The Court of Federal Claims will hear your prototype OT protest

128 U.S.C. § 1491(b)(1)Jurisdiction follows the procurement, not the instrument

The Tucker Act's bid protest provision, 28 U.S.C. § 1491(b)(1), reaches objections made in connection with a procurement or a proposed procurement. Reading the Federal Circuit's decision in Distributed Solutions with the definition of procurement now at 41 U.S.C. § 111, the court started from the rule that "a procurement begins when an agency identifies a need". It then held:

"The Court finds that its broad procurement protest statute, 28 U.S.C. § 1491(b)(1), encompasses the instant protest because the OT competition at issue is in connection with the Navy's procurement of MUSVs"

Here the need came first. On March 26, 2026, the Navy issued its solicitation as "a direct, competitive down-select for a potential multi-vessel production and/or service contract", and it said it "is no longer interested in paying industry to build prototypes".

Of the 25 offerors, the Navy selected seven for Phase 2, and only an offeror that succeeds in the prototype competition can receive the production contract. The government argued that the Navy had not yet decided whether to buy vessels or a service; the court said that does not matter, and that testing done so the Navy can choose the vessels it will acquire is part of determining its need, not research for its own sake.

The Navy's own answers to industry questions said the opposite. In its responses to questions of April 9, 2026, it answered five questions with the same sentence: "The MUSV solicitation does not include a requirement for the production of a vessel and delivery to the U.S. Navy". Asked whether it would mandate a C2 system for production, it replied that "Questions regarding follow-on production may be addressed at a later date". The opinion does not quote those answers. It looked instead to how the Navy built the competition and what it said about production, and found a procurement.

2Hymas and the principal purpose"Non-procurement OT" is a label, not a shield

The government argued that once the Navy properly invoked its OT authority, there was no procurement and nothing for the court to review. The court held that jurisdiction cannot be settled by the type of authority invoked; following Hymas, it looks to the principal purpose of the instrument. Of the government's phrase, it wrote: "It is just a label coined and brandished by the Government".

The OT statute itself uses procurement concepts. Section 4022 builds on the research authority in 10 U.S.C. § 4021, incorporates the Procurement Integrity Act at 10 U.S.C. § 4022(h), and calls for a written determination by the senior procurement executive. The court did not hold that an OT is a procurement contract: the question is not the instrument's label but whether the transaction is in connection with a procurement. And it gave the Navy no deference; the reach of the statute is a question of law for the court.

The Navy's own Solicitation Guidance says as much. Its definitions state that "This type of OT is treated by DoD as an acquisition instrument", and its Procurement Integrity Act section provides that "all Agreements awarded under this solicitation shall be treated as Federal Agency procurements for purpose of 41 U.S.C. Chapter 21".

310 U.S.C. § 4022(b)(2)The OT competition requirement is a statute you can protest under

A protest must allege a violation of a statute or regulation in connection with the procurement. The government said 10 U.S.C. § 4022(b)(2) governs OTs, not procurements, and relied on Cleveland Assets. The court called that position circular. The statute requires that "competitive procedures shall be used when entering into agreements to carry out the prototype projects". The court's answer: "It is essentially the OT counterpart to CICA's competition mandate".

Jurisdiction does not bring the FAR with it. In the court's words, "OTs remain exempt from the FAR, CICA, and most procurement statutes, and review reaches only the Navy's compliance with section 4022's own conditions and the Solicitation's terms".

4Telesto's jurisdictional blackoutA Phase 1 cut can be protested now

In Telesto, the court held that challenges to the prototyping phase of an OT fall outside its protest jurisdiction until prototyping ends and the agency decides to buy: "there is an effective jurisdictional blackout". Judge Hadji declined to adopt that rule, for three reasons.

First reason: the rule is difficult to reconcile with Distributed Solutions. Under that decision, a proposed procurement begins with the process for determining a need for property or services. Telesto itself recognized that the agency's decision to proceed under its OT authority "was itself a procurement decision", yet it declined to find jurisdiction until the agency later decides to buy. The court called that "a condition the statute does not impose".

Second reason: the rule fits this record poorly, and for an offeror this is the reason that matters most. The Navy structured the competition as a down-select for production, and only successful prototype offerors may receive production contracts. "An offeror eliminated at Phase 1 is therefore foreclosed from production". Deferring review until the Navy declares a prototype successful would leave that offeror without a forum until the competition has run its course, and "would leave the timing of this Court's jurisdiction to the agency's own determination".

Third reason: the rule would divide one acquisition between courts. Telesto contemplated that, absent a procurement, review lies in a district court under the Administrative Procedure Act, while the rest of the acquisition comes to this court. Splitting one acquisition by phase is the fragmentation Congress set out to prevent in the Administrative Dispute Resolution Act of 1996, which made this court, under 28 U.S.C. § 1491(b)(1), the exclusive judicial forum for procurement protests.

5Limits and remediesWhere the line still sits

The government warned that this reading would bring every OT into the court. The court said it would not: "An OT whose principal purpose is to fund research or to stimulate a commercial market, and through which the agency does not intend to acquire anything for its own use, remains outside the statute".

Nor does an OT protest belong in a district court under the Administrative Procedure Act, as the government proposed. The court read the statute as making it the exclusive judicial forum for procurement protests, and on Raytheon's view, wrote that "it is more accurate to state that the Court has exclusive procurement protest jurisdiction, not de facto jurisdiction".

The solicitation invoked the follow-on production authority in 10 U.S.C. § 4022(f), and since the briefing the Navy has made follow-on production awards. The court held that those awards do not moot the protest, because relief, including an injunction and recovery of bid and proposal costs, remains available.

The offerors paid those costs themselves. The Solicitation Guidance told them that "The Government will not pay companies for costs associated with Phase 1 and 2". The prototype agreement itself was priced at $15,010,000: $10,000 for the post-award conference and $15,000,000 for a successful on-water test.

Key takeaways

• A path to production opens the door. When the solicitation ties production to the prototype competition, an exclusion at the first down-select can be protested now. Keep that language, and the agency's public statements, in your capture file.
• The label does not decide it. Expect the government to call the agreement a "non-procurement" OT, and answer with the principal purpose of the competition you were cut from. Here, a Q&A answer that the solicitation required no production did not keep the protest out, and the solicitation itself called the instrument an acquisition instrument.
• The grounds are section 4022 and the solicitation. The FAR does not come with jurisdiction; the court reviews the agency's own evaluation terms and how it applied them.
• The split is open. Telesto has not been overruled, the judges of the court do not bind one another, and the Federal Circuit has not yet decided the question.
• Not every OT is reviewable. An OT that funds research or builds a commercial market stays outside the court. Track your bid and proposal costs by competition: the agency may not pay for them, and their recovery stays available after it awards.

Documents and data used in this piece

Disclaimer. This piece is commentary on a published decision. It is not legal advice, and it is not a determination about any contractor, competition or agreement. The decision rules on the court's jurisdiction only, not on the merits of either protest. Confirm how it applies to you with counsel or a government contracts professional. Read the court's opinion in full.

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