$1.5B cap on Navy MUSV production money: court orders Saildrone reevaluation and claims OT protest jurisdiction

The money

Congress appropriated $2.1 billion “for development, procurement, and integration of purpose-built medium unmanned surface vessels” in Section 20002(31) of the 2025 reconciliation law, P.L. 119-21 ^[7]. The money stays available until Sept. 30, 2029 ^[1].

The Navy has already committed most of it. Marine Log reported on Sept. 30 that the Navy had awarded production OT agreements for 30 MUSVs, 10 each to HII, Saronic Technologies and Galliano Marine Services, at an average procurement cost of $40 million per vessel ^[4]. Leidos, PAC MAR and Sea Machines each received a $15 million award for completing their prototype projects and were placed on the Drones.mil maritime marketplace, where they can receive follow-on production agreements ^[4]. The court put the awards made so far at approximately $1.245 billion ^[1]. By this brief’s arithmetic, that is the 30 hulls at the average price plus the three prototype payments, and it leaves about $255 million before the injunction’s $1.5 billion ceiling.

The cap covers any obligation of the Section 20002(31) money for MUSV production, “including, but not limited to, follow-on production awards under 10 U.S.C. § 4022(f)” and awards made under any other solicitation or agreement ^[1]. It lifts seven days after the Navy finishes its reevaluation and tells Saildrone the outcome in writing ^[1]. The judge called the cap the main burden of the relief and noted it “leaves the Navy free to obligate the bulk of the appropriation” without risking lapsed funds ^[1].

The prototype stage itself was cheap for the government. Offerors that cleared both phases were to receive $15,010,000 on completing a post-award conference and an on-water test event, and the Navy paid nothing else beyond a $10,000 conference payment ^[1].

The programs: what did the Navy get wrong in the MUSV down-select?

The Portfolio Acquisition Executive for Robotic and Autonomous Systems issued Solicitation N00024-26-R-6326 on March 26, 2026, under the prototype authority of 10 U.S.C. § 4022 ^[2]. The Navy called it “a direct, competitive down-select for a potential multi-vessel production and/or service contract with delivery of a production vessel in [fiscal year 2027]” ^[2]. Phase 1 was pass/fail on vessel design, manufacturing readiness and a test plan; one unacceptable rating ended a bid ^[1]. Of 25 proposals, seven advanced ^[1].

Saildrone. The Navy rejected Saildrone’s Spectre under the vessel design criterion because its J-8 Placemat, a one-page summary form, showed displacements above its own stated maximum ^[1]. The placemat listed a maximum displacement of 231 metric tons (MT), 256 MT with the required 25 MT load and 303 MT with two 40-foot containers ^[1]. Sea Machines’ Steamrunner placemat had the same problem: 370.71 MT maximum, 380.96 MT with 25 MT and 428.56 MT with two containers ^[1]. Its Steamracer placemat left those fields blank ^[1]. The government conceded the two companies “made similar errors,” and the record did not show which Sea Machines vessel the Navy evaluated ^[1]. The court said it did not matter, since the Navy marked Sea Machines acceptable on every sub-criterion either way and “nothing in the evaluation explains why” ^[1].

The government’s defenses, that Sea Machines’ proposal held other proof of compliance and that its parent hull had been tested, appear nowhere in the contemporaneous evaluation, and the court rejected them as post hoc rationalization ^[1]. Hadji stressed that he was not deciding whether Spectre meets the threshold requirements; that call stays with the Navy ^[1]. Saildrone’s placemat claimed 75 MT of payload capacity against the 72.6 MT two containers require, and 2,790 nautical miles of range at 25 knots in Sea State 4 ^[1]. The Navy had also failed Saildrone on manufacturing readiness and test planning, then withdrew both findings in litigation; the court barred it from reviving them ^[1].

Blue Water Autonomy. Blue Water lost. Its test vessel was a twin-hulled catamaran with a direct-drive plant, while its production design is an axe-bow monohull with a diesel-electric plant ^[1]. The Navy’s workbook recorded: “Fail – unrepresentative test vessel. Entirely different hullform and machinery layout” ^[1]. The court held that “representative” required comparing the test and production vessels, hull and propulsion included, and that how much difference is too much is the Navy’s technical judgment ^[1]. It added, as an alternative ground, that Blue Water saw the ambiguity in a pre-proposal question and did not press it before proposals were due ^[1].

The production field. HII is building its Romulus design and Saronic its Marauder ^[4]. Naval News reported that Saronic’s award is firm-fixed-price and was made under Section 4022(f), the follow-on production authority, and described Marauder as a 180-foot autonomous ship ^[5]. The first production MUSVs are due before the end of fiscal 2027 ^[4]. Section 4022(f) lets the department award follow-on production without new competition when competitive procedures picked the prototype participants and they “successfully completed the prototype project” ^[6]. That is why Phase 1 mattered: an offeror eliminated there “is therefore foreclosed from production,” the court wrote ^[2].

The Navy has since changed the rules for new entrants. Breaking Defense reported that the Phase II call for solutions released in September, previewed in this site’s September brief, drops the 25-knot speed requirement and asks for at least two 20-foot containers instead of two 40-foot ones ^[3].

The politics

The government fought on jurisdiction first. Justice Department lawyers argued the Court of Federal Claims cannot hear protests of OT competitions, which are exempt from the Federal Acquisition Regulation and the Competition in Contracting Act ^[2]. Hadji disagreed on Oct. 29. His court’s protest statute, 28 U.S.C. § 1491(b)(1), reaches objections “in connection with a procurement or a proposed procurement,” and he held that an OT prototype contest designed to feed straight into production qualifies ^[2]. He also tied the competition to Section 4022(b)(2), which requires competitive procedures “to the maximum extent practicable” for prototype agreements ^[2, 6].

The opinion matters for anyone competing for OT work. The Federal Circuit has not addressed whether OT protests fall under Section 1491(b)(1) ^[2]. Hadji departed in part from Telesto Group v. United States, a 2025 decision by another judge of the court that found an “effective jurisdictional blackout” during prototyping until the agency decides to buy ^[2]. He drew a limit as well: an OT whose principal purpose is funding research or stimulating a commercial market, with nothing acquired for the agency’s own use, stays outside the statute ^[2]. Footnote 15 states the court has “exclusive” procurement protest jurisdiction over OT protests like this one ^[2].

Three of the seven advancing offerors intervened: HII Unmanned Systems, Leidos and Saronic ^[1]. Leidos’ cross-motion against Blue Water was granted; Saronic’s against Saildrone was denied ^[1].

According to Breaking Defense, a Navy spokesperson said the service will comply and reevaluate Saildrone’s proposal ^[3]. Saildrone founder Richard Jenkins called the ruling a win for fair competition, while Blue Water co-founder Austin Gray argued nothing about the test vessel was core to the company’s product and credited the Navy with positive changes in Phase II ^[3]. Christopher Miller, the Navy’s portfolio manager for robotic and autonomous systems, acknowledged that the Phase 1 requirements were hard on industry, Breaking Defense reported ^[3].

Next milestone: when does the Navy have to decide on Saildrone?

The remand runs 60 days from the order ^[1]. Within 14 days of the order, the government must file a status report listing everything obligated from the $2.1 billion by awardee and amount, the status of each offeror’s test event including any extension of the Sept. 30, 2026 deadline, and the reevaluation schedule ^[1]. Within 74 days, the parties must file a stipulation of dismissal or a joint status report on the Navy’s decision ^[1].

If Saildrone passes, the Navy must reinstate it on the same terms as the seven, negotiate a prototype OT agreement and set a test schedule that accounts for the missed Sept. 30 date ^[1]. Blue Water’s case, No. 26-936, goes to judgment for the government ^[1]. Whether the Navy obligates the remaining headroom under the cap before Saildrone’s reevaluation finishes is the number to watch in the first status report.