Background
Strategi Consulting, LLC, a small business, developed a tactical software platform called “Voltron” for the U.S. Air Force under a Phase II Small Business Innovation Research (SBIR) contract. The SBIR program includes a statutory preference that, when practicable, any follow-on Phase III work should be awarded to the company that developed the technology. After its Phase II contract ended, Strategi alleged the government had a continuing need for the software but, instead of awarding Strategi a Phase III contract, it began developing a duplicative system called “Vigil.”
Strategi filed a bid protest, claiming the government was improperly using a quasi-governmental organization known as “Dragon Army”—which itself uses private support contractors—to perform what was effectively Phase III work derived from Voltron. This, Strategi argued, violated the SBIR program’s mandatory preference. The government moved to dismiss the case for lack of jurisdiction.
The government contended that its actions did not constitute a “procurement” that could be challenged in court, but were rather a permissible internal decision to continue software development using its own resources. Alternatively, it argued the protest was barred by a statute (the Federal Acquisition and Streamlining Act) that prohibits protests related to the issuance of task orders, as the work was allegedly assigned via existing task orders.
The Court’s Holding
The Court of Federal Claims denied the government’s motion to dismiss, allowing Strategi’s bid protest to proceed. The court held that it had subject-matter jurisdiction over the dispute because Strategi’s allegations were sufficiently “in connection with a procurement or a proposed procurement,” as required by the Tucker Act. The court relied on precedent that interprets its bid protest jurisdiction broadly, covering even the initial stages of an agency determining its need for services.
The court rejected the government’s characterization of the work as purely “internal development.” It found that Strategi had presented enough evidence to suggest that the government’s actions were more akin to an “acquisition by another name,” particularly given the acknowledged use of private “service support contractors” within Dragon Army. The court noted that even if the decision was one of “insourcing,” it could still fall under the court’s jurisdiction. Further, the court determined that the statutory bar on task order protests did not apply because Strategi was not challenging the issuance of a specific task order, but rather the government’s overarching decision to use that contracting vehicle to circumvent the SBIR preference.
Key Takeaways
- An agency’s decision to use a mix of government personnel and existing support contractors can be considered a “procurement” subject to bid protest jurisdiction.
- Labeling work as “internal development” or “insourcing” does not automatically shield an agency from a bid protest, especially when it involves replicating technology developed by a small business under an SBIR contract.
- The statutory bar on task order protests does not prevent a challenge to an agency’s fundamental procurement strategy, even if that strategy is implemented through task orders.
- The Court of Federal Claims will broadly interpret its jurisdiction to enforce statutory procurement preferences, such as the mandate to award SBIR Phase III contracts to the original technology developer where practicable.
Why It Matters
This decision is a significant affirmation of the Court of Federal Claims’ role in policing agency procurement decisions that fall into a grey area between formal solicitations and internal agency work. It signals that agencies cannot easily evade judicial review by structuring a new acquisition as “in-sourcing” or by funneling work through existing contract vehicles if doing so circumvents a mandatory procurement statute.
For small businesses in the defense and technology sectors, the ruling reinforces the value of the SBIR program. It confirms that the statutory preference for a Phase III follow-on contract is an enforceable right that can be protected through a bid protest, even when the government does not issue a new solicitation and instead attempts to replicate the technology with other contractors. The decision provides a pathway for SBIR awardees to hold the government accountable to its statutory obligations.