Saving Other Transaction Agreements from Bid Protest Review: How to Keep OTs as Innovative and Flexible Tools for Research and Development

• Pages: 737-794
• Date: 01 July 2024
• Published date: 01 July 2024
• Author: Joshua B. Fix
• Subject Matter: Derecho Público y Administrativo

737

SAVING OTHER TRANSACTION AGREEMENTS

FROM BID PROTEST REVIEW: HOW TO KEEP OTS AS

INNOVATIVE AND FLEXIBLE TOOLS FOR RESEARCH

AND DEVELOPMENT

Joshua B. Fix*

ABSTRACT

Other transaction agreements (OTs) are a fast and flexible way for the Depart-

ment of Defense (DoD) to benefit from the innovation that small businesses

and nontraditional defense contractors can offer. The benefits of OTs include

that they are more flexible than traditional procurement contracts and they

avoid some of the red tape some members of industry associate with the fed-

eral procurement system. One form of red tape that OTs largely avoid is the

bid protest system in which losing competitors can challenge the DoD’s con-

tract awards to their rivals. Such protests consume time and money and can

delay projects. Recently, however, the decision of the Court of Federal Claims

(COFC) in Hydraulics International suggests that a significant portion of OTs

are vulnerable to bid protest challenges after all.

This article proposes a three-part response to the developments at the

COFC that threaten to mire OTs in bid protest litigation. First, this article

outlines arguments to challenge the reasoning behind the COFC’s decisions

according itself jurisdiction over protests of OT awards. Second, this article

proposes using OTs’ flexibility on data rights and the flexibility that Congress

gave the DoD for science and technology projects to insulate future OTs from

* BA, May 2003, University of Virginia; JD, May 2010, Indiana University Maurer

School of Law—Bloomington; LLM, May 2020, The Judge Advocate General’s School, Char-

lottesville, VA; LLM, May 2023, The George Washington University Law School. This article

was originally written as a thesis submitted to the faculty of The George Washington University

Law School in partial satisfaction of the requirements for the degree of Master of Laws on May

21, 2023. Thesis directed by Ana Victoria Christoff, Professorial Lecturer in Law Govern-

ment Procurement Law Program. The author thanks his wife, Amberly; his son Theodore; his

colleagues in the Army JAG Corps; his fellow students in the Government Procurement Law

program; his faculty advisor, Dean Jessica Tillipman; and his intellectual property instructor,

Professor Locke Bell. The author especially thanks his thesis advisor, Professor Victoria Christoff,

whose insights, advice, and enthusiasm made this work both immeasurably better to read and

truly enjoyable to write. Major Joshua B. Fix serves in the United States Army Judge Advocate

General’s Corps. All views expressed in this article are solely those of the author and do not

reflect the official policy or position of the United States Army, the Department of Defense, or

the U.S. Government.

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738 Public Contract Law Journal • Vol. 53, No. 4 • Summer 20 24

bid protest review. These recommendations include using royalty and licens-

ing agreements rather than follow-on production awards as an incentive for

private innovators to participate in OTs. Third, this article recommends Con-

gress clarify the COFC’s jurisdiction over protests of OTs by adding a defi-

nition of “procurement” to the statute controlling the COFC’s jurisdiction.

TABLE OF CONTENTS

I. Introduction ........................................................................................739

II. Why the Decision in Hydraulics International Matters: An Overview

of Federal Acquisitions, OTs, and Hydraulics International Itself ........739

A. An Overview of OTs ......................................................................743

1. A Brief History of OTs in General ..........................................743

2. The Development of the DoD’s OT Authority ......................744

3. The DoD’s Current OT Authority .........................................746

B. Executive, Legislative, and Judicial Oversight of OTs ..................747

1. Review of OT Formation at GAO ..........................................749

2. Review of OT Formation at Federal District Courts .............750

i. MD Helicopters .................................................................. 750

ii. SpaceX II ............................................................................. 754

3. Review of OT Formation at the Court of Federal Claims .....757

i. SpaceX ................................................................................757

ii. Kinemetrics .........................................................................759

iii. Hydraulics International ..................................................... 761

III. The Government Should Challenge the Reasoning of

Hydraulics International in Future Cases. ............................................763

A. The Protester Was Not an “Interested Party.” .............................765

B. The Protest Did Not Object to a Solicitation or Award

of a Procurement Contract and the Alleged Violation of Law

Was Mere Disagreement with the DoD’s Assessment of

Practicability ..................................................................................766

C. The Alleged Violation of Law Was Not in Connection with

a “Procurement” or a Proposed “Procurement” as Congress

Defined That Term. .......................................................................769

IV. The DoD Should Use Strategies to Insulate Prototype OT

Awards from Protests. .........................................................................778

A. The DoD Can Forego the Use of Follow-On Production

Clauses and Instead Use Data Rights Agreements in OTs

to Incentivize Participants. ............................................................779

B. The DoD Can Also Leverage Its Ability to Award Science

and Technology Projects Through Peer Review or Scientific

Review Rather Than Full and Open Competition to

Streamline OT Awards. .................................................................790

V. The DoD Should Ask Congress to Save OTs from Bid Protest

Review. ................................................................................................791

VI. Conclusion ..........................................................................................793

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739Saving Other Transaction Agreements from Bid Protest Review

I. INTRODUCTION

The recent Court of Federal Claims (COFC) decision in Hydraulics Inter-

national1 subjects the award of other transaction agreements (OTs)2 for

Department of Defense (DoD) prototype projects to “bid protest” review.3

Subjecting OTs to bid protest review inhibits the DoD’s ability to quickly

meet new technological needs. The DoD should follow a three-part plan to

preserve the value of OTs in quickly developing and fielding new technology

with fewer bid protests. This article proposes that plan.

The plan this article proposes sets out a three-part set of solutions to

the problems posed by Hydraulics International. The DoD can use each part

independently or in combination with the other parts. First, the government

should argue against the COFC’s continued application of the reasoning of

Hydraulics International. That includes appealing any future decisions under

the reasoning of Hydraulics International to the Court of Appeals for the Fed-

eral Circuit. Second, the DoD should begin using OTs in ways that do not

trigger the bid protest jurisdiction of COFC under the reasoning of Hydraulics

International. Third, the DoD should request Congress amend the law and

make clear that the COFC’s bid protest jurisdiction does not extend to OTs.

Before detailing each part of its proposed plan, this article will provide

a brief history of OTs and the implications of Hydraulics International. After

laying the foundation for why Hydraulics International unreasonably restrains

the DoD’s ability to use OTs as Congress intended, this article will move to

potential legal challenges to the reasoning of Hydraulics International. Then

this article will discuss how the DoD can use OTs in ways that avoid the

COFC’s bid protest jurisdiction even if Hydraulics International remains good

law. After that, this article will examine options for statutory changes that

would legislatively overrule Hydraulics International. Finally, this article will

sum up the problem created by Hydraulics International and the options avail-

able to solve it.

II. WHY THE DECISION IN HYDRAULICS INTERNATIONAL

MATTERS: AN OVERVIEW OF FEDERAL ACQUISITIONS,

OTS, AND HYDRAULICS INTERNATIONAL ITSELF

To understand the significance of recent developments in the use of OTs, it

is helpful to understand the history of OTs and an overview of the federal

1. Hydraulics Int’l, Inc. v. United States, 161 Fed. Cl. 167 (2022).

2. The acronym “OTA” is often used to refer to both other transaction authorities—the con-

stellation of statutes authorizing executive branch agencies to enter transactions with private

businesses outside the usual federal acquisition system—and other transaction agreements—the

actual agreement between the federal agency and private business under an other transaction

authority. See H M. P, C. R S., R45521, D  D U

 O T A: B, A,  I  C 2 (2019)

[hereinafter U  O T A]. For clarity, this article will refer to other

transaction agreements or other transactions as “OTs” and will refrain from using the acronym

“OTA” to reduce potential confusion.

3. See Hydraulics, 161 Fed. Cl. at 174.

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