(Credit: istockphoto.com/YinYang)
No. 2
Looking into the Crystal Ball
Examining GAO’s Oracle America Ruling
By Major William T. Wicks
It hasn’t attracted much attention but a seemingly minor quasi-judicial ruling is a prime example of how our acquisition system serves as a means to self-inflicted unilateral disarmament. Unless senior leadership in the Defense Department acts in the next few weeks, this Government Accountability Office’s (GAO) protest decision in favor of Oracle and against the Army and Transportation Command will ensure that China will dominate the future military application of quantum computing, artificial intelligence and machine learning, data analytics, biotechnology, robotics and autonomous operations.1
On 31 May 2018, the Government Accountability Office (GAO) sustained a bid protest against the U.S. Army, U.S. Transportation Command (TRANSCOM), and the Defense Innovation Unit-Experimental (DIUx) in Oracle America for improper use of Other Transaction Agreement (OTA) authority under 10 U.S.C. § 2371b in order to obtain “prototype” cloud computing services and follow-on production from REAN Cloud Services LLC.2 The GAO decision caused a firestorm of reaction, including from outspoken former Senate Armed Services Committee (SASC) staffer, Mr. Bill Greenwalt, who predicted dire consequences to the Department of Defense’s (DoD) technological edge from the GAO decision’s application to DoD OTAs.3 The GAO decision and Mr. Greenwalt’s commentary further provoked a similarly extraordinary public rebuttal from the GAO, with the GAO Managing General Counsel, Mr. Kenneth Patton, asserting that the GAO did not create policy through its decision, but rather merely interpreted it in Oracle America.4
One does not need to search too far afield in current popular culture to find similar breathless predictions of the imminent demise of American military overmatch due to the alleged failures of the defense acquisition establishment to prepare for technologies and conflicts of the future. A prime example of this, among others, is a hypothetical reprise of an attack on U.S. military facilities throughout the Pacific Rim by the Chinese and Russian militaries in the near-futuristic novel Ghost Fleet: A Novel of the Next World War, by P.W. Singer and August Cole.5
Set against this unusually dramatic backdrop for the field of acquisition law, the GAO decision siding with the protester in this case began with a critical finding that the protester, Oracle America, was an “interested party” with standing to challenge the Army OTA award in a GAO bid protest.6 The GAO’s rationale in finding Oracle to be an interested party in the sustained bid protest for the cloud prototype OTA may open other DoD OTA award decisions up to challenge through bid protests at the GAO, as suggested by Mr. Greenwalt and others.7 The GAO’s position in Oracle America undermines and may swallow the general rule that OTAs are generally not subject to the Competition in Contracting Act (CICA) and GAO bid protests. Furthermore, the GAO’s decision finding that Oracle was an “interested party” likely is inconsistent with Congress’s intent for streamlining prototype OTAs under 10 U.S.C. § 2371b.8 Given these concerns, Congress should seriously examine limiting the GAO’s jurisdiction to hear bid protests of OTAs under 10 U.S.C. § 2371b, much as it limited the GAO’s jurisdiction to review task order protests less than $25 million awarded by the DoD.
The next section will examine what OTAs are, provide a brief history of OTAs’ use, and will examine how the DoD uses OTAs for prototyping and follow-on production today. It will then examine a renewed focus on DoD OTAs for prototypes enacted in the 2016 National Defense Authorization Act (NDAA). Next, the GAO’s prior review of OTAs for other agencies within the U.S. government will be discussed. This article will then look at the GAO’s Oracle America decision and analysis of “interested party” status, focusing on its flawed CICA-type analysis to establish Oracle America as an interested party. The final section will propose a solution to limit the GAO’s jurisdiction over prototype OTA bid protests in order to facilitate innovative transactions and review a proposed way forward in light of the strategic environment. Appendices A and B contain examples of proposed legislation limiting bid protests of § 2371b OTAs.
Background
An OTA is not a traditional procurement contract governed by the Federal Acquisition Regulation (FAR) or the Defense FAR Supplement (DFARS).9 Additionally, an OTA is not considered a grant or cooperative agreement governed by 10 U.S.C. § 2358 through the DoD Grants and Agreements Regulations (DODGARS).10 Other Transaction Agreements are simply acquisition authorities “other” than—or outside the bounds of—traditional FAR and DODGARS-based contract methods. Other Transaction Agreements can be much more flexible than traditional FAR-based procurement contracts, with clauses specifically crafted for each case. In addition, under the enabling statute for DoD prototypes, section 2371b OTAs are not explicitly subject to the broad “full and open” competition requirements of CICA,11 nor are they subject to the Contract Disputes Act (CDA),12 among other significant limitations on other FAR-based federal procurement contracts.13
Instead of a “contracting officer” having authority to bind the government, under an OTA, an “agreements officer” fulfills a similar role binding the government to the agreement and ensuring the contractor’s compliance with terms and conditions.14 Additionally, as the updated 2018 DoD OTA Guide notes, one of the most advantageous aspects of section 2371b prototype OTAs is that data rights are generally much more negotiable, allowing the government and contractors to adjust certain data rights more flexibly than under traditional FAR-based instruments.15
These newly-modified acquisition authorities for DoD prototyping can serve as useful tools to enhance access to non-traditional defense contractors and academia-developed solutions for defense requirements as well. Since the 2016 NDAA and permanent codification of prototype OTA authority in 10 U.S.C. § 2371b, the defense contracting industry and the media have expressed significant interest in the potential flexibility associated with the use of these OTAs, for experimentation and follow-on production.16
A Brief History of OTAs
Beginning with the National Aeronautics and Space Act of 1958, the National Aeronautics and Space Administration (NASA) was the first federal agency to use OTAs for research and prototyping efforts—many decades before other federal agencies.17 Since NASA’s inception, it has used OTAs—known as Space Act Agreements within NASA—significantly more than any other federal agency, and indeed currently maintains many more active OTAs than other federal agencies.18 After approximately thirty years of OTA use by NASA, in 1989, Congress enacted 10 U.S.C. § 2371 to allow the Defense Advanced Research Projects Agency (DARPA) to enter into OTAs for basic, applied, and advanced research efforts.19
Section 2371 OTAs are commonly referred to as research OTAs, as opposed to prototype OTAs under section 2371b. Subsequently, Congress enacted Section 845 of the Fiscal Year (FY) 1994 NDAA to allow for DARPA, and by extension the DoD, to enter into OTAs for prototype efforts as well.20 As the original 2017 DoD OTA Guide points out, Congress enacted legislation authorizing OTAs for research and prototyping in order to supplement other well-known guidance for grants and cooperative agreements under 10 U.S.C. § 2358.21
Since the enactment of OTA authority for prototyping in 1994, in the late 1990s and early 2000s, DARPA and the Army initially utilized OTAs during the pre-materiel solution development phase of the Future Combat Systems (FCS) program.22 Due to congressional concerns about the inapplicability of the Truth in Negotiations Act (TINA)23 and the lack of certified cost data from the lead systems contractor, the Army eventually re-negotiated all of the OTAs under FCS as FAR Part 15 negotiated procurement contracts during the summer of 2005, preceding the ultimate cancellation of the FCS program in 2009.24 This massive program cancellation served as background to the Army’s perceived reticence to using non-FAR acquisition vehicles such as OTAs prior to the 2016 NDAA.
Increased Emphasis on OTAs for Prototypes in 10 U.S.C. § 2371b
In the 2016 NDAA, Congress replaced the FY 1994 NDAA Section 845 DoD prototype authority with permanently codified authority for prototyping OTAs in 10 U.S.C. § 2371b, supplementing the already existing section 2371 for research OTAs.25 Congress intended section 2371b for flexible and fast OTA prototype agreements in order to build prototypes quickly without strictures of the FAR and CICA, and then move to follow-on production.26 Specifically, the statute authorizes “prototype projects directly relevant to enhancing mission effectiveness of military personnel and the supporting platforms, systems, components, or materials proposed to be acquired or developed . . . or to improvement of platforms, systems, components, or materials in use by the armed forces.”27 Furthermore, in order to award such an OTA under section 2371b, a “non-traditional defense contractor” must participate to a significant extent, or a traditional defense contractor must provide one-third of the cost share unless waived by the service Senior Procurement Executive (SPE).28
In turn, 10 U.S.C. § 2302(9) defined a non-traditional defense contractor for a section 2371 research OTA or section 2371b prototype OTA as:
[A]n entity that is not currently performing and has not performed, or at least the one year period preceding the solicitation of sources by the Department of Defense for the procurement or transaction, any contract or subcontract for the Department of Defense that is subject to full coverage under the cost accounting standards prescribed pursuant to section 1502 of title 41 and the regulations implementing such section.29
The statute unfortunately does not define what “significant participation” means, but the updated 2018 DoD OTA Guide states that the non-traditional defense contractor could, for instance, supply key technology, accomplish significant amounts of effort, or cause a material reduction in cost, schedule, or increase performance, among a list of non-exhaustive other efforts supplied by the guide.30
The statute also authorizes DoD agencies to provide for follow-on production after initial completion of a section 2371b OTA prototype.31 In order to award a follow-on production section 2371b OTA without competing the requirement a second time, DoD agencies may do so if “(A) competitive procedures were used for the selection of parties for the participation in the transaction; and (B) the participants in the transaction successfully completed the prototype project provided for in the transaction.”32 Congress did not, however, define what a “successful prototype” would be in the text of the statute, either.33
Subsequent to section 2371b’s enactment, the SASC stated openly in the report accompanying the 2017 NDAA that it would like DoD agencies with OTA authority to expand their use of OTAs, if possible.34 As the SASC explicitly stated, OTAs are supposed to be very broad authorities:
The statutory authority for other transactions as delineated in section 2371 and 2371b of title 10, United States Code, is written in an intentionally broad manner . . . making use of OTAs, and their associated flexibility, may require senior leaders and Congress to tolerate more risk . . . . Importantly, any such risk must be viewed as lesser than the risks of stymieing innovation or slowing the development and fielding of critical new capabilities.35
After the initial enactment of the 2016 NDAA authorizing section 2371b prototype and production OTAs, the DoD published the department-wide OTA Guide for prototypes in January 2017, including definitions and guidance for possible follow-on production of prototypes.36 Arguably, portions of the initial 2017 guide were incomplete or ambiguous. Therefore, the November 2018 DoD OTA Guide replaced the initial January 2017 DoD OTA Guide, and is now in effect throughout all DoD agencies utilizing OTAs.37 In the Oracle America decision itself, the GAO partly deferred to the 2017 DoD OTA Guide’s definition as to what constitutes a successful prototype for the purposes of section 2371b, given the lack of any statutory definition.38 On a broader scale, in the Department of the Army, OTAs have become more prominent as acquisition vehicles since the 2016 NDAA and especially since the advent of U.S. Army Futures Command and the Cross-Functional Teams (CFTs).39 Given the recent, renewed interest in OTAs across the DoD, the GAO’s ultimate involvement in reviewing bid protests of DoD OTAs may have been inevitable.
The GAO’s Role in Reviewing Bid Protests of OTAs
Concurrent with this broad and renewed interest in OTAs in the DoD since the 2016 NDAA, the GAO has carved out a role in reviewing OTAs over the years, mostly within federal agencies other than the DoD. Under normal circumstances, according to the GAO’s Bid Protest Regulations enacted pursuant to CICA, the GAO reviews bid protests from “interested parties” of traditional FAR-based contracts to ensure compliance with “procurement law and statutes.”40 Based on in its own previous bid protest decisions, discussed below, any GAO review of an OTA protest is supposed to be a much more limited review than a typical bid protest reviewing a “procurement contract” for goods and services.
In addition to the GAO’s jurisdiction over OTA bid protests, the Court of Federal Claims (COFC) or the various federal district courts may have jurisdiction to review bid protests of OTAs under the Tucker Act,41 including section 2371 or section 2371b OTAs. In an August 2019 decision, the COFC reviewed a section 2371b OTA regarding Air Force Launch Service Agreements in Space Exploration Techs. Corp. v. United States, but dismissed the bid protest by finding that they were not “procurement contracts” for Tucker Act purposes, and transferred venue to U.S. District Court in the Central District of California under 28 U.S.C. §1391(b).42 However, the GAO has exercised jurisdiction over the vast majority of bid protests of section 2371b OTAs up to this point, in Oracle and subsequent cases.
Regarding the GAO’s Bid Protest Regulations, as stated above, the GAO will only review bid protests from “interested parties.”43 Interested parties are those entities who are “[a]ctual or prospective offerors whose direct economic interest would be affected by the award of a contract or by the failure to award a contract.”44 This in turn derives from the U.S. Code’s definition of an “interested party” for the purposes of a federal procurement contract.45 Unlike the GAO’s general ability to review traditional procurement contracts subject to CICA under its Bid Protest Regulations, however, the GAO previously established much more limited views of its ability to review OTA award decisions for other non-DoD agencies in the decisions, Rocketplane Kistler and MorphoTrust.
The GAO’s OTA Analysis in Rocketplane Kistler
Representing the foundation for the GAO’s review of the OTA in Oracle America, Rocketplane Kistler was a 2008 GAO review of a NASA Space Act Agreement or OTA for low-earth orbit (LEO) transportation engineering services.46 The protester, Rocketplane Kistler, contended that NASA must obtain research and development services for LEO engineering under a research and development procurement contract, and not a Space Act agreement.47 In denying the protest, the GAO stated that it would only review whether the Space Act Agreement was “knowing and authorized,” given that the primary purpose of the agreement did not principally provide for goods and services for the direct benefit of NASA, and otherwise complied with the authorizing statute—here, the Space Act.48 The GAO analysis of the agency’s statutory authority to enter into the agreement is very short and the GAO does not attempt to dissect the agency’s rationale in so doing.49 This deferential decision in Rocketplane Kistler set the stage for the GAO’s review in MorphoTrust in 2016.
(Credit: istockphoto.com/Pattanaphong Khuankaew)
The GAO’s OTA Analysis in MorphoTrust
Subsequent to the 2008 Rocketplane Kistler decision, in 2016 the GAO reviewed a Transportation Security Administration (TSA) OTA in MorphoTrust that sought to purchase commercial technology in support of expedited screening at various airport security checkpoints around the United States.50 The TSA Head of Contracting Activity (HCA) concluded a determination and findings (D&F) stating that a traditional procurement contract under the FAR was inappropriate under the circumstances to procure commercial screening technology, as authorized under the Aviation & Transportation Security Act of 2001 (ATSA).51 The protester, MorphoTrust, contended that the TSA was required to use a traditional procurement contract under the FAR to obtain the expedited screening technology, as opposed to an ATSA OTA.52 The GAO further found, however, that there was no specific statutory requirement from Congress for the TSA to use a traditional FAR-based procurement contract for this particular requirement, as opposed to an OTA authorized under the ATSA.53 Reiterating points from Rocketplane Kistler and associated GAO case law, the GAO concluded that where “the decision to use ‘other transaction’ authority—is authorized by statute or regulation, [the GAO] will not make an independent determination of the matter.”54 The GAO went on to find that the TSA OTA use was consistent with its statutory authority, and that the TSA HCA properly documented the correct rationale in its D&F setting forth conditions for the OTA.55 Notably, the GAO’s analysis of TSA’s statutory authority to enter into other transactions was not lengthy, and did not attempt to pierce the rationale behind what TSA adequately documented in the D&F.56 Therefore, the GAO denied the protest by MorphoTrust on the merits.57 This 2016 decision served as a prelude to the GAO’s rationale in Oracle America discussed below.
The GAO’s Analysis in Oracle America, Inc.
The cases discussed above lead up to the 2018 bid protest in Oracle America, explicitly dealing with a DoD section 2371b OTA for prototype cloud computing services.58 In this decision, the GAO sustained the bid protest against the Army, TRANSCOM, and DIUx in Oracle America for improper use of OTA statutory authority in obtaining prototype cloud computing services and follow-on production from REAN Cloud Services LLC.59 The critical gateway was the GAO’s decision that the protester, Oracle America, was an interested party pursuant to the Bid Protest Regulations with standing to challenge the OTA award decision. The GAO’s finding that Oracle was an interested party came despite the fact that Oracle did not submit a response to the Commercial Solutions Opening (CSO) (roughly equivalent to a FAR-based Request for Proposals) for the OTA in the case.60 Notably, however, the GAO did not accept Oracle America’s argument that the 2017 DoD OTA Guide’s definition of a prototype was improper and deferred to the DoD definition.61 The GAO nevertheless went on to sustain two protest grounds against the Army, finding that the follow-on production OTA award to REAN Cloud was improper for two reasons. First, the GAO found the follow-on award improper because the CSO did not mention a follow-on production agreement.62 Second, the GAO found the follow-on production OTA with REAN Cloud improper because the Army did not obtain a successful prototype before awarding the follow-on OTA.63 Ultimately, the GAO’s interested party finding allowed these sustained protest grounds to occur.
The GAO’s Flawed Analysis Regarding Oracle’s Interested Party Status
In order to establish the protester’s interested party status in Oracle, the GAO cited a number of cases where an offeror did not submit a proposal or bid—and yet considered the protester an “interested party.” The cases cited by the GAO are Helionix Sys., Inc.,64 Courtney Contracting Corp.,65 Afghan Carpet Servs., Inc.,66 MCI Telecomm. Corp.,67 Coulson Aviation (USA) Inc. et al.,68 and Space Exploration Techs. Corp.69 Each of these cases cited by the GAO to establish interested party status deals with the definition of an interested party in a traditional procurement contract for goods and services, drawn from the GAO’s Bid Protest Regulations, FAR, and CICA. None of the cases cited by the GAO to establish Oracle’s interested party status dealt with a prototype OTA for the DoD under section 2371b or its predecessor, section 845 of the FY 1994 NDAA.
The GAO used obvious CICA-type definitions to establish Oracle’s interested party status in Oracle America, allowing the protester to put a “foot in the door” and went on to sustain two protest grounds against the Army for the follow-on production agreement.70 In its interested party analysis in Oracle America, the GAO did not explain why it applied CICA-based definitions to an OTA, under which CICA does not explicitly apply.71 If the GAO will permit a firm that did not even submit a response to an OTA CSO such as Oracle and rely on CICA-based definitions of interested parties, there is real risk that valuable and quick OTAs may bog down the process in future lengthy bid protest litigation, much as Mr. Greenwalt predicts.72
Subsequent Applications of the GAO Rationale in Oracle America
Additional section 2371b OTA protests filtered up to the GAO in the intervening months since the decision in Oracle America, discussed above. In September 2018, for example, in Blade Strategies, the GAO dismissed a section 2371b OTA award challenge to an Army OTA award due to the protest being untimely under GAO’s Bid Protest Regulations—regulations enacted pursuant to CICA.73 Though it was a dismissal, the Blade decision’s rationale suggested that were it received a timely challenge, the GAO could undertake another comprehensive review of a section 2371b OTA.
Such a protest occurred shortly thereafter in January 2019. In a possible preview of section 2371b OTA bid protests to come, this type of fulsome GAO review occurred in ACI Technologies.74 There, the GAO undertook a comprehensive protest of a Department of the Navy prototype OTA for electromagnetic spectrum (EMS) defense prototypes under section 2371b with a consortium of companies, dismissing the protest in part and denying it in part.75 ACI Technologies’s protest was a pre-award challenge to the OTA Solicitation filed with the GAO prior to the due date for receipt of proposals in October 2018, preventing an OTA award to the consortium from occurring.76 The protester contended that the Navy’s use of a section 2371b OTA was inappropriate for this type of EMS defense requirement and that the Navy should have used a traditional FAR-based procurement contract.77
In the decision on the merits, the GAO specifically cites its previous rationale in Oracle America, concluding that it will review established internal agency guidelines in reviewing section 2371b OTAs for prototypes because the protester and the agency both referred to the guidelines in the agency report and comments.78 Oddly, the GAO also cites a previous decision, Triad Logistics Services Corp., stating that it normally does not review bid protests that merely cite violations of internal agency guidance.79 Regardless of Triad’s holdings, the GAO explains in ACI Technologies that it will follow agency guidance in effect at the time of the solicitation defining a prototype OTA under section 2371b—the 2017 DoD OTA Guide—due to the fact that the parties conceded the issue in briefing.80 Ultimately, the Navy prevailed in this protest, but in the process the GAO expanded its power to review section 2371b OTAs and enlarged the incorrectly-decided legal standard in Oracle America.81 Notably, the GAO did not mention interested party analysis at any point in the ACI Technologies decision.82 It is unclear from the decision whether the Navy conceded interested party status, or whether the GAO established it some other way.83 This apparently leaves the GAO’s Oracle interested party rationale applying CICA-definitions to section 2371b intact.
Subsequent to ACI Technologies, in April 2019, the GAO issued another opinion on a section 2371b OTA for Army Futures Command’s Future Armed Reconnaissance Aircraft in MD Helicopters.84 In the decision itself, the GAO dismissed MD Helicopters’ protest, and found that it does not typically review OTA bid protests, citing the source of its authority in the Bid Protest Regulations and CICA.85 In fact, the GAO stated explicitly that “[w]e dismiss the protest because we do not review the award of non-procurement instruments issued under an agency’s OTA authority.”86 MD Helicopters argued that the term “generally” in 4 C.F.R. § 21.5(m) provided the GAO wide discretion to hear its protest.87 The GAO went on, however, to state that because CICA established the GAO’s bid protest jurisdiction, providing it the ability to review protests for alleged violations of procurement laws and regulations, it could not therefore review OTAs because OTAs are not by definition procurement contracts.88
Interestingly, the GAO conceded that because its jurisdiction derives from CICA, and that its Bid Protest Regulations also derive from CICA, it therefore cannot review section 2371b OTA bid protests.89 If this is the case, it is unclear how the GAO reached its decisions in Oracle America and ACI Technologies, as discussed previously in this article. In the end, the MD Helicopters decision was a win for Army Futures Command, but its rationale built upon inconsistent grounds from prior GAO cases and may leave protesters and federal agencies alike to wonder which way the GAO will decide in light of its previous decisions.
In contrast to its expansive interpretation in Oracle America—and apparent application in ACI Technologies and MD Helicopters—the GAO previously stated more deferential standards for reviews of non-DoD OTAs in Rocketplane Kistler and MorphoTrust, delineating criteria as to whether the use of an OTA under an enabling statute was “knowing and authorized.”90 Due to the potential for continued disruptive litigation in the wake of Oracle America, ACI Technologies, and MD Helicopters, however, Congress should go much further to facilitate OTAs for section 2371b prototypes in the DoD by insulating the OTAs for the prototypes and follow-on production from bid protests entirely.
Congress Should Limit OTA Bid Protest Jurisdiction
Given that the GAO is showing willingness to review section 2371b OTAs like traditional FAR-based procurement contracts and applying CICA-type definitions to OTAs, Congress should examine modifying section 2371b to explicitly limit the circumstances where protesters may challenge such OTAs. A legislative proposal limiting OTA bid protest jurisdiction under section 2371b would demonstrate greater deference shown to the DoD’s use of prototype OTAs, as reflected in GAO’s prior decisions in Rocketplane Kistler and MorphoTrust, and not Oracle America.
Congress could more explicitly foreclose the possibility of disruptive bid protests by modifying the statute even further by limiting the circumstances in which a protester may challenge an OTA award. A legislative change of this type limiting protest jurisdiction has recent precedent in Congress’s previous limitations on bid protests for DoD task orders under $25 million within the 2017 NDAA, or if they increase the scope, period, or maximum ordering amount under an indefinite delivery-indefinite quantity (IDIQ) contract.91 This amendment modified 10 U.S.C. § 2304c(e) in 2017, significantly increasing the threshold to protest DoD task orders from the original Federal Acquisition Streamlining Act (FASA) of 1994 threshold of $10 million to $25 million.92 It further clarified again that only the Comptroller General has exclusive jurisdiction to hear bid protests over that amount.93 Under the FASA, Congress gave the GAO exclusive jurisdiction to hear protests of those type and amount regarding task orders—based solely on Congress’s policy choice.94 Likewise, if Congress wants to insulate and encourage the DoD OTA prototyping process as mentioned in the 2017 NDAA SASC report, it should examine limiting the GAO’s DoD OTA protest jurisdiction, possibly for both prototype and production OTAs.
This type of change resembles Congress’s previous limitation on DoD task order jurisdiction.95 This proposed change does not mean that OTAs under section 2371b would be completely without oversight, given that the statute already requires agencies to provide audit quality information regarding section 2371b OTAs over $5 million to the Comptroller General and GAO.96 This type of change merely means that Congress is limiting the risk of disruptive litigation as a policy choice to protect fast prototyping and rapid fielding for the DoD. Notably, the House of Representatives mandated increased reporting on section 2371b prototypes within the 2019 DoD Appropriations Act, requiring DoD agencies to provide quarterly notice to congressional appropriations committees for all active OTAs.97 Certainly, Congress is contemplating OTA oversight in a broader sense than just permitting the GAO to continue its bid protest jurisdiction over OTAs in the wake of Oracle America.
If Congress wants to preserve some level of bid protest review at the GAO for transparency purposes, it could enact a provision in a future NDAA modifying section 2371b by perhaps setting a high-dollar limit allowing the GAO to review section 2371b OTAs under limited circumstances—for instance, over $100 million. This could ensure that lower value prototype OTAs move quickly toward solutions without the interruption of bid protest litigation. The current section 2371b statute already reflects a similar policy choice with the dollar-level thresholds of approval required for certain OTAs over $100 million and $500 million—under most circumstances by the agency HCA, service Senior Procurement Executive (SPE), or the Undersecretary of Defense for Acquisitions & Sustainment (USD—A&S).98 The jurisdictional threshold for GAO bid protest jurisdiction over section 2371b OTAs for prototypes and production could mirror those approval levels.99 Appendix A contains an example of proposed legislation limiting such protests of section 2371b OTAs over certain monetary thresholds and exclusively at the GAO.100 Setting a monetary threshold may be arbitrary depending on the project, and constrain otherwise permissible prototyping.
Alternatively to setting a monetary threshold limit, Congress could incorporate a “knowing and authorized” legal standard of review—as articulated by the GAO in Rocketplane Kistler and MorphoTrust—as the definitive standard of review for OTAs. Given the GAO’s prior deference to agencies’ determinations and statutory authority in Rocketplane Kistler and MorphoTrust, this may be tempting at first glance. Without further guidance from Congress, however, section 2371b OTAs would still be exposed to disruptive protests and preserve the GAO’s incorrect analysis from Oracle America—as ACI Technologies recently proved.101 Indeed, in ACI Technologies, aside from citing Oracle America, the GAO also extensively cites its previous analyses in Rocketplane Kistler and MorphoTrust.102 Such standards will be thin shields if Oracle America remains good law.
Given the limits of monetary thresholds and potential changes to a legal standard of review for OTAs, Congress could disallow bid protests of any and all DoD OTAs by including a provision in a future NDAA explicitly barring any such challenges. Appendix B contains such an example of proposed legislation prohibiting protests of section 2371b OTAs.103 This radical solution barring any protests on section 2371b OTAs may be the cleanest method of dealing with the problem, especially in light of the GAO’s expanded application of Oracle America’s analysis in ACI Technologies.104
In order to provide comprehensive protection to section 2371b OTAs, Congress can explicitly prohibit protests of prototype OTAs, plus associated follow-on production OTAs. Such a model of expeditious prototyping and follow-on production without the threat of litigation gives DoD agencies latitude to experiment, “fail fast,” and encourage innovation. Then-Secretary of the Army, Dr. Mark Esper, and then-Chief of Staff of the Army, General Mark Milley, emphasized exactly this type of urgency for “quick wins” and rapid innovation at U.S. Army Futures Command’s activation ceremony in August 2018.105 Without such agile acquisition vehicles, DoD’s sought-after innovations may stagnate within bid protest litigation at the GAO.
Notably, since the GAO decision in Oracle America, the 2016 NDAA Section 809 panel recommended similar changes to the law curtailing the GAO’s bid protest jurisdiction for a number of other types of federal contracts, resulting in three volumes of recommendations for reforming the DoD acquisition system.106 Congress originally tasked the Section 809 Panel—composed of experts from within DoD, industry, and academia—with making recommendations to reforming the DoD acquisition system and associated regulations in the 2016 NDAA.107 The Section 809 panel makes a number of recommendations aimed at reforming bid protests in its third volume report released in January 2019.108 Among the proposed changes is a radical increase to the Micro-Purchase Threshold (MPT) to $15 million dollars using “readily available procedures,” and limiting post-award bid protests to the competition advocate of the contracting activity.109 This recommendation effectively prevents the GAO’s review of post-award bid protests for any contracts under that threshold.110
Additionally, the Section 809 panel recommends further limiting the GAO’s jurisdiction in other areas, including limiting the jurisdiction of the GAO and COFC to procurements whose expected value would exceed $75,000, preventing protesters from filing protests at the COFC after unsuccessfully protesting at the GAO, and imposing the same timeliness rules that apply to GAO protests to the Tucker Act.111 Though the Section 809 Panel does not recommend that Congress limit OTA protest jurisdiction in its most recent report, such legislation explicitly limiting protests of section 2371b OTAs should not remain out of the question in order to encourage speedy innovation.
Conclusion
The GAO fundamentally “struck out” with the Oracle America decision and used a plainly flawed rationale in finding Oracle America to be an interested party for the cloud computing OTA. It applied CICA-type analysis when CICA was never explicitly intended to apply to these types of OTAs by Congress. Subsequent decisions in Blade Strategies and ACI Technologies ominously suggest the possibility of “open season” to review DoD OTAs by the GAO.112 This application will possibly chill the DoD’s use of OTAs, and runs counter to the SASC Report’s intent requesting broader application of DoD OTAs.113 Moreover, the GAO’s decision does not represent the acceptable level of risk for innovative acquisitions anticipated by Congress in the same report.114 Given these concerns, Congress should critically examine limits on bid protest jurisdiction under section 2371b, possibly prohibiting them entirely, while maintaining transparency through quality audit information anticipated in the statute. This resembles Congress’s limitation on the GAO’s jurisdiction to review DoD task orders less than $25 million within the 2017 NDAA.115 Congress should further evaluate whether to limit OTA protests in a manner suggested by the Section 809 panel, parallel to the increased MPT and other recommendations in the Volume 3 report.116
Without similar limits, valuable and speedy OTAs for DoD use will be delayed or halted in successive rounds of bid protest litigation, allowing the United States’ global competitors to speed past unencumbered—much as Mr. Greenwalt predicts in his June 2018 criticism of the Oracle America decision.117 The GAO’s rebuttal to Mr. Greenwalt attempts to modestly reassure readers about GAO’s intent in the Oracle America decision.118 The GAO’s defensive position, however, does not adequately address the possibility of disruptive litigation, putting DoD research and development at a disadvantage to strategic peer and near-peer competitors.119 Indeed, the whiplash from GAO decisions felt by the industry and the DoD in ACI Technologies and MD Helicopters proves otherwise.120
Given the GAO’s application of the wrongly-decided Oracle America decision, it is apparent that the GAO will continue to use its rationale to entertain bid protests of section 2371b OTAs.121 Congress should act to foreclose time-consuming litigation of OTAs before global competition metaphorically flies by the United States. Without congressional action to ensure technological overmatch, a grim future similar to that predicted in Ghost Fleet may be one step closer for the U.S. military: a modern-day Pearl Harbor.122 In no uncertain terms, the GAO’s decision in Oracle America should be “OTA” here. TAL
MAJ Wicks is the Command Judge Advocate, 414th Contracting Support Brigade, Vicenza, Italy.
Appendix A. Proposed Legislation to Limit § 2371b Bid Protest Jurisdiction
SEC. 2371b. Authority of the Department of Defense to carry out certain prototype projects. (d) APPROPRIATE USE OF AUTHORITY.—Section 2371b(d) of title 10, United States Code, is amended by inserting after paragraph (2) the following new paragraph: “(3) The Comptroller General of the United States shall have exclusive jurisdiction to review any bid protest, as defined in Section 3551 of title 31, United States Code, of a prototype other transaction agreement or a follow-on production other transaction agreement executed by a Department of Defense agency under this section only where the subject other transaction agreement’s value exceeds $100,000,000.00.
Appendix B. Proposed Legislation to Prohibit § 2371b Bid Protest Jurisdiction
SEC. 2371b. Authority of the Department of Defense to carry out certain prototype projects. (d) APPROPRIATE USE OF AUTHORITY.—Section 2371b(d) of title 10, United States Code, is amended by inserting after paragraph (2) the following new paragraph, “(3) The Comptroller General of the United States and the federal courts of the United States shall not have jurisdiction to review any bid protest, as defined in Section 3551 of title 31 and Section 1491(b) of title 28, United States Code, of a prototype other transaction agreement or a follow-on production other transaction agreement executed by a Department of Defense agency under this section.
Notes
1. Bill Greenwalt, GAO Decision Threatens U.S. Military Dominance; Reject It, Breaking Defense.com (June 27, 2018, 4:01 AM), https://breakingdefense.com/2018/06/gao-decision-threatens-us-military-dominance-reject-it/. Mr. Greenwalt is currently a Senior Fellow at the Atlantic Council and formerly worked for the late Sen. John S. McCain as a professional staffer on the Senate Armed Services Committee from 2015 to 2017. Id.
2. Oracle America, B-416061, 2018 CPD ¶ 180 (Comp. Gen. May 31, 2018).
3. See Greenwalt, supra note 1.
4. Kenneth Patton, GAO Says Oracle Protest Did Not Make Policy; Criticizes Greenwalt Op-ed, Breaking Defense.com (July 9, 2018, 2:00 PM), https://breakingdefense.com/2018/07/gao-says-oracle-protest-did-not-make-policy-criticizes-greenwalt-op-ed/.
5. P.W. Singer & August Cole, Ghost Fleet: A Novel of the Next World War 51-82 (2015).
6. See Oracle America, 2018 CPD ¶ 180, at 12.
7. See Greenwalt, supra note 1.
8. See S. Rep. No. 115-125, at 189-90 (2017).
9. See generally Federal Acquisition Regulation (FAR), 48 C.F.R., Chapter 1 (2019); see also Defense FAR Supplement (DFARS), 48 C.F.R., ch. 2 (2019).
10. See generally DoD Grants and Agreements Regulations (DODGARS), 32 C.F.R. §§ 21-37 (2019).
11. See generally Competition in Contracting Act (CICA), 31 U.S.C. §§ 3551-3556; 41 U.S.C. §3301 (2019).
12. See generally Contract Disputes Act (CDA), 41 U.S.C. §§ 7101-7109 (2019).
13. See 10 U.S.C. § 2371b(b)(2) (2019). The Truth in Negotiation Act (TINA) regarding certified cost data also does not explicitly apply to Other Transaction Authority (OTAs). See 10 U.S.C. § 2306a (2019); see also 41 U.S.C., ch. 35 (2019). Furthermore, the Bayh-Dole Act regarding intellectual property rights does not explicitly apply to OTAs either. See 35 U.S.C. §§ 200-212 (2019).
14. See U.S. Dep’t of Def., Other Transactions Guide for Prototype Projects, app. A, at 32 (Nov. 2018), https://www.dau.mil/guidebooks/Shared%20Documents/Other%20Transactions%20(OT)%20Guide.pdf [hereinafter 2018 DoD OTA Guide].
15. See id., app. F.
16. See, e.g., Greenwalt, supra note 1; see also Susan B. Cassidy, Jennifer Plitsch, & Tyler Evans, DIUx and DoD Other Transaction Prototype Agreements: The Fast Track to DoD Funding (Feb. 22, 2018), https://www.insidegovernmentcontracts.com/2018/02/7476/; see also Tim Greeff, How the U.S. Can Put Its OTA Procurement Process to Best Use (Mar. 23, 2018), https://www.federaltimes.com/acquisition/2018/03/23/how-the-us-can-put-its-ota-procurement-process-to-best-use/; see also Scott Maucione, OTAs are the Cool New Thing in DoD Acquisition (Oct. 19, 2017, 1:44 PM), https://federalnewsnetwork.com/acquisition/2017/10/ota-contracts-are-the-new-cool-thing-in-dod-acquisition/; see also Scott Maucione, DoD Wants to Cut Contracting Time by 50 Percent as Part of AT&L Split (Oct. 11, 2017, 5:44 PM), https://federalnewsnetwork.com/defense/2017/10/dod-wants-to-cut-contracting-time-by-50-percent-at-part-of-atl-split/.
17. See National Aeronautics and Space Act, Pub. L. 85-568, 72 Stat. 426 (1958); see also U.S. Dep’t of Def., Other Transactions Guide for Prototype Projects 8 (2017) [hereinafter 2017 DoD OTA Guide] (on file with author).
18. U.S. Gov’t Accountability Off., GAO-16-209, Use of ‘Other Transaction’ Agreements Limited and Mostly for Research and Development Activities 27 (2016).
19. See National Defense Authorization Act for Fiscal Year 1990, Pub. L. No. 101-189, 103 Stat. 1352 (1990) (codified at 10 U.S.C. § 2371 (2019)).
20. See National Defense Authorization Act for Fiscal Year 1994, Pub. L. No. 103-160, § 845, 107 Stat. 1547; see also 2017 DoD OTA Guide, supra note 17, at 8.
21. See 2017 DoD OTA Guide, supra note 17, at 17; see also 10 U.S.C. § 2358 (2019).
22. See Christopher G. Pernin et al., RAND Report, Lessons From the Army’s Future Combat Systems Program 167-72 (2012).
23. 10 U.S.C. § 2306a (2019); 41 U.S.C. §§ 3501–3509 (2019).
24. See Pernin et al., supra note 22, at 180–81; see also U.S. Gov’t Accountability Off., GAO-19-132, Army Modernization: Steps Needed to Ensure Army Futures Command Fully Applies Leading Practices 7 (2019).
25. See National Defense Authorization Act for Fiscal Year 2016, Pub. L. No. 114-92, § 815 129 Stat. 726 (2015) (codified at 10 U.S.C. § 2371b (2019)).
26. See S. Rep. No. 115-125, at 190 (2017).
27. 10 U.S.C. § 2371b(a)(1) (2019).
28. 10 U.S.C. § 2371b(d)(1)(D) (2019); see also 2018 DoD OTA Guide, supra note 14, at 13.
29. 10 U.S.C. §2302(9) (2019).
30. See 2018 DoD OTA Guide, supra note 14, at 32.
31. 10 U.S.C. § 2371b(f)(1) (2019).
32. 10 U.S.C. § 2371b(f)(2) (2019).
33. See 10 U.S.C. § 2371b(f)(2). The lack of a definition of a “successful prototype” in the statutory language of section 2371b led the Government Accountability Office (GAO) to agree with the government’s position and rely upon the definition provided in the January 2017 DOD OTA Guide in the Oracle America decision. See Oracle America, 2018 CPD ¶180, at 18; see also 2017 DoD OTA Guide, supra note 17, at 11.
34. See S. Rep. No. 115-125, at 190 (2017).
35. Id. (emphasis added).
36. See generally 2017 DoD OTA Guide, supra note 17.
37. See generally 2018 DoD OTA Guide, supra note 14.
38. See Oracle America, 2018 CPD ¶180, at 14.
39. See, e.g., U.S. Dep’t Of Army, Dir. 2017-24, Cross-Functional Team Pilot in Support of Materiel Development (6 Oct. 2017); see also U.S. Dep’t Of Army, Dir. 2017-33, Enabling the Army Modernization Task Force (7 Nov. 2017). The GAO has also noted all of the Army modernization focus areas in its January 2019 report about Army Futures Command containing recommendations for the improvement of Army acquisitions. Notably, OTAs figure prominently in each of the Army cross-functional team modernization focus areas: long-range fires, advanced air-missile defense, future vertical lift, increased Soldier lethality capabilities, the next generation Ground Combat Vehicle, and advanced networking capabilities. See U.S. Gov’t Accountability Off., GAO-19-132, Army Modernization: Steps Needed to Ensure Army Futures Command Fully Applies Leading Practices (2019).
40. 4 C.F.R. § 21 (2019) (GAO Bid Protest Regulations).
41. 28 U.S.C. § 1491(b)(1) (2019).
42. See Space Exploration Techs. Corp. v. United States, 2019 U.S. Claims LEXIS 1041 at 32-34, 144 Fed. Cl. 433 (Fed. Cl. 2019). The ultimate issue of Court of Federal Claims (COFC) or federal district court jurisdiction over OTA bid protests is beyond the scope of this article. However, the COFC has affirmatively taken jurisdiction over a contract dispute involving a NASA Space Act Agreement or OTA under the Tucker Act in denying the agency’s motion to dismiss. See Spectre Corp. v. United States, 132 Fed. Cl. 626, 627–28 (Fed. Cl. 2017).
43. 4 C.F.R. § 21.0(a)(1) (2019).
44. Id.
45. See 31 U.S.C. § 3551 (2019).
46. Rocketplane Kistler, B-310741, 2008 CPD ¶ 22 (Comp. Gen. Jan. 28, 2008).
47. Id. at 5.
48. Id. at 10.
49. See id.
50. MorphoTrust, B-412711, 2016 CPD ¶ 133 (Comp. Gen. May 16, 2016).
51. See Aviation & Transportation Security Act of 2001, Pub. L. No. 107-71, 115 Stat. 597 (2001).
52. Id. at 9-10. After the Transportation Security Agency (TSA) completed and publicized its determination and finding, MorphoTrust sent an e-mail directly to the agency, alleging that the TSA could not use an OTA under the Aviation & Transportation Security Act and must use a traditional FAR-based contract for the procurement. The GAO found that this constituted an agency-level protest. Id. at 5.
53. Id. at 10.
54. Id. at 9.
55. Id.
56. See id.
57. Id. at 10.
58. See Oracle America, 2018 CPD ¶180, at 2.
59. Id.
60. Id. at 12.
61. Id. at 14.
62. Id.
63. Id. at 19.
64. See Helionix, Inc., B-404905.2, 2011 CPD ¶ 106 at 3 (Comp. Gen. May 26, 2011). This was a General Services Administration (GSA) FAR-based contract for administrative and technical services for the Public Building Service. Id.
65. See Courtney Contracting Corp., B-242945, 91-1 CPD ¶ 593 at 4 (Comp. Gen. June 24, 1991) (protester was interested party, despite not submitting bid or offer, where remedy sought was the opportunity to compete). This was a FAR-based invitation for bids (IFB) for the Department of Interior for mine gas drainage and maintenance. Id.
66. See Afghan Carpet Servs., Inc., B-230638, 88-1 CPD ¶ 607 at 3 (Comp. Gen. June 24, 1988) (protester is an interested party if it is a potential competitor if the protest is sustained, even though it did not submit bid under the protested solicitation). This was a GSA Federal Supply Schedule FAR-based contract for carpeting in federal facilities. Id. The GAO cites CICA and its Bid Protest Regulations at 4 C.F.R. §21.0 in discussing “interested party” status. Id.
67. See MCI Telecomm. Corp., B-239932, 90-2 CPD ¶ 280 at 4-5 (Comp. Gen. Oct. 10, 1990) (protester was interested party to challenge order as out of scope of the underlying contract, even where protester did not participate in the competition of the contract). This was a Bureau of Prisons FAR-based request for proposal (RFP) for telephone services for federal inmates. See id. In reviewing interested party status, GAO explicitly cites CICA and the Bid Protest Regulations at 4 C.F.R. § 21.0. Id.
68. See Coulson Aviation (USA) Inc. et al., B-409356.2 et al., 2014 CPD ¶ 106 at 16 (Comp. Gen. Mar. 31, 2014) (protesters were interested parties to challenge a sole-source award because if an agency decided to meet its needs using a competitive procurement, the protester would be eligible to compete). This was a Forest Service FAR-based RFP for aviation services in support of wildfire suppression, containing justification and approval for a sole source decision. Id. Again, the GAO cites CICA and the Bid Protest Regulations in reviewing the protester’s interested party status. Id.
69. See Space Exploration Techs. Corp., B-402186, 2010 CPD ¶ 42 at 4, n.2 (Comp. Gen. Feb. 1, 2010) (finding protester to be an interested party to challenge order under indefinite delivery-indefinite quantity (IDIQ) contract, even where protester was not a vendor under the IDIQ contract, where protester challenged the order as outside the scope of the IDIQ contract). This was a protest over procurement of commercial space launch services under scope challenge of a delivery order. Id. Despite the fact that this was a Space Act Agreement for launch services, the GAO cites to the Bid Protest Regulations at 4 C.F.R. § 21.0, defining an interested party, as shaped by CICA. Id.
70. See Oracle America, 2018 CPD ¶180, at 10-12.
71. See id.
72. See Greenwalt, supra note 1.
73. See Blade Strategies, LLC, B-416752, 2018 CPD ¶ 327 at 2 (Comp. Gen. Sept. 24, 2018).
74. See ACI Technologies, B-417011, 2019 Comp. Gen. LEXIS 16 (Comp. Gen. Jan. 17, 2019).
75. Id. at 2.
76. Id.
77. Id.
78. Id. at 4.
79. ACI Technologies, 2019 Comp. Gen. LEXIS 16 at 5 (citing Triad Logistics Serv., B-403726, 2010 CPD ¶ 279 at 2-3 (Comp. Gen. Nov. 24, 2010)).
80. Id. As discussed above, the 2017 DoD OTA Guide is no longer in effect, due to superseding guidance in the 2018 DoD OTA Guide, published November 2018. Cf. 2018 DoD OTA Guide, supra note 14.
81. See ACI Technologies, 2019 Comp. Gen. LEXIS 16, at 9.
82. See id. at 5-6.
83. See id.
84. MD Helicopters, B-417379, 2019 U.S. Comp. Gen. LEXIS 94 (Comp. Gen. Apr. 4, 2019).
85. Id. at 2.
86. Id.
87. Id. at 3.
88. Id.
89. Id.
90. See Rocketplane Kistler, 2008 CPD ¶ 22, at 10; see also MorphoTrust, 2016 CPD ¶ 133, at 9.
91. See National Defense Authorization Act for Fiscal Year 2017, Pub. L. No. 114-328, § 835, 130 Stat. 2000 (2016).
92. 10 U.S.C. § 2304c(e) (2019).
93. Id.
94. See Federal Acquisition Streamlining Act of 1994, Pub. L. No. 103-355, 108 Stat. 3243 (1994) (codified at 41 U.S.C. 4106(f) (2019)).
95. See National Defense Authorization Act for Fiscal Year 2017, Pub. L. No. 114-328, § 835, 130 Stat. 2000 (2016).
96. 10 U.S.C. § 2371b(c)(1) (2019).
97. See Conference Report to Accompany H.R. 6157, H.R. Rep. No. 115-952, at 153 (2018) (Conf. Rep.).
98. See 10 U.S.C. §2371b(a)(2) (2019).
99. See id.
100. See infra, app. A.
101. See ACI Technologies, 2019 Comp. Gen. LEXIS 16, at 5.
102. See id. at 5-6.
103. See infra, app. B.
104. See ACI Technologies, 2019 Comp. Gen. LEXIS 16, at 5.
105. Rose L. Thayer, Army Expects to Spend Up to $50 Billion a Year on Futures Command, Stars & Stripes (Aug. 24, 2018), https://www.stripes.com/news/army-expects-to-spend-up-to-50-billion-a-year-on-futures-command-1.544234.
106. See Advisory Panel on Streamlining and Codifying Acquisition Regulations, Section 809 Panel Report, Summary of Recommendations, Volume 3, at 1, https://discover.dtic.mil/wp-content/uploads/809-Panel-2019/Volume3/Vol3_Summary_Letter-size.pdf (last visited Jan. 21, 2020) [hereinafter Section 809 Panel Report Summary].
107. See National Defense Authorization Act for Fiscal Year 2016, Pub. L. No. 114-92, § 809, 129 Stat. 726 (2015).
108. Section 809 Panel Report Summary, supra note 106, at 1.
109. See Advisory Panel on Streamlining and Codifying Acquisition Regulations, Section 809 Panel Report, Volume 3, Part 1, at 22-24, 35, https://discover.dtic.mil/wp-content/uploads/809-Panel-2019/Volume3/Sec809Panel_Vol3-Report_Jan2019_part-1_0509.pdf (last visited Jan. 21, 2020) [hereinafter Section 809 Panel Report Part 1].
110. See id. at 35.
111. See Advisory Panel on Streamlining and Codifying Acquisition Regulations, Section 809 Panel Report, Volume 3, Part 2 at 355, https://discover.dtic.mil/wp-content/uploads/809-Panel-2019/Volume3/Sec809Panel_Vol3-Report_Jan2019_part-2_0307.pdf (last visited Jan. 21, 2020).
112. See Blade Strategies, LLC, 2018 CPD ¶ 327, at 2-3; see also ACI Technologies, 2019 Comp. Gen. LEXIS 16, at 5.
113. See S. Rep. No. 115-125, at 190 (2017).
114. See id.
115. See National Defense Authorization Act for Fiscal Year for Fiscal Year 2017, Pub. L. No. 114-328, § 835, 130 Stat. 2000 (2016).
116. See Section 809 Panel Report Part 1, supra note 109, at 22-24, 35.
117. See Greenwalt, supra note 1.
118. See Patton, supra note 4.
119. See id.
120. See ACI Technologies, 2019 Comp. Gen. LEXIS 16, at 5; see also MD Helicopters, 2019 U.S. Comp. Gen. LEXIS 94 at 3.
121. See ACI Technologies, 2019 Comp. Gen. LEXIS 16, at 6-9; see also MD Helicopters, 2019 U.S. Comp. Gen. LEXIS 94 at 4-5.
122. See Singer & Cole, supra note 5, at 72.