The Court of Federal Claims (COFC) recently took jurisdiction over a bid protest involving an Other Transaction Authority (OTA) prototype award because the Court found the OTA could lead to a follow-on procurement contract. The decision in Hydraulics International, Inc. v. United States, No. 22-364 (Aug. 8, 2022) potentially opens the floodgates for protests involving any prototype OTA that contains the standard "may result in a production contract" language — a significant development for any company competing for OTA awards. 

Summary of Hydraulics International Protest Decision

The prototype OTA at issue in Hydraulics International involved an upgrade to military helicopter Aviation Ground Power Units (AGPU). The Army issued a Request for Enhanced Whitepapers (RWP) pursuant to its OTA authority, inviting submissions for various projects that included the AGPU upgrade prototype project. 

Like many prototype OTA solicitations, the RWP provided that, "[u]pon a determination that this competitively awarded prototype project has been successfully completed, this project may result in the award of a follow-on production contract for over 150 AGPUs without use of competitive procedures." The Army received five whitepapers in response to the RWP, including from Hydraulics International. Ultimately, the Army did not select Hydraulic International for award.

Hydraulics International filed a bid protest at COFC challenging the OTA prototype award to a competitor and alleging that the Army misevaluated its proposal. The government moved to dismiss the protest for lack of subject matter jurisdiction. Relying on Space Exploration Technologies Corp. v. United States, 144 Fed. Cl. 433 (2019) (SpaceX), the government argued that the acquisition of AGPU prototypes through the use of OTAs was not "in connection with a procurement or a proposed procurement," as required for Tucker Act jurisdiction under 28 U.S.C. § 1491(b)(1), because any follow-on production from the OTAs was conditional.

The Court disagreed with the government for three main reasons:

• First, the Court noted that the OTAs' exemption from the Federal Acquisition Regulation (FAR), which applies to procurement contracts, does not necessarily dictate a finding that Tucker Act jurisdiction is lacking. 
• Second, the Court found the requisite nexus between the Army's prototype OTA award and a potential production contract based on an analysis of recent precedent, including the decisions in Kinemetrics, Inc. v. United States, 155 Fed. Cl. 777 (2021) and MD Helicopters Inc. v. United States, 435 F. Supp. 3d 1003 (D. Ariz. 2020). In Kinemetrics, COFC found it had bid protest jurisdiction over an OTA as long as the OTA "had a direct effect on the award of a [procurement] contract." In MD Helicopters, the District of Arizona found that an OTA prototype project "took place within the process of determining the need for [an] acquisition." Based on these decisions, the Court in Hydraulics International found that "where an OTA can result in the exclusion of a bidder for consideration of a follow-on production contract, the OTA is in connection with a procurement or a proposed procurement."  
• Third, the Court distinguished the SpaceX decision because the OTA competition in that case (1) was not for goods or services and (2) the phase two procurement at issue was a separate FAR-based competition, fully open to those excluded from the phase one OTA competition. 

Ultimately, the Court held that the AGPU OTAs were part of the Army's "process for determining a need for acquisition," and are in connection with a proposed procurement giving COFC jurisdiction under the Tucker Act. 

Key Takeaways

The Court's decision in Hydraulics International confirms the recent trend towards finding Tucker Act bid protest jurisdiction over OTA awards. To be successful, a protester must plausibly allege that an OTA award has a "connection with a procurement or a proposed procurement." The Hydraulics International decision suggests that this nexus can be established when an OTA prototype solicitation contains language suggesting the possibility of a follow-on production contract, such as the standard language that award "may result in a production contract." 

If you have any questions about the Hydraulics International decision or Tucker Act bid protest jurisdiction over OTAs, please contact one of the Miller & Chevalier attorneys listed below:

Alex L. Sarria, asarria@milchev.com, 202-626-5822

Jason N. Workmaster, jworkmaster@milchev.com, 202-626-5893

Alexandra S. Prime, aprime@milchev.com, 202-626-5940

Connor W. Farrell, cfarrell@milchev.com, 202-626-5925

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