United States: Court Of Federal Claims Asserts Jurisdiction Over OTA Claim

Last Updated: July 17 2017
Article by Locke Bell

The Court of Federal Claims held for the first time last Friday that damages were available for the Government's alleged breach of an other transaction agreement ("OTA"), declining to dismiss a contractor's $47 million claim against the Government for breach of a Space Act Agreement OTA and a related licensing agreement.  Although the court reached the correct decision in Spectre Corporation v. United States, No. 16-932C (Fed. Cl. June 30, 2017), its short opinion, focused only on the arguments briefed by the parties, deprives contractors of ringing precedent.

An OTA may be defined generally as a transaction that is not a procurement contract, grant, or cooperative agreement, into which only select agencies can enter.  Some OTAs take the form of an assistance agreement, akin to a grant or cooperative agreement, while others appear to be more similar to a standard procurement contract.  Classification as an OTA rather than a procurement contract determines many rights and obligations of both parties, not least of which is the inability of the nongovernmental party to bring a claim for damages in the court or the boards of contract appeals under the Contract Disputes Act, a remedy only available under procurement contracts.  Some in the Government and industry, including the Department of Defense in recent guidance, have surmised that the court may hear claims for damages under OTAs pursuant to the court's Tucker Act jurisdiction, which permits the court to render judgment on any claim based on "any express or implied contract with the United States."  28 U.S.C. § 1491(a)(1).  With Spectre, this hypothesis is confirmed, at least this once, without any mention of doubt.

In fact, rather than address the question of whether the OTA at issue in Spectre — a fully reimbursable Space Act Agreement issued by NASA to Spectre Corporation to produce silicon-carbide-based pressure sensors according to NASA patents and determine their suitability for the commercial market — constitutes an "express or implied contract," the court assumes it does out of the gate.  The court refers to the agreement as a contract throughout its opinion, yet appropriately omits any citation to the Contract Disputes Act, recognizing that the agreement, while a "contract" for the purposes of the Tucker Act, is not a procurement contract for the purposes of the Contract Disputes Act.  The court takes for granted that the OTA is a contract, perhaps, because the parties do so themselves.  In briefing the Government's motion to dismiss, neither party addressed whether Spectre's Space Act Agreement in particular, or OTAs more generally, should be considered an express or implied contract subject to the court's Tucker Act jurisdiction.

This oversight by the parties and the court is forgivable; Spectre's Space Act Agreement most certainly was a contract, as many OTAs are.  As the Federal Circuit noted in Trauma Service Group v. United States, "[A]ny agreement can be a contract within the meaning of the Tucker Act, provided that it meets the requirements for a contract with the Government, specifically:  mutual intent to contract including an offer and acceptance, consideration, and a Government representative who had actual authority to bind the Government." 104 F.3d 1321, 1326 (Fed. Cir. 1997) (Rader, J., dictum).  These factors were undisputed in Spectre.  Further, the idea that an agreement other than a procurement contract may be subject to the court's claims jurisdiction under the Tucker Act is nothing new.  See Penn. Dep't of Pub. Welfare v. United States, 48 Fed. Cl. 785, 790 (2001) (listing cases where grant agreements were held to be contracts within Tucker Act jurisdiction).

Yet, the Court of Federal Claims' and the Federal Circuit's lexicology under the Tucker Act is inconsistent when they examine bid protest jurisdiction, creating confusion.  Compare 28 U.S.C. § 1491(b)(1) (providing jurisdiction to render judgment on objections to solicitations for "a proposed contract" or the award of "a contract") with Hymas v. United States, 810 F.3d 1312, 1324 (Fed. Cir. 2016) ("As previously observed, the Claims Court's bid protest jurisdiction under [the Tucker Act] speaks exclusively to procurement solicitations and contracts." (internal quotations omitted)).  It would have been prudent for the Court of Federal Claims to acknowledge in Spectre that different meanings of the word "contract" exist within the Tucker Act, and to hold explicitly that OTAs may constitute contracts, at least for the purposes of the court's claims jurisdiction.

Despite the court's failure to do so, it should suffice for contractors to know that there now is direct precedent to bring a claim for breach damages against the Government under an OTA.  Of course, actually recovering these damages is another matter entirely — Spectre has claimed over $47 million in damages resulting from the Government's alleged breach, including $215,000 Spectre paid to NASA under the Space Act Agreement, $2 million in additional funds it invested in a related grant project with the State of Ohio, and $45 million in anticipated profits. It will be interesting to see how these lofty damages claims fare as the case proceeds.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved

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