The U.S. Court of Federal Claims (COFC) recently addressed the scope of its jurisdiction over Other Transaction Authority (OTA) agreements in the case of Telesto Group, LLC v. United States, No. 1:24-cv-01784. The case provides significant insights into the practical considerations and implications for government contractors engaging in OTAs and adds to the growing body of case law delineating the boundaries of COFC's authority in OTA-related disputes, particularly in the context of bid protests. This Holland & Knight alert delves into the limitations of the court's jurisdiction, importance of understanding OTA and necessity for timely objections and comprehensive documentation in government contracting.
Telesto Group, LLC v. United States: Case Overview
In Telesto, the plaintiff challenged the U.S. Army's conduct during the prototype phase of the Enterprise Business System-Convergence (EBS-C) program, which was executed under the Army's OTA as per 10 U.S.C. § 4022. Telesto Group LLC alleged that the Army's evaluation process was flawed and that the Army failed to ensure significant participation from nontraditional defense contractors, as required by statute.
The COFC dismissed Telesto's protest, holding that it lacked jurisdiction over the claims related to the OTA's prototype phase. In doing so, the court emphasized that its jurisdiction under 28 U.S.C. § 1491(b)(1) is confined to specific areas: the decision to use an OTA as a procurement vehicle, compliance with statutes governing U.S. Department of Defense OTAs (10 U.S.C. §§ 4021 and 4022), compliance with applicable regulations and adherence to the terms of the Prototype Project Opportunity Notice (PPON)
The court further reasoned that the OTA in question did not constitute a procurement contract under the Tucker Act, 28 U.S.C. § 1491(b)(1) and, therefore, fell outside its bid protest jurisdiction. Additionally, the court found that the Army did not violate the statutory requirement concerning nontraditional contractor participation.
Another notable part of the case involved the court's decision to deny Telesto's motions to supplement the record with additional declarations and emails. The court found supplementation was not required for effective judicial review, which underscores the presumption of completeness afforded to the government's designation of the administrative record.
Finally, Telesto highlights the issue of "timely objections" as being crucial in understanding the waiver of claims. In Telesto, the plaintiff attempted to bring claims challenging the Army's evaluation of steps 4 and 5 of the initial prototyping phase of the program. However, the court found that Telesto had waived its claims regarding the Army's evaluation of steps 4 and 5 because it failed to object to the changes in the evaluation criteria during the OTA project. The court applied the principle from Blue & Gold Fleet, LLP v. United States, which bars parties from raising objections after the fact if they did not object at the time the issue arose. This principle is particularly relevant in OTA projects, where the flexibility and innovation intended by such agreements can lead to changes in evaluation criteria or processes. In Telesto's case, the failure to object during the step 4 and step 5 evaluations meant that any claims related to those steps were considered waived.
Evolving Jurisprudence on OTA Jurisdiction
The COFC's jurisdiction over OTAs is notably limited; however, the Telesto decision contrasts with other recent COFC rulings that have taken a broader view of the court's jurisdiction over OTA-related disputes, including:
- Raytheon Company v. United States, No. 24-1824C, 2025 WL 583350 (Fed. Cl. Feb. 24, 2025): In this case, Raytheon challenged its exclusion from further participation in a Missile Defense Agency (MDA) prototype OTA for the Glide Phase Interceptor program. The COFC denied the government's motion to dismiss Raytheon's protest and held that it had jurisdiction over the protest, emphasizing that the OTA was "intended to provide the government with a direct benefit in the form of products or services," thus falling within the scope of the Tucker Act. (See Holland & Knight's previous alert, "Court of Federal Claims Deems Itself 'De Facto Forum' for Other Transaction Agreement Protests," March 17, 2025.)
- Independent Rough Terrain Center, LLC v. United States, 172 Fed. Cl. 250, 257 (2024): In this case, the protester challenged an OTA awarded for the development of rough-terrain forklifts for the Army. The COFC asserted jurisdiction, reasoning that the agreement was closely connected to a potential procurement and that the government's intent to acquire goods or services was evident. This decision further illustrates the court's willingness to consider the substance and intent behind OTAs when determining jurisdiction.
The differing outcomes in Raytheon, Independent Rough Terrain Center and Telesto all hinge on the COFC's interpretation of whether an OTA is "in connection with a procurement or proposed procurement" under the Tucker Act (28 U.S.C. § 1491(b)(1)), which governs the court's bid protest jurisdiction.
In Raytheon, the court concluded that although the OTA was not a procurement contract, the agency's intent was to transition to a follow-on production contract without competition (authorized under 10 U.S.C. § 4022(f)). This made the prototype OTA closely tied to a future procurement. Accordingly, because the OTA phase was "in connection with a procurement or proposed procurement," the protest fell within the Tucker Act's jurisdiction.
Similarly, in Independent Rough Terrain Center, the court focused on the functional nature of the agreement – that is, even though the government labeled it an OTA, the actual intent was the acquisition of specific products. Jurisdiction was found because the OTA was effectively used to procure specific goods, making it subject to bid protest jurisdiction under the Tucker Act.
Unlike Raytheon, Telesto was eliminated during the prototype phase, and no production contract had been awarded or directly proposed. In its decision in Telesto, the court emphasized that there was no clear connection between the agency's actions and a current or imminent procurement. Rather, the agreement was squarely a prototype effort, and the only participant advancing to the next step was Accenture Federal Services. Therefore, Telesto's claims were too remote from any procurement. The court held that it does not have jurisdiction over a pure prototype OTA where no procurement has yet occurred or been promised to the protester.
Bottom Line for Contractors
The Telesto decision underscores the importance of the specific circumstances surrounding each OTA. The closer the OTA is tied to an actual or imminent procurement, the more likely COFC will find jurisdiction. If a contractor is participating in only a pre-procurement prototype phase with no guarantee of award, it may be outside of the court's jurisdictional reach.
COFC's jurisdiction over OTA-related protests remains a nuanced and evolving area of law. Though Telesto reflects a narrower interpretation, cases such as Raytheon and Independent Rough Terrain Center demonstrate the court's openness to exercising jurisdiction when an OTA is closely tied to a procurement action.
A summary of the jurisdictional distinctions in these cases is below.
Finally, contractors engaging in OTAs should:
- Assess the Nature of the OTA. The Telesto case highlights the importance of understanding the specific requirements set forth in the PPON and the statutory conditions under 10 U.S.C. § 4022(d)(1). Determine whether the OTA is intended to lead to a procurement of goods or services, which may bring it within the COFC's jurisdiction.
- Document Government Intent for Both Jurisdictional and Record Purposes. Maintain records that reflect the government's intent to procure through the OTA, as this can be pivotal in establishing jurisdiction. Be aware of challenges that may exist in a bid protest context to supplement the administrative record. Contractors must be proactive in ensuring that the record accurately reflects the agency's decision-making process, as post hoc attempts to supplement the record are unlikely to succeed.
- Understand OTA and Stay Informed on Legal Developments. Contractors must be well versed in the statutory and regulatory framework governing OTAs. Monitor ongoing case law developments to understand how the COFC's jurisdiction over OTAs is evolving and engage legal counsel early to ensure you do not fall victim to avoidable jurisdictional challenges.
- Timely Objections. The principle of waiver, as applied in the Telesto case, illustrates the critical need for contractors to raise objections promptly during the procurement process. Telesto's failure to object to the Army's evaluation criteria changes during the OTA project led to the waiver of its claims regarding those changes.
As the use of OTAs continues to grow, contractors should remain vigilant and consult legal counsel to navigate the complexities of challenging OTA decisions.
