Claims Court Has Jurisdiction Over Protests Under "Other Transaction Agreements" (OTAs)

In Hydraulics International, Inc. v. United States, — Fed. Cl. –, 2022 WL 3150517 (8/8/22) (HII), the Court of Federal Claims (CFC), ruled that it had jurisdiction over a protest filed under an Army OTA. On the merits of the protest, the Court held that the Army’s actions were lawful and denied the protest.

The Army OTAs

The Army sought an upgrade to its aviation ground power unit, known as “AGPU1.1,” to service all models of Army helicopters. Per statutory authority, the Army sought to meet this need pursuant to an OTA. The Army first awarded an OTA to the “Aviation and Missile Technology Consortium” that engages industry and academia in OTA prototype projects. To conduct these projects and to meet the Army’s needs, the Consortium Manager (CM) would issue “Requests for Enhanced Whitepapers” (RWPs) to members of the Consortium and then would enter other OTAs with selected contractors.

In January 2021, the CM issued an RWP inviting submissions on various prototype projects, one of which was the AGPU 1.1 upgrade. This project contemplated an award – on a best value basis — to up to two contractors for a base effort of one prototype. After government testing, the government reserved the right to down-select to one vendor to deliver 10 prototypes in a second phase. The RWP also provided, pursuant to the Army’s OTA statutory authority, that if the Army determined that the prototype project was successfully completed, it may result in a follow-on production contract of over 150 units without use of competitive procedures.

Five contractors submitted whitepapers on the AGPU1.1 upgrade. Insofar as relevant, the submission of Sun Test System was rated Excellent; that of John Bean Technologies (JBT) was rated Acceptable; and that of HII was rated Acceptable. HII’s proposal however provided for a redesign of its current commercial unit to meet the Army’s technical requirements. HII provided a timeline for redesign that exceeded the timeline required by the government.

The Army awarded the base effort to Sun Test and JBT on a best value basis. The Army considered HII’s schedule risk and redesign risk as undesirable.

The Protest and the Parties’ Positions

HII filed this protest with the Court of Federal Claims (CFC), contending that the Army misevaluated its submissions. The Army argued that its actions were lawful but contended that the Court did not have the jurisdiction to hear HII’s protest because it arose out of an OTA.

Under the Tucker Act, the CFC has jurisdiction over protests filed “in connection with a procurement or a proposed procurement”. The Army contended that it acquired these prototypes through use of OTAs and OTAs are not procurements, nor are they in connection with a procurement or proposed procurement. HII contended that while OTAs are not procurement contracts, since there existed the possibility of a later production contract here, this OTA was “in connection with” a procurement and the Court had jurisdiction.

The Court Rules

The Court briefly reviewed the history of the OTA. OTA authority was first granted to NASA under the Space Act of 1958, in response to successes in space by the Soviet Union. The Act granted NASA the broad authority to issue contracts and such “other transactions” as necessary to meet its mission. Congress later extended this authority to DOD and to other agencies. It is undisputed that the Army had the authority to invoke OTA procedures for the AGPU 1.1 prototype project here.

In accordance with Federal Circuit precedent, the Court looked to the definition of “procurement” in 41 USC 111. It noted that the term “procurement” includes “all stages” in the process of acquiring property or services, including “determining a need” for the same. Here, the OTAs initiated the process for determining a need for acquisition, and they were in connection with that process because the OTAs may result in the exclusion of HII from consideration of a follow-on production contract. The Court concluded that the OTAs were in connection with a procurement or proposed procurement, and thus the Court had jurisdiction over HII’s protest complaint.

As for the merits of the protest, the Court held, briefly stated, that the Army did not err in evaluating HII’s timeline schedule or pricing, neither in the Army’s evaluation documents or in its selection memorandum, and that the evidence showed that the Army did not improperly waive or relax its modularity requirement for the awardees’ benefit. The Court also stated that it would not “second guess” the Army’s best value determination. The Court denied HII’s protest.

Lessons Learned

This decision is a blow to government efforts to immunize OTAs from all regulatory compliance and conventional judicial oversight. Given the high stakes involved, it would not be surprising if the government appealed this decision to the Federal Circuit, which has not yet expressly decided the issue. Stay tuned for further developments!