COFC Finds Jurisdiction Over OTA Protest | Bradley Arant Boult Cummings LLP
The United States Federal Claims Court, in Hydraulics International, Inc. c. United States, recently ruled that the court had jurisdiction over a bid challenge challenging an award decision of another transaction authority (OTA) in a potential future deal. The key facts and takeaways from this remarkable and welcome move – which has the potential to open the floodgates to OTA protests – are discussed below.
The demonstration involved an upgrade of military helicopter ground power units (AGPUs) used to service army helicopters. To accomplish the AGPU upgrade, the government chose an OTA as the procurement vehicle. OTAs are transactions “other than contracts, cooperative agreements, and grants” that are typically used for advanced research projects (10 USC §§ 4021-22). The Army’s goal in using an OTA was to avoid procurement regulatory hurdles and “reduce cost and risk” for the entire project. The Army first awarded an OTA to the Aviation and Missile Technology Consortium (AMTC), which engages academia and industry in OTA prototype projects. AMTC, in turn, is managed by Advanced Technology International (ATI).
In January 2021, ATI released a Request for Enhanced White Papers (RWP), inviting submissions of white papers for various projects. The RWP provided that “[u]if this competitively awarded prototype project is determined to have been successfully completed, this project may result in the award of a follow-on production contract for more than 150 AGPUs without recourse to competitive procedures.
Hydraulics International, Inc. (HII) submitted a white paper in response to the RWP but was not selected. So, in March 2022, HII filed a lawsuit with the court, challenging the Army’s assessment.
The government decided to dismiss HII’s claim for lack of jurisdiction in the matter because the claim was allegedly not “in connection with a bargain or proposed bargain,” as required by 28 U.S.C. § 1491 (b)(1). Specifically, the government argued that the OTAs at issue are not related to a public procurement project, as any “follow-on production” of OTAs is conditional and may never occur, and even if it were to occur, may still not be a “supply.”
The court dismissed the government’s jurisdictional challenge, noting that if AGPU’s OTAs are part of the military‘s “procurement need determination process,” then they are tied to a proposed deal and the court therefore has jurisdiction over HII’s protest. The court went on to note that the OTA’s exception to certain federal laws and regulations does not necessarily mean that they are exempt from the court’s jurisdiction under the Tucker Act.
Then the court found that two recent decisions, one from the court and one from the District of Arizona, “did not align with the government’s interpretation” of the OTA’s bylaws and the Tucker Act. In Kinemetrics, Inc. c. United Statesthe court ruled that it had jurisdiction to protest an OTA, as long as the OTA “ha[s] a direct effect on the allocation of a [procurement] Contract.” In MD Helicopters Inc. v. United States, the district court dismissed a claim against the Army for a prototype OTA project because the OTA “occurred as part of the ‘process of determining a need for acquisition’ of ‘advanced helicopters’.” On the basis of these decisions, the court of Hydraulics International Inc. concluded that “where an OTA may result in the exclusion of a bidder for consideration of a subsequent production contract, the OTA is related to a government procurement or a proposed procurement”.
The court then distinguished the earlier decision of the court in SpaceX v. United Statesnoting that the OTA competition in this case was not for goods or services, and that the phase two procurement was predetermined to be a separate FAR-based competition, fully open to those excluded from the OTA competition.
Accordingly, the court held that the OTA AGPUs at issue were part of the military’s “procurement determination process” and therefore related to a proposed procurement giving the court jurisdiction under the law. Tucker.
The recent court decision in Hydraulics International Inc. is both remarkable and welcome in that it is apparently part of a broader move by the court to be wary of the government’s jurisdictional arguments in the context of the OTA. This decision is significant in that it is the latest in a series of cases that have begun to reveal, with some clarity and consistency, the contours of the court’s jurisdiction over OTA manifestations. It is now clear that the tribunal considers that its jurisdiction in the context of OTA extends to cases where an OTA may result in the exclusion of a bidder from consideration of a subsequent production contract.
Additionally, the decision is noteworthy because the court found that the wording of the OTA at issue — i.e., “may lead to a production contract” — is sufficient for the court to have jurisdiction. . Such language is quite common in the context of OTA, and therefore the court’s decision may have the effect of opening the floodgates to future manifestations of OTA. This too is a welcome development as court review is a necessary check and balance that helps ensure transparency and accountability in the OTA context.