As I mentioned in a recent post, the Department of Defense (DoD) is using its “other transaction” authority with increased frequency to attract non-traditional defense contractors and to capitalize on the cutting-edge technological advancements found in the commercial marketplace. Other Transaction Agreements (OTAs) are not procurement contracts, grants, or cooperative agreements and, as such, many procurement laws and regulations do not apply, including the Competition in Contracting Act (CICA) and the Federal Acquisition Regulation (FAR).
As a result, OTAs are generally not subject to review under current procurement protest procedures. This has led to concerns about transparency in the process and worries about whether OTAs are being improperly awarded. Additionally, it has frustrated many commercial entities who do not know where to turn when they feel like they have not been given a fair opportunity to compete for the government’s business. Although the Government Accountability Office (GAO) has determined that it does not have jurisdiction over protests challenging the award of, or the solicitation for an award of, an OTA, the GAO did recently decide that it would review a timely protest questioning whether an agency acted within the limits of its statutory authority.
In Oracle America, Inc., the GAO sustained a protest filed by Oracle challenging a $950 million production OTA (P-OTA) awarded to REAN Cloud by the Army to migrate legacy software from existing DoD platforms to a commercial cloud service provider. The P-OTA followed an initial $2.4 million prototype OTA that was awarded to REAN Cloud approximately 8 months earlier. Among other things, Oracle claimed that the Army did not comply with the statutory requirements in 10 U.S.C. § 2371b(f) which define the conditions that must be met before a follow-on P-OTA can be awarded. The GAO sustained the protest finding that the P-OTA award was improper because
(1) the prototype OTA did not specifically contain any provision that allowed for follow-on production and,
(2) REAN had not yet successfully completed the prototype OTA prior to the Army awarding it the P-OTA.
This decision is notable not only because it is the first time that the GAO has sustained a protest involving an OTA, but more importantly because it reaffirms the position that the GAO took in Morpho Trust – an agency’s decision to use its “other transaction” authority, rather than a procurement contract, is not reviewable by the GAO unless a protester can demonstrate that the agency’s use of its authority is inconsistent with the statute granting authority. This opinion unmistakably shows where the GAO stands on the issue of bid protest jurisdiction over OTAs and serves as a clear guide for both legal practitioners and industry alike.
Although an agency’s decision to use its “other transaction” authority is not reviewable by the GAO, it is still possible for an interested party to seek relief from the Court of Federal Claims (COFC), which derives its jurisdiction over “contracts” from the Tucker Act. It is unclear where the COFC stands on the issue because it has not yet asserted jurisdiction over a protest involving an OTA. However, most practitioners believe that it is unlikely the COFC will interfere with an agency’s decision to use its “other transaction” authority given the recent Congressional preference for OTAs. Some practitioners also believe that a frustrated commercial entity could seek injunctive relief, in the form of a stay, from a federal district court under the Administrative Procedures Act. Federal district courts have generally not exercised bid protest jurisdiction since 2001 so it is impossible to predict how a court would rule on the issue. Finally, it is also possible for an interested party to seek relief from the agency by filing an agency-level protest. I am generally not a fan of agency-level protests because they are unlikely to be successful absent a clear showing of error.
The holding in Oracle America, Inc. does nothing to alleviate concerns that OTAs are being improperly awarded. Rather, it highlights the fact that contracting officers have almost unlimited discretion to use an agency’s “other transaction” authority instead of a FAR-based procurement contract. If that is really the case, then OTAs just might be bulletproof.
The recent emphasis of OTAs is changing the landscape of DoD procurement and it is crucial that commercial entities looking to do business with the government understand the basics of OTAs, if they are eligible to participate, and where the government is advertising OTA opportunities. My partner, Maria Panichelli, and I will present a two-part webinar series on these topics and more on July 24 and August 14. Click here for more information and to register.