agency Announcement (BAA) seeking white papers on “research related to the development of a new Glide Phase Interceptor (GPI)” and noting that successful participants may be awarded a follow-on production contract.
Based on the submitted white papers, MDA issued OTAs for Phase 1, Material Solutions Analysis, to Northrop Grumman and Raytheon. In mid-FY 2023, MDA launched Phase II, Technology Development, which was expected to continue into FY 2029 and cost more than $2.5 billion. Phase III, Product Development, was slated to follow and focus on building and testing the potential prototypes. On May 1, 2024, MDA issued a Request for Prototype Proposal (RPP), identified as Option Period 2C+, which intended to complete the Phase II deliverables.
However, on September 25, 2024, MDA discontinued Raytheon’s participation in the GPI Program.
On November 6, 2024, Raytheon filed a bid protest with COFC challenging the MDA’s decision to move forward with Northrop Grumman’s technology and discontinue Raytheon’s participation in the GPI Program. Raytheon argued that MDA improperly evaluated each company’s proposal by using unstated evaluation criteria, looking at Raytheon’s perceived cost risk while not doing the same with Northrop Grumman’s proposal, and ignored statutory requirements to “achieve . . . initial operation capability for the Glide Phase Interceptor . . . not later than December 31, 2029.”
The government moved to dismiss Raytheon’s protest arguing that the court lacked jurisdiction as this was an OTA award.
The Decision
Instead of dismissing the protest, “[i]n an effort to break the Sisyphean cycle,” Judge Bonilla set forth a general jurisdictional rule stating that “this Court is the de facto forum for bid protests involving ‘other transactions’ (OTs) and ‘other transaction agreements’ (OTAs) awarded under 10 U.S.C. §§ 4021–22.” Judge Bonilla continued, “[t]he annual award of billions in taxpayer dollars cannot evade judicial scrutiny, nor be returned to the whims of tactical forum shopping. Congress intended neither.”
The judge issued a “working definition of OTs and OTAs falling within this Court’s exclusive bid protest jurisdiction under the Tucker Act: an acquisition instrument other than a traditional procurement vehicle intended to provide the government with a direct benefit in the form of products or services.” While Judge Bonilla agreed that there may be limited exceptions to this general rule, he held the case at issue was not one of them.
COFC then concluded that OT authority exercised by MDA and the OTAs awarded and then discontinued for Raytheon “fall squarely within the working jurisdictional framework” and that the Option Period 2C+ award to Northrop Grumman met the jurisdictional underpinnings of the Tucker Act because it was a continuance of an invitation to work through research and development with an intent to purchase.
The court did not find it relevant that “MDA had not yet formally committed to purchasing an end product from Northrop Grumman or any other successful prototype developer.” Rather, it concluded that “the invocation of this Court’s jurisdictional authority to review a contested procurement is predicated on the agency’s demonstrated intent, actions to date, and intentions moving forward.”
Going Forward
While Judge Bonilla’s opinion is not binding on other COFC judges and may well be challenged on appeal to the Federal Circuit, it is a significant development and signals a possible expansion of COFC’s post-award OTA protest jurisdiction. This is a positive development for both the private sector and the government.
As the judge stated, the use of OTAs is quickly expanding. In FY 2023 alone, DoD spent more than $15 billion on over 2,500 OT agreements. Other agencies, including NASA, the Department of Homeland Security, the Department of Health and Human Services, the Department of Energy, and others also possess OT authority. In addition, the Trump Administration has signaled an interest in overhauling the federal procurement system to make it easier for private industry to do business with the government.
Without OTA protest jurisdiction, awards of large swaths of federal defense funding for innovative products would be practically unchallengeable. For this reason, we believe both the private sector and the government should welcome Judge Bonilla’s decision as the lack of meaningful judicial redress disincentivizes non-traditional government contractors from investing the resources needed to pursue OTA opportunities.
For more information on how the COFC’s recent ruling may affect protests related to OTAs, please contact the author of this post.