Court of Federal Claims Deems Itself "De Facto Forum" for Other Transaction Agreement Protests

In a decision published on Feb. 24, 2025, Judge Armando Bonilla of the U.S. Court of Federal Claims (COFC or Court) weighed in on the ongoing debate about jurisdiction over protests of other transaction agreements (OTAs). The Raytheon decision is intended to "streamline the litigation of these jurisdictional issues in future cases."¹

Judge Bonilla's opinion is not binding on other judges. However, the decision clarifies the Court's jurisdiction over OTAs and represents progress in addressing the previously uncertain landscape of OTA jurisdiction. This decision, coupled with a March 6, 2025, U.S. Department of Defense (DOD) memorandum titled "Directing Modern Software Acquisition to Maximize Lethality"² (SecDef Memo) from Defense Secretary Pete Hegseth, has significant implications for contractors engaging in OTAs with DOD. In light of OTA funding increases in recent years, contractors should understand their ability to protest OTA awards.

The Facts of Raytheon

The case before the COFC concerned a DOD Missile Defense Agency's OTA for the development of missile defense capabilities.³ In 2021, the agency awarded OTAs for Phase I of the program to three defense contractors, then reduced the awardees to two in 2022 (Northrup Grumman and Raytheon).⁴ In 2023, the agency began Phase II; on Sept. 25, 2024, following a prototype test, the agency chose to move forward with only Northrup Grumman and discontinue Raytheon's participation in the program.⁵ Raytheon brought a bid protest to the Court on Nov. 6, 2024, challenging the agency's decision to eliminate Raytheon from the competition.⁶ The government moved to dismiss, arguing that OTAs are not "in connection with a procurement or a proposed procurement," as required under the Tucker Act, and do not qualify as a solicitation for a proposed contract.

The Court Examines Key Precedent

The Court began its analysis by considering other decisions related to OTA jurisdiction. The Court examined the Space Exploration Technologies Corp. v. United States (SpaceX) decision, where a post-award bid protest of OTAs was ultimately transferred from the COFC to the appropriate U.S. district court.⁷ In SpaceX, the COFC limited its conclusions to the facts of the case. It attempted to distinguish between the agency's decisions that were "in connection with a procurement," therefore under the jurisdiction of the Tucker Act,⁸ and agency decisions that merely "related to" a procurement.⁹ The SpaceX court ultimately concluded the agency's decision regarding this protype development agreement "did not involve the procurement of goods or services" and that the Tucker Act did not grant jurisdiction over this protest.¹⁰

In subsequent cases in 2021 and 2022, the Court found jurisdiction over post-award bid protests of OTAs and declined to transfer the cases to a district court. In Kinemetrics, Inc. v. United States, the Court "rejected the application of SpaceX" to the facts of that case and found the instant solicitation that requested a technical and cost proposal was directly connected with a contract award; the Court found jurisdiction over this protest because it was "in connection with a procurement."¹¹ In Hydraulics International, Inc. v. United States, the Court found a post-award bid protest of an OTA award was "in connection with a procurement or proposed procurement" because, unlike SpaceX, the protype being developed was "specifically tailored" to the U.S. Army's needs. ¹²

Most recently, in 2024, the Court again considered its jurisdiction in Independent Rough Terrain Ctr., LLC v. United States (IRTC).¹³ The IRTC Court considered that OTAs may themselves be procurements, not just decisions "in connection with a procurement" because the government was seeking goods or services.¹⁴

Raytheon builds off these key decisions, affirming the Court's jurisdiction over OTAs.

OTA Treatment in the Last Decade

The government's use of OTAs has undisputedly increased over time. The DOD has noted this trend by documenting "the number of actions increasing from 496 in FY 2017 to 4,391 in FY 2022 and total dollars obligated increasing from $2.2 billion in FY 2017 to a peak of $16.02 billion in FY 2020" (crediting the COVID-19 pandemic with high-dollar other transactions (OTs) in 2020).¹⁵

As the use of OTAs has evolved over the last decade, so, too, has the treatment of protests of OTA awards. Indeed, the DOD's Guide to OTs in November 2018 states "bid protests are rare for [other transactions (OTs)]" with regard to the U.S. Government Accountability Office (GAO) because 1) "GAO has limited jurisdiction to review OT decisions and protests to GAO regarding OT awards are rare" and 2) "[p]rotests to the U.S. Court of Federal Claims are also possible but are a rare occurrence."¹⁶ The recent Raytheon decision will alter this 2018 assessment.

Perhaps the best case study for the treatment of OTAs by the GAO and federal district courts is the MD Helicopters Inc. v. United States of America cases. The GAO reiterated its rejection of jurisdiction over OTAs in its 2019 decision in MD Helicopters, which states "agreements issued by the agency under its 'other transaction' authority 'are not procurement contracts,' and therefore we generally do not review protests of the award or solicitations for the award of these agreements under our bid protest jurisdiction."¹⁷ The case was eventually filed in a federal district court. The plaintiff argued this federal district court had jurisdiction under the Administrative Procedure Act (APA). This plaintiff claimed that the government's OTA award decision was arbitrary and capricious, therefore a violation of the APA. Relying on the COFC's SpaceX decision, the MD Helicopters Court found that the Administrative Dispute Resolution Act (ADRA) limited its jurisdiction. ¹⁸ It further asserted that the protestor was "objecting to a solicitation" and that ADRA authorized only the COFC jurisdiction over such a matter.¹⁹ Because the GAO and federal district courts claimed to not have jurisdiction over OTA protests, the ability to protest OTAs at the COFC is crucial for judicial review of OTA award decisions.

The Court Finds Authority to Review Protests of OTAs

In Raytheon, the Court concluded that the Tucker Act grants it authority over OTA bid protests. The Court does not go as far as the ITRC decision to consider the OTA a procurement, but settles on well-tread ground that "at a minimum," the agency's solicitation demonstrates that the OTA award decision was "in connection with a procurement or proposed procurement." ²⁰ Indeed, the novelty of the Court's reasoning in this decision was its proposition of a "working definition" of OTAs as "an acquisition instrument other than a traditional procurement vehicle intended to provide the government with a direct benefit in the form of products or services."²¹

The fact the Court found most persuasive was the agency's "demonstrate[d] intent" to award a follow-on production contract if "the proposed solution is proven."²² The Court also found relevant the nature of products under development. The Court distinguished the facts Raytheon from Space X because in Raytheon, the products being developed were "unique to the federal government" without broad commercial applications.²³ The Court found this case's missile development program to be more similar to the military vehicle development programs in Hydraulics International and IRTC because the prototypes were tailored for government use. It was this similarity to Hydraulics International and IRTC that formed the basis for the Court to grant jurisdiction.²⁴ In consideration of the facts of Raytheon and the distinction from the facts in Space X, the Court dismissed the jurisdictional challenges to the protest.

The Future of OTAs and OTA Litigation

The Court opined on the predictability resulting from the Raytheon decision. Pointedly, the Court stated that it would be "the de facto forum for bid protests involving [OTs and OTAs]."²⁵ The Court's express goal was to "articulat[e] a predictive forum selection standard" and "streamline the litigation of these jurisdictional issues in future cases."²⁶ The precedent of this decision likely will result in fewer motions challenging venue or jurisdiction succeeding, thus reducing the barrier to entry to OTA protests.

Because it is more predictable, the COFC should be prepared for more OTA bid protest litigation. Additionally, OTA bid protest litigation could be more prevalent simply as a result of the increased use of OTA and protests in general.

Procurement trends have historically shown an increase in OTAs.²⁷ In September 2024, the DOD proposed a rule that would expand the definition of "appropriate circumstances" to award a prototype OTA and add authority for follow-on production contracts.²⁸ These new guidelines show the DOD's continued interest in new applications for and increased use of OTAs.

The new administration's priority of running the federal government like a business also bodes well for OTAs. OTAs align with the current administration's expressed interest of efficiency and flexibility.²⁹ Utilizing the Department of Government Efficiency (DOGE), the new administration is working to limit government contracts and procurement spending generally. An executive order, "Implementing the President's 'Department of Government Efficiency' Cost Efficiency Initiative," issued on Feb. 26, 2025, asked agency heads to terminate contracts when allowable and begin "a comprehensive review of each agency's contracting policies, procedures, and personnel." This executive order will likely result in delays in contractors receiving new contract awards and modifications (as previously discussed by Holland & Knight).³⁰

OTAs also allow for the integration of commercial applications, with the expectation of reduced cost, for government contracts. Major defense contractor L3Harris wrote a letter to DOGE with its proposals to reduce spending on government contracts, specifically encouraging DOGE to commercialize defense acquisition process.³¹

The SecDef Memo emphasizes the importance of using streamlined acquisition pathways, including OTAs, to enhance the efficiency and effectiveness of defense procurement.³² The SecDef Memo mandates that all DOD components use the Pentagon's Software Acquisition Pathway and other authorities designed to leverage commercial capabilities, such as Commercial Solutions Openings and Other Transaction contracting approaches.³³ This directive aims to speed up the process for fielding software-heavy systems and underscores the DOD's commitment to performance-based outcomes. This policy shift aims to reduce bureaucratic barriers, accelerate procurement timelines and attract nontraditional defense contractors by offering more flexible contractual frameworks. The memorandum highlights the DOD's intent to leverage OTAs to rapidly integrate cutting-edge technologies and maintain a competitive edge.

It is not surprising that the current administration encourages the use of OTAs. OTAs are special contractual instruments that allow federal agencies to engage in agreements outside the traditional Federal Acquisition Regulation (FAR) framework. They are particularly useful for research, prototyping and production projects where conventional contracts may be too restrictive. By utilizing OTAs, the DOD can collaborate more effectively with innovative companies that might otherwise be deterred by the complexities of standard government contracts.

Finally, fewer traditional procurement contracts will likely increase competition for, and protests resulting from, all procurements, including OTA protests. This administration's goal of reducing spending on government contracts will ultimately make competition for federal contracts such as OTAs more fierce and push companies whose pursuit of an OTA is to litigate.

Taking all of these factors into consideration, government contractors should be aware of the COFC jurisdiction over OTA bid protests and their ability to litigate the OTAs in the COFC if they are unsuccessful.

Implications for Defense Contractors

The increased emphasis on OTAs presents both opportunities and challenges for defense contractors:

• Access to Nontraditional Vendors. The flexibility of OTAs makes it easier for the DOD to partner with startups and tech firms that are at the forefront of innovation but lack experience with government contracting. Traditional defense contractors may need to adapt by forming partnerships or consortia with these nontraditional vendors to remain competitive.
• Accelerated Procurement Processes. OTAs can significantly shorten procurement cycles, allowing for faster deployment of new technologies. Contractors must be prepared to operate within these expedited timelines, which may require more agile development and decision-making processes.
• Compliance and Oversight. Though OTAs offer flexibility, they also require diligent attention to compliance and ethical standards. Robust compliance programs remain crucial, even within the flexible OTA framework.

Practical Tips for Contractors

To navigate the evolving landscape effectively, contractors should consider the following strategies:

• Develop Agile Contracting Capabilities. Invest in training and infrastructure that enable rapid proposal development and project execution to align with the expedited timelines associated with OTAs.
• Enhance Compliance Programs. Establish comprehensive compliance and ethics programs to prevent misconduct. Regular audits and employee training can mitigate the risk of violations that could lead to substantial penalties.
• Engage with Nontraditional Partners. Explore collaborations with startups and tech companies to integrate innovative solutions into defense projects. Such partnerships can enhance competitiveness in securing OTA-based contracts.
• Stay Informed on Policy Developments. Regularly monitor DOD communications and policy changes related to OTAs to anticipate shifts in procurement strategies and adjust business approaches accordingly.

By proactively adapting to the DOD's increased use of OTAs and learning from recent industry and jurisdictional developments, defense contractors can position themselves for success in a rapidly changing procurement environment.

Staying informed about the latest legal developments and DOD policies regarding OTAs is crucial for successfully pursuing and performing OTA agreements. Contractors should ensure thorough documentation of all interactions and agreements related to OTAs, including maintaining detailed records of communications, proposals and contract modifications. Engaging experienced legal counsel to review OTA agreements and provide guidance on potential legal challenges can help identify and mitigate risks associated with OTAs. Additionally, contractors should be prepared to file a protest if they believe an OTA award was improperly executed, as the Raytheon decision provides a clear precedent for challenging OTA awards in the COFC.

Holland & Knight will continue to monitor developments regarding other transactions and provide updates. Please contact the authors if you have specific questions for your business.

Notes

¹ Raytheon Co. v. United States, No. 24-1824C, 2025 WL 583350, *1 (Fed. Cl. Feb. 24, 2025).

² "Directing Modern Software Acquisition to Maximize Lethality," Sec. of Def., Dep't of Def. (March 7, 2025).

³ Raytheon, 2025 WL 583350 at *2.

⁴ Id.

⁵ Id. at *3.

⁶ Id. at *4.

⁷ Raytheon, 2025 WL 583350 at *8 (citing Space Expl. Techs. Corp. v. United States, 144 Fed. Cl. 433 (2019)).

⁸ The Tucker Act, 28 U.S.C. § 1491, grants the Court of Federal Claims authority over bid protests.

⁹ Id.

¹⁰ Id.

¹¹ Id. at *9 (citing Kinemetrics, Inc. v. United States, 155 Fed. Cl. 777, 780–81 (2021)).

¹² Id. (citing Hydraulics Int'l, Inc. v. United States, 161 Fed. Cl. 167, 171 (2022), appeal dismissed, No. 22-2287, 2023 WL 2729433 (Fed. Cir. March 31, 2023)).

¹³ Id. (citing Indep. Rough Terrain Ctr., LLC v. United States, 172 Fed. Cl. 250, 257 (2024)).

¹⁴ Id.

¹⁵ "Report to Congress On the Use of Other Transaction Authority for Prototype Projects In FY 2022," Dep't of Def., Off. of the Under Sec. of Def. for Acquisition and Sustainment (April 2023).

¹⁶ Other Transactions Guide, Dep't of Def., Off. of the Under Sec. of Def. for Acquisition and Sustainment (Nov. 2018); see also Other Transactions Guide, Dep't of Def., Off. of the Under Sec. of Def. for Acquisition and Sustainment (Jul. 2023) (This DOD guide no longer indicates that protests are rare or discusses GAO jurisdiction. Instead, DOD directs agreement officers to "immediately confer with legal counsel" after a protest is raised.)

¹⁷ MD Helicopters Inc., B-417379, 2019 CPD ¶ 120 at 2 (Comp. Gen. Apr. 4, 2019) (citing Blade Strategies, LLC, B-416752, Sept. 24, 2018, 2018 CPD ¶ 327 at 2; Rocketplane Kistler, B-310741, Jan. 28, 2008, 2008 CPD ¶ 22 at 3).

¹⁸ MD Helicopters Inc. v. United States, 435 F. Supp. 3d 1003, 1013 (D. Ariz. 2020).

¹⁹ Id. at 1011.

²⁰ Raytheon, 2025 WL 583350 at *10.

²¹ Id.

²² Id.

²³ Id.

²⁴ Id.

²⁵ Id. at *1.

²⁶ Id.

²⁷ "Report to Congress On the Use of Other Transaction Authority for Prototype Projects In FY 2022."

²⁸ 89 FR 71865, 71866 (However, given the statutory requirements of OTs, DOD estimates "implementation of the proposed rule will result in less than a 10% increase new OT awards.")

²⁹ Gregory Korte, "Trump Agencies Move to Centralize Contracts in Bid to Cut Costs," Bloomberg Law (Feb. 26, 2025).

³⁰ David S. Black and Amy L. Fuentes, "Executive Order on DOGE Cost Efficiency: Major Changes in Federal Contracts and Grants," Holland & Knight Government Contracts Blog (March 4, 2025).

³¹ "A Letter to the Leaders of the DOGE," L3Harris (Jan. 15, 2025).

³² "Directing Modern Software Acquisition to Maximize Lethality," supra n. 2.

³³ Id.

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