Much has been written during recent years regarding the increasing volume of government acquisitions and spending effected under Other Transaction (OT) authority. These transactions are generally exempt from the requirements of the Federal Acquisition Regulation (FAR), and the ability of offerors (or potential offerors) to challenge agencies’ decisions has been unclear—and thus is the subject of a developing body of case law.
On June 2, 2025, the Court of Federal Claims (COFC) published an opinion in Telesto Group, LLC v. United States and addressed a bid protest challenging the U.S. Army’s actions during an acquisition conducted under OT authority. Although it ultimately denied the protest allegations on the merits, the court analyzed the contours of its bid protest jurisdiction in challenges related to an OT acquisition.
The Telesto Group opinion is noteworthy because the court employed a novel “principal purpose” test to determine whether the government was seeking to obtain a product or service, thus giving the COFC Tucker Act jurisdiction over the proposed procurement. In this developing body of case law, the Court of Appeals for the Federal Circuit has not yet considered (let alone resolved) the issue of OT bid protest jurisdiction; as such, contractors interested in OT acquisitions should take note of this COFC decision.
Case Background
The Telesto Group case arose from the Department of the Army’s efforts to develop a solution to consolidate five separate business systems and improve their efficiency. The program—called Enterprise Business System-Convergence (ESB-C)—was initiated pursuant to the Army’s OT authority under 10 U.S.C. § 4022.
In a Prototype Project Opportunity Notice (PPON), the Army announced that it would conduct a multistep competition during a prototype phase, which would be followed by the award of a follow-on production contract. The Army explained that it would evaluate participants after each step of the prototype phase and select certain participants to advance to the next stage.
During the prototype phase, the Army selected only one participant, Accenture Federal Services, LLC, to continue to the final step. Telesto Group filed a bid protest at the COFC challenging the ESB-C competition. In particular, Telesto Group claimed that the Army’s conduct during the prototype phase was arbitrary and capricious, and it argued that the Army violated 10 U.S.C. § 4022.
The government moved to dismiss the complaint, arguing that the COFC lacked bid protest jurisdiction to consider projects conducted under the Army’s OT authority. In short, the government maintained that the ESB-C program was not a procurement and therefore fell outside of the COFC’s Tucker Act jurisdiction.
The COFC’s Jurisdictional Analysis
At the outset, the court noted that its jurisdiction to consider bid protests related to projects under OT authority has been the subject of a growing body of caselaw and remains uncertain. The court explained that the key question in deciding whether the Tucker Act confers jurisdiction on COFC is whether the protest is “in connection with a procurement or a proposed procurement.” 28 U.S.C. § 1491(b)(1). The court also pointed out that, although the Tucker Act does not define the term “procurement,” Congress has defined the term to include “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.” 41 U.S.C. § 111.
Citing established Federal Circuit precedent, the court explained that the government’s decision to initiate a process that could potentially lead to a procurement contract, including under OT authority, is a protestable procurement decision. However, the court stated that the inquiry into whether an OT acquisition is a procurement is complicated by the fact that Congress defined OT acquisitions in the negative. That is, under 10 U.S.C. § 4021(a), Congress defined OT projects by what they are not, namely “transactions (other than contracts, cooperative agreements, and grants).”
Having set that backdrop, the court undertook its jurisdictional analysis and made several key findings:
- The Army’s decision to use its OT authority—as opposed to some other authority to initiate the prototype phase of the EBS-C program—was itself a procurement decision. As a result, the court concluded that it had jurisdiction to review the terms of the Army’s PPON to ensure compliance with laws applicable to OT projects.
- The resolution of whether the EBS-C program involves a procurement requires the court to apply a “principal purpose” test. The court explained that the test would examine the relationship between the prototype program participants and the Army to determine whether the government is seeking to obtain a product or service. As an example, the court explained that an OT project which is undertaken to assist with the development of a prototype but that does not contemplate the acquisition of the potentially successful prototype would not constitute a procurement.
- Applying the test to the facts, the EBS-C program became one “in connection with a … proposed procurement” when the Army completed the prototyping process and determined that it would acquire the successful protype through a follow-on production contract. In this regard, the court found that there is “an effective jurisdictional blackout” during the prototyping phase of an OT project.
- Because the EBS-C program progressed to the point that it was, at least, a proposed procurement, there was COFC jurisdiction to consider Telesto Group’s challenges to the Army’s compliance with applicable statutes, regulations, as well as the PPON and other program-related documents. The court reasoned that all these authorities could form the basis of a protest as each related to the competitive procedures required for the Army’s use of OT authority under 10 U.S.C. § 4022.
Based on these findings, the court concluded that only two of Telesto Group’s allegations—one asserting insufficient participation by nontraditional defense contractors and another claiming that unfair changes were made to the PPON—fell within the COFC’s jurisdiction. But in the end, the court considered and rejected all of Telesto Group’s allegations on their merits.
Takeaways for Government Contractors
The Telesto Group opinion reinforces the case law supporting bid protest jurisdiction to consider OT acquisitions at the COFC. At the same time (as explained above), the court analyzed the jurisdictional issue in a novel way, applying a “principal purpose” to determine whether the OT project amounted to a procurement.
Contractors interested in participating in OT acquisitions should consider the following key takeaways:
- “Principal Purpose” Analysis: The Telesto Group opinion explained that when considering the issue of jurisdiction, the COFC will perform a case-by-case examination of the relationship between the government and the parties participating in the OT acquisition. The court used what it called the “principal purpose” test to determine whether the government intended to acquire a product or service—thereby making the protest “in connection with a . . . proposed procurement” for purposes of the Tucker Act. As a result, contractors considering filing a protest must have a solid grasp of the facts of the particular acquisition in order to assess the likelihood the OT project will be considered a procurement.
- Challenge to Decision to Use OT Authority: The court confirmed that under Federal Circuit precedent, there is COFC jurisdiction to consider a protest challenging the government’s decision to use OT authority at the outset. Indeed, the court noted that the EBS-C program might have been challenged successfully because 32 C.F.R. § 3.1 limits the use of OT authority to “prototype projects that are directly relevant to weapons or weapon systems proposed to be acquired or developed by the Department of Defense.” Accordingly, contractors should assess the validity of the government’s use of OT authority at an early stage. This is especially true when the government attempts to move a project from a traditional FAR-based procurement to an OT acquisition.
- Jurisdictional Blackout During Prototype Phase: The court found there was no COFC jurisdiction to challenge the government’s actions during the prototype phase. This means that according to the Telesto Group opinion, jurisdiction to consider OT acquisitions is not constant throughout. Rather, jurisdiction exists at the outset, disappears in the prototype phase, and finally re-emerges if and when the government decides to award a follow-on production contract.
- Notably, the court’s approach in this regard differs from that taken by other COFC opinions. For example, the Hydraulics Int’l, Inc. and Independent Rough Terrain decisions suggest that COFC jurisdiction exists throughout the OT acquisition as long as a follow-on procurement is contemplated in the beginning. Contractors should track the approach taken by other members of the COFC in forthcoming decisions. But as the case law continues to develop, contractors will have to recognize this ambiguity and factor it into their risk assessments.
- District Court Jurisdiction: The opinion makes clear that if the OT project does not include at least a proposed procurement, the COFC does not have jurisdiction. In such a case, however, the acquisition is not immune from judicial review. Instead, jurisdiction would exist in a federal district court under the Administrative Procedure Act (APA). So, contractors should be sure to remember that there is more than one potential forum for an OT-related protest.
Conclusion
Until the Federal Circuit resolves the issue of OT protests at the COFC, the jurisdictional landscape will continue to be complicated, uncertain, and potentially dynamic. Thus, in the absence of a bright line rule, contractors must pay close attention and consult with counsel related to potential protest challenges.
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