Bid protests of other transaction agreements, also known as “OTs” or “OTAs,” are a common topic for this blog. These federal agreements differ from your everyday procurement contracts in that they are not subject to the Competition in Contracting Act (CICA), Federal Acquisition Regulation (FAR), Department of Defense (DoD) FAR Supplement (DFARS), or other common procurement laws and regulations. Although they are not a particularly new phenomenon, the number and size of OT awards has increased exponentially in the last ten years, driven chiefly by a revised statutory authority and increased popularity at DoD.[1] So, too, come the bid protests.
But, being subject to different legal frameworks, an OT bid protest is not a garden-variety bid protest challenging a solicitation or award of a procurement contract. Thorny questions abound, particularly on jurisdiction and appropriate forum between the Government Accountability Office (GAO), the Court of Federal Claims, and other federal courts of general jurisdiction. We have discussed these questions at length in other posts (see Another Piece to the Puzzle: Court of Federal Claims Has Jurisdiction over Bid Protest Where the Disputed Other Transaction Could Lead to a Follow-on Production Contract, Where Can You Protest an Other Transaction Award? Insights from Kinemetrics, and GAO Sharpening Its Blade [Strategies] on OTA Review, for a few). One rule that seemed clearcut (until recently) was that GAO will not hear post-award bid protests challenging the outcome of an OT competition. After all, GAO’s Bid Protest Regulations say as much outright, at 4 C.F.R. § 21.5(m): “GAO generally does not review protests of awards, or solicitations for awards, of agreements other than procurement contracts,” with some exceptions not relevant to OTs.[2]
Then, last week, GAO issued its decision in ARiA, B-422365 et al. (May 28, 2024), finding the Office has jurisdiction over protests challenging the award of non-procurement instruments – like OTs – if the awards are “necessary to identify the only entities eligible to submit a proposal” for a future procurement contract. Under the rule set out in ARiA, where a competitive award does not independently fall within GAO’s jurisdiction but operates “similar to a down-select or competitive range process” eliminating offerors from consideration through “successive rounds [that] ultimately may result in a [procurement] contract award,” the award decision is subject to GAO’s bid protest review.
There are a couple caveats. For one, the award at issue in ARiA was a cash prize[3] rather than an OT. However, GAO’s decision is not based on the nature of the intermediate award, but instead hinges on that award’s operation to limit the competitive field for a larger competition that “ultimately may result” in a procurement contract.
It is common nowadays for OTs to serve a similar “down-select” role, especially under DoD’s specific authority to award OTs for prototyping projects and issue follow-on production contracts.[4] Using that authority as part of a multi-phase procurement strategy, DoD will competitively award OTs to multiple offerors to develop prototypes that are then tested and competitively evaluated in one or more down-selects until the last one standing is awarded a procurement contract for production.
Compare this to the multi-phase procurement in ARiA. In the first round, the Army received 133 concept white papers for its xTechScalabe Artificial Intelligence (AI) competition and selected eight cash prize winners to receive $10,000 each and advance to the second round. From those eight, the Army would select four to receive an additional cash prize and advance to a third and final round, where a “separate announcement” would invite them to submit proposals for a procurement contract of up to $2 million each. According to GAO, one cannot isolate only the prize competition at issue when considering jurisdiction, as that would wrongly “view the first round in a vacuum, separate from the entire procurement contemplated by the competition announcement.” Carrying this analogy forward, is the award of a set of prototype OTs that will establish the competitive range for a future production contract any less a part of “the entire procurement” contemplated by the agency?
A second caveat: the procurement contract contemplated in ARiA is a Small Business Innovation Research (SBIR) “direct to phase II” contract award. In a footnote, GAO discusses the “intricacies of the SBIR program” and the Small Business Administration’s view that the prize competition announcement could “only be properly read as one whole procurement,” lest the Army have violated statutory prohibitions on using invitations, pre-screening, or pre-selection to determine eligibility for phase II awards.
One might argue that this discussion limits GAO’s decision to its facts, and other multiple-award down-select competitions should not be viewed as so intertwined into “one whole procurement.” But that is not what GAO says; GAO raises the point only in a footnote declining to say whether the competition announcement complied with applicable SBIR laws, not to justify its holding. Such an argument also overlooks the Army’s intent to issue a separate solicitation for the phase II contract, which GAO held was not sufficient to segregate the cash prizes from the remainder of the procurement process. Many OTs will not contemplate even a separate solicitation for final down-select to production (although some do). Moreover, at least in the case of many DoD prototype OTs, the ultimate procurement contract and initial prototype OT are similarly linked by statute, such that the authority for the procurement award depends inextricably on award of the prototype OT.[5]
All told, GAO’s decision in ARiA appears to support a revised rule: GAO will not review post-award protests challenging outcome of an OT competition (or other non-procurement instrument) unless that outcome limits the competitive range of offerors eligible for award of a subsequent procurement contract.[6]
This mirrors a similar forum-selection rule that appears to be developing in the federal courts, although there are only a small handful of cases to date and no binding precedent. The cases appear to be coalescing around a framework whereby the Court of Federal Claims – the forum specifically designed to hear federal bid protests (among other things) – has exclusive jurisdiction over OT bid protests only where the agency contemplates follow-on procurement contracts with limited competition. On the other hand, only federal district courts of general jurisdiction will review challenges to OTs with no direct connection to a future procurement contract. See Another Piece to the Puzzle: Court of Federal Claims Has Jurisdiction over Bid Protest Where the Disputed Other Transaction Could Lead to a Follow-on Production Contract and Where Can You Protest an Other Transaction Award? Insights from Kinemetrics for more discussion of the relevant decisions.
Much more to come, no doubt, as GAO and the courts face a rising tide of OT bid protests. None of the decisions or opinions to date are precedentially binding on any individual GAO attorney or judge at the Court of Federal Claims, making any attempt to state a clearcut or definite rule a risky endeavor. One need look no further than GAO’s decision in ARiA for evidence of that.
[1] See 10 U.S.C. § 4022.
[2] GAO will review – and has reviewed – protests alleging an agency is improperly using a non-procurement instrument (e.g., an OT) to procure goods or services. 4 C.F.R. § 21.5(m); see, e.g., Rocketplane Kistler, B-310741, Jan. 28, 2008, 2008 CPD ¶ 22. It also will review protests challenging DoD’s award of an OT beyond its statutory authority. See Oracle Am., Inc., B-416061, May 31, 2018, 2018 CPD ¶ 180.
[3] Pursuant to a prize challenge under the authority of 10 U.S.C. § 4025.
[4] See 10 U.S.C. § 4022(f).
[5] See 10 U.S.C. § 4022(f)(2).
[6] Query whether this general rule may apply in the specific case of a competitive range of one, i.e., to give GAO jurisdiction over any single-award prototype OT that establishes eligibility for award of a future procurement contract, as is expressly contemplated in most DoD prototype OTs and, in any case, is true as a matter of law. See 10 U.S.C. § 4022(f)(2).