We have addressed on this blog questions relating to jurisdiction at the GAO, Court of Federal Claims (CFC), and district courts to hear suits relating to awards using the government’s Other Transaction (OT) authority. Multiple agencies now have this OT authority, which was first conceived by the principal architect of the 1958 NASA authorizing statute, Paul Dembling, who included in that legislation a catchall authorizing “other transactions as may be determined as necessary in the conduct of its work and on such terms as it may been appropriate.”
Despite Massive OT Growth, Jurisdictional Questions Remain
In an effort to, in part, give agencies a more flexible, commercial-like ability to further research and development (R&D) by attracting non-traditional companies to engage with the government, these OT transactions are not subject to or restricted by the mature but complex web of procurement regulations included in the Federal Acquisition Regulation (FAR) and agency supplements. Today, there are billions of dollars of OT awards being made each year. In FY2023 alone, DoD spent more than $15 billion on over 2,500 OT agreements.
Despite the massive uptick in the use of OT agreements, significant questions remain about the ability of contractors to challenge government actions relating to these awards, which are not considered procurement contracts.
CFC Holds it Has Jurisdiction Over Protests of OT Follow-on Production Contracts
Thankfully, at least with regard to DoD OT follow-on production contracts, some clarity was brought to this jurisdictional morass by a CFC decision published on July 16, 2024. In that decision, Judge Davis held that CFC has jurisdiction to hear a dispute over such awards. While the case was dismissed due to unrelated reasons (the protestor’s sam.gov registration had lapsed and, therefore, the court found it did not have standing), the court’s conclusions regarding OTA jurisdiction bring some much needed clarity.
In the case, Independent Rough Terrain Center, LLC (IRTC) challenged the Army’s decision to award a follow-on production contract to Taylor Defense Products, LLC (TDP) for the modernization of rough terrain container handlers (RTCH), which the Army uses to move shipping containers. Both IRTC and TDP had been awarded OTA agreements for initial prototypes, and because both prototypes were successful, the Army was authorized under the OTA statute, 10 U.S.C. § 4022, to limit the selection process of contractors for the follow-on production contract to IRTC and TDP. Under that statutory provision, for the follow-on production contract the Army had the choice to use the OT authority used in the prototype awards or the FAR authority used in typical procurement contracts. The Army selected the former.
After the Army made award to Taylor, IRTC filed an agency-level protest, which was dismissed after the agency committed to take corrective action. The Army then notified IRTC that its sam.gov registration had lapsed while the OT award was pending. The CFC protest followed.
The government moved to dismiss, arguing that by the text of the OT statute, those actions are not procurements, therefore the Court of Federal Claims did not have bid protest jurisdiction under the Tucker Act, 42 U.S.C. § 1492(b), because that jurisdiction is limited to procurements. IRTC argued that because the Army intended to procure goods and services under the follow-on production contract, it was a procurement under applicable precedent, irrespective of the authority used. And even if it was not itself a procurement, IRTC argued that the production contract was “in connection with” a procurement such that the court had Tucker Act jurisdiction.
The court agreed with IRTC, holding that while OT agreements may not be contracts, cooperative agreements, or grants, and although they are not governed by the FAR, they do fall under CFC’s bid protest jurisdiction, which is not limited to only FAR-based contracts. Using the broad definition of “procurement” applied by the Federal Circuit to CFC’s jurisdictional statute, Judge Davis concluded that “[the Army’s] choice of follow-on production under § 4022(f)(5) is not between a non-procurement (i.e., under OT authority) or a procurement (i.e., under FAR authority), it is between two different authorities for ‘acquiring property or services.’” Importantly, the court noted that there is a material distinction between OT prototype awards, over which the opinion concluded CFC has no jurisdiction, and follow-on production contracts, which it does.
Conclusion
While it remains to be seen whether this decision will be followed (judges at CFC are not bound by one another’s decisions), hopefully this well-written decision will establish a jurisdictional foundation relating to follow-on OT awards that will give industry confidence that they can seek relief in at least one venue for violations relating to this category of OT awards. Further, this development should be welcomed by the government, as the lack of meaningful judicial relief for violations relating to follow-on production OT awards undermines one of the main purposes of the OT authority as the inability to challenge improper OT awards dismissing the interest of non-traditional government contractors in investing time and resources in much-needed government R&D and prototyping efforts.
