Court of Federal Claims determines that it has bid protest jurisdiction over a pre-award protest for failure to award a Phase III SBIR.

Article by: Ryan Bradel, Partner

On July 24, 2026, the U.S. Court of Federal Claims issued an opinion affirming its broad jurisdiction over bid protests of Small Business Innovative Research (“SBIR”) procurements.  This decision was especially significant in that it cut new snow on the question of whether the Court of Federal Claims had jurisdiction over pre-award protests of the government’s failure to make a Phase III SBIR award to a company that had performed Phase I and Phase II SBIRs, answering that important question in the affirmative.   

In Strategi Consulting, LLC v. United States, Judge Carolyn N. Lerner denied the government’s motion to dismiss a bid protest brought by a company that had developed “TacSRT” (Tactical Surveillance, Reconnaissance, and Tracking) software—a platform called Voltron—for the Air Force and Space Force under a Small Business Innovation Research (SBIR) Phase II contract. Strategi alleged that after it completed Phase II with all deliverables accepted, the government declined to award it a follow-on Phase III contract and instead handed effectively the same work to “Dragon Army,” an Air Force Research Laboratory organization that Strategi describes as a badge-less, pooled, multi-contractor environment. The SBIR statute requires federal agencies to issue Phase III awards (if awarded at all) to the SBIR recipients who created the technology “[to] the greatest extent practicable.” Dragon Army allegedly built a duplicative platform called Vigil using private contractors working under existing task orders. The government characterized all of this as permissible “internal development of the Government’s own technology.” 

The core holding is jurisdictional, but it is significant. The Court held that Strategi’s allegations fall squarely within its Tucker Act bid-protest jurisdiction over “any alleged violation of statute or regulation in connection with a procurement or a proposed procurement.” Drawing on the Federal Circuit’s broad reading of “procurement” in cases like Distributed Solutions and Systems Application & Technologies, Judge Lerner found that Strategi had shown that the agency reviewed its Phase III proposals, declined to award, demanded its Voltron codebase, and then continued developing similar software—likely with private contractors. That was enough to defeat the government’s argument that no “procurement” existed.  The existence of a “procurement” is the sine qua non of whether the Court has protest jurisdiction.  

The court distinguished cases like ASTi, where an agency’s decision to insource decades-old, internally developed software was deemed too speculative to be a procurement. Here, by contrast, the agency had declined a concrete 2025 follow-on proposal while simultaneously pursuing the same capability through outside performers. Critically, the Court also rejected the notion that an agency can escape review simply by relabeling contractor-supported work as an “internal resource,” and it confirmed that the SBIR Phase III preference under 15 U.S.C. § 638(r)(4) is a procurement statute that can anchor a protest—not a mere “cautionary and informative” directive with no judicial remedy. 

The opinion also cleared two other hurdles the government raised. First, the court held that the Federal Acquisition Streamlining Act (“FASA”) Task Order Bar did not preclude the suit, because Strategi’s core allegation is a violation of the SBIR procurement preference, not a challenge to the task orders themselves; the task orders were “ancillary,” and in the alternative, FASA’s increased-scope exception applied because the alleged de facto Phase III work exceeded the scope of those orders. Second, the court found Strategi had Article III standing, because it sought declaratory and injunctive relief expressly contemplated by 28 U.S.C. § 1491(b)(2)—not merely bid-and-proposal costs—and that relief could redress its injury. The motion to dismiss was therefore denied in full, the stay was lifted, and the case now proceeds toward cross-motions for judgment on the administrative record. 

For technology contractors, several practical lessons emerge. The most important is that surviving a motion to dismiss is not the same as winning: Judge Lerner was emphatic that Strategi cleared only a threshold, preponderance-of-the-evidence bar on jurisdictional facts, and that its burden at the merits stage “will be much higher.” A protester in this posture should temper expectations accordingly.  

But the decision is a meaningful signal that the SBIR Phase III preference has real teeth, and that a small business can protest when an agency appears to route follow-on development to other performers rather than negotiate with the company that created the technology—even absent a formal solicitation. Agencies cannot reliably immunize such decisions from review by calling them “internal development,” insourcing, or routine task-order work; courts will look at substance over form. 

The case is also a reminder of how much documentation matters. Strategi survived because it built a record: its Phase III proposal and presentations, the agency’s request for the Voltron codebase, contracting-officer statements suggesting bias, testing and certification records, and even Jira backlog comparisons purporting to show that Vigil replicated Voltron’s features. Contractors who suspect their work is being duplicated or reassigned should preserve exactly this kind of contemporaneous evidence of a continuing need, their own follow-on proposal, and the competitor’s overlapping effort.  

Equally instructive is Strategi’s insistence, when the government demanded its codebase, that its SBIR data rights still governed all use of the Voltron software and technical data—a posture that underscores why innovators must clearly assert and defend their SBIR data rights before, during, and after any transition. Whether Strategi ultimately prevails on the merits remains to be seen, but the jurisdictional roadmap this opinion lays out is one that SBIR awardees, prototype developers, and other technology contractors will be citing for years.