The U.S. Court of Federal Claims recently ruled in favor of Strategi Consulting, LLC, in a bid protest against the United States government. The case, filed under docket number 26-450, centers on Strategi's allegations that the government failed to award it a follow-on Phase III contract for software development despite a continuing need. This ruling is significant as it addresses the government's compliance with the Small Business Innovation Research (SBIR) program, which mandates certain preferences for small businesses in federal contracting.
Strategi Consulting, a small business that developed Tactical Surveillance, Reconnaissance, and Tracking (TacSRT) software for the U.S. Air Force and U.S. Space Force, claimed that the government assigned the work to another organization, Dragon Army, instead of awarding it to Strategi. The court's decision could have implications for how federal agencies handle contract awards, particularly in relation to small businesses and the SBIR program.
The dispute began when Strategi completed a Phase II contract and sought a Phase III contract to continue its work. The company alleged that the government had a continuing requirement for the TacSRT development but instead chose to pursue similar work with Dragon Army, which operates in a quasi-governmental capacity. Strategi argued that this action violated the statutory preference for awarding Phase III contracts to the original contractor, as outlined in the SBIR program.
The case reached the Court of Federal Claims after Strategi filed a complaint on March 20, 2026. The government moved to dismiss the case, arguing that there was no procurement action and that the court lacked jurisdiction. However, the court found that the allegations raised by Strategi fell within the scope of procurement-related actions, thus allowing the case to proceed.
In its ruling, the court stated, "The court’s broad jurisdiction over actions in connection with a procurement encompasses the claims as alleged in Plaintiff’s Complaint." The ruling was issued by Judge Carolyn N. Lerner, who denied the government's motion to dismiss, stating that the bid protest statutes allow for the declaratory and injunctive relief requested by Strategi.
The court also noted that the government’s characterization of its actions as permissible internal development did not negate the claims made by Strategi. The judge emphasized that the SBIR program requires federal agencies to issue Phase III awards to the previous contractors that developed the technology to the greatest extent practicable.
The impact of this ruling could be significant for small businesses seeking to engage with federal agencies under the SBIR program. The court's decision reinforces the need for federal agencies to adhere to statutory preferences when awarding contracts, especially when prior contractors have demonstrated their capabilities and compliance with program requirements.
Going forward, this ruling may set a precedent for how similar cases are handled in the future, particularly regarding the rights of small businesses in federal contracting. It highlights the importance of transparency and fairness in the procurement process, ensuring that small businesses are not overlooked in favor of larger organizations.
The government has the option to appeal the ruling, and it remains to be seen whether further legal action will be taken. Additionally, there may be related cases pending that could further clarify the legal standards surrounding the SBIR program and procurement practices.