Court Allows Protests Over Navy’s $2 Billion MUSV Prototype Competition

On October 29, 2026, the U.S. Court of Federal Claims ruled that Blue Water Autonomy Inc. and Saildrone Inc. may continue challenging the U.S. Navy’s competition for medium unmanned surface vessel (MUSV) prototypes. The competition has been described as a $2 billion opportunity. The companies were not selected and sought to protest that outcome. The court’s decision addresses whether it can hear their challenges—not whether the Navy conducted the competition improperly or which company should receive an award.

The government argued that the court lacked jurisdiction because the Navy used an other transaction (OT) agreement. OTs offer defense agencies more flexibility than traditional contract procurements when pursuing prototype solutions, and they are not generally governed by the Federal Acquisition Regulation (FAR) or the Competition in Contracting Act (CICA). The court nevertheless concluded that its broad procurement protest statute allowed it to hear these cases because the OT competition was “in connection” with a procurement for MUSVs. A central consideration was the prototype effort’s connection to a potential path to production.

For contractors, the ruling is a reminder that the choice of an OT vehicle does not, by itself, settle whether a protest can be heard. The specific relationship between prototype work and a possible production acquisition may matter to a court’s jurisdictional analysis. Companies excluded from OT competitions should promptly review the governing OT statute’s competition requirements, the solicitation terms, and the record for evidence of agency intent to transition from prototype development to production.

The decision is fact-specific and is not binding precedent. It does not make OTs generally subject to the FAR or CICA, and it leaves unresolved how courts may treat OT efforts primarily designed to fund research or develop a commercial market rather than support a potential production procurement. Contractors should also distinguish the jurisdictional ruling from a merits decision: the protests may proceed, but the court has not found that the Navy erred, ordered a new competition, or required selection of either protester.

• Decision date: The court ruled on October 29, 2026, allowing the challenges to proceed.
• Protesters: Blue Water Autonomy Inc. and Saildrone Inc. are challenging their non-selection in the Navy MUSV prototype competition.
• Opportunity scale: The competition is described as a $2 billion opportunity for medium unmanned surface vessel prototypes.
• Jurisdictional basis: The court found the protest statute could reach the OT competition because it was “in connection” with a procurement for MUSVs.
• Production connection: The prototype effort’s potential path to production was relevant to the court’s ability to hear the protests.
• OT distinction: The ruling does not make OTs generally subject to the FAR or CICA; it concerns the facts and procurement connection in this case.
• No merits finding: The court has not decided whether the Navy’s selection decisions were proper or identified an awardee.
• Contractor action: Excluded firms should assess protest options promptly, including statutory competition requirements, solicitation provisions, and evidence of production intent.
• Open question: The decision leaves uncertain how courts will view OTs primarily intended for research funding or commercial-market development.