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October 03, 2018 - Acquisition Regulations, Protests & Litigation, Compliance

GAO Sharpening its Blade [Strategies] on OTA Review

Five Peculiarities of Protests of Federal Supply Schedule Orders

The Government Accountability Office’s (GAO) recent decision in Blade Strategies, LLC, B-416752, 2018 WL 4584111 (Comp. Gen. Sept. 24, 2018), clarifies the GAO’s jurisdiction and standard of review for protests of other transaction agreements (OTAs), and also serves as a good reminder that all protests challenging an aspect of an agency’s solicitation — including the agency’s choice of an OTA over a procurement contract — must be filed prior to the time for receipt of initial proposals.

Generally, the GAO’s bid protest jurisdiction does not extend to the review of awards made under an agency’s “other transaction” authority; however, the GAO will review a timely protest that an agency is improperly using an OTA rather than a procurement contract.  See 4 C.F.R. § 21.5(m).  As we have discussed on this blog, the GAO’s standard of review for this question seemingly has evolved over time.  Traditionally, the GAO would evaluate whether an agency was attempting to “acquire (by purchase, lease, or barter) property or services for the direct benefit or use of the United States Government,” in which case a procurement contract would be required in accordance with the Federal Grants and Cooperative Agreements Act (FGCAA).  See Rocketplane Kistler, B-310741, Jan. 28, 2008, 2008 CPD P 22.  This was necessary “to ensure that an agency [was] not attempting to avoid the requirements of procurement statutes and regulations” by exploiting its other transaction authority.  Id.  However, in two recent decisions, MorphoTrust and Oracle, the GAO disregarded whether the OTA was designed to purchase goods or services for the Government’s direct benefit or use, and instead looked only to “whether the agency’s use of its discretionary authority was proper, i.e., knowing and authorized.”  Oracle America, Inc., B-416061, May 31, 2018, 2018 CPD P 180; MorphoTrust USA, LLC, B-412711, May 16, 2016, 2016 CPD P 133 (holding that “although the FGCAA provides applicable guidance to all federal agencies when the choices are limited to (1) procurement contracts, (2) grants, or (3) cooperative agreements, it provides no guidance when determining when an agency may properly use its other transaction authority”).

The difference between these standards is stark:  one prevents an agency from issuing an OTA where it should issue a procurement contract instead, while the other simply looks to whether Congress has bestowed an agency with sufficiently broad other transaction authority.  The latter is necessary in at least one instance, namely the Department of Defense’s (DOD) express authority to enter into OTAs for prototype projects, which undoubtedly are acquisition instruments for the purchase of goods (i.e., prototypes) or services (i.e., prototyping) that the DOD uses for its direct benefit and use.  But the latter standard yields much too lenient a result when applied to other agencies, such as NASA, that have been authorized broadly to enter into “enter into and perform such contracts, leases, cooperative agreements, or other transactions as may be necessary in the conduct of its work and on such terms as it may deem appropriate.”  51 U.S.C. § 20113(e) (emphases added).  Under the MorphoTrust and Oracle standard, at least on its face, NASA and similarly authorized agencies appear to be able to issue OTAs — and avoid procurement law — when buying nearly anything.

Yet it is possible to rectify this apparent split and the concern it raises by returning to the FGCAA.  That is, when examining whether an agency’s use of its other transaction authority was “proper,” the GAO should consider not only the agency’s specific “other transaction” authority, but all applicable statutes, including the FGCAA.  For DoD alone, Congress has expressly and specifically authorized it to acquire certain goods and services through OTAs, and even set unique statutory bounds on the structure of these OTAs, defined the parties that may enter into them, and mandated competitive procedures for awarding them.  See 10 U.S.C. § 2371b.  By operation of longstanding rules of statutory construction, this specific, subsequent authorization supersedes the more general direction in the FGCAA to the extent of the conflict between the two.

Thus, with the exception of MorphoTrust (which involved an OTA competition held by the Transportation Security Administration), the GAO’s precedents can be reconciled with existing law — and produce a reasonable and workable result reflecting Congress’ intent — if the focus of the GAO’s analysis is not only whether the use is “knowing and authorized,” but whether it is “proper,” i.e., not a violation of statute or regulation.  And although it was immaterial to the outcome of the protest, that seems to be the direction in which the GAO is heading (or at least looking) in Blade Strategies, where the Office recites its standard of review simply as whether “an agency is improperly using its other transaction authority to procure goods or services.”  Or perhaps that’s just us building castles in the air.

The more concrete takeaway from Blade Strategies is its rule on timeliness.  Specifically: “Where a protester is aware that the agency has issued a competitive solicitation seeking to enter into an OTA pursuant to its statutory authority, any protest regarding the use of that authority must be filed prior to the time for receipt of initial proposals.”  The GAO found Blade Strategies failed to satisfy this rule, as Blade Strategies was aware not only that the Department of the Army had issued the protested solicitation, but that the solicitation expressly called for the award of an OTA, yet Blade Strategies nevertheless waited to challenge the agency’s use of an OTA until after the award decision was announced.  To allow a disappointed bidder to protest the use of an OTA after award would, like in analogous scenarios with procurement contracts, frustrate the GAO’s charge of “resolving protests expeditiously without unduly disrupting or delaying the procurement process.”  Therefore, the GAO dismissed Blade Strategies’ protest as untimely.

Whether simply exploring the exploding number of OTA opportunities available to all types of contractors, or concerned by an agency’s move to OTAs for work historically performed under traditional procurement contracts, companies must remember that any challenges to the agency’s actions must be brought early on.  And remember:  even though the GAO will not consider protests challenging the award of an OTA, one still may be able to bring a protest in court.  But that is a topic for another day.