Government Contracts Monitor

\"It’s None of Our Business\": GAO Keeps Its Nose Out of Private Disputes

May 4, 2015

By: Eric Whytsell

Several months ago, this blog identified the Government Accountability Office (GAO) decision in InSpace 21 LLC, B-410852 (December 8, 2014) as a cautionary tale and discussed the importance of getting joint ventures right. After declining to resolve what it considered a dispute between two private parties, GAO rejected that protest for failure to demonstrate interested party status. Subsequently, InSpace sought reconsideration, arguing that GAO got things wrong. But GAO did not budge: it would not get involved in a dispute between joint venturers regarding who had authority to file a protest under their operating agreement.

In support of its request for reconsideration, InSpace asserted that: (1) GAO erred in finding InSpace was not an interested party; (2) by concluding InSpace had failed to establish its interested party status, GAO in effect decided the dispute between joint venturers that it claimed to be avoiding; and (3) GAO should reconsider its decision in light of the subsequent resolution of the dispute over authority to file the protest in a Virginia Court. GAO rejected all three of InSpace’s arguments.

With respect to the first argument, GAO explained that InSpace misunderstood the original opinion. According to GAO, it did not hold that InSpace was not an interested party. Rather, because GAO will not review disputes between joint venturers regarding interpretation of their operating agreement and the agreed upon process for authorizing a protest, GAO was unable to conclude that the person who filed the protest was actually authorized to represent InSpace. In other words, GAO never reached the merits of the interested party issue.

GAO also rejected the notion that its earlier decision to dismiss the protest improperly intruded on a dispute between private parties. InSpace essentially argued that dismissing its protest amounted to the GAO’s choosing sides. From GAO’s perspective, that is what would have happened had it allowed the protest to go forward. Instead, GAO simply followed its rules and found the protester had failed to carry its burden because of the dispute (which the GAO made a point not to resolve).

Not even a Virginia Court’s subsequent resolution of the underlying dispute and finding that the protest was properly authorized moved GAO to reconsider its prior dismissal. The Court’s finding probably would have decided the question had it been in place at the time of the protest, but it came too late to help InSpace. As GAO explained, while reconsideration of its protest decisions can be based on information not previously considered, that does not include information that arises from events that took place after the decision to be reconsidered. Here, the Court resolution did not come until six weeks after GAO’s original decision and, thus, did not provide grounds for GAO to conclude that it erred.

This decision underscores how committed GAO is to staying out of private disputes – and how important it is for contractors to have effective joint venture agreements and other legal arrangements in place. If the underlying documents are subject to disputes that need to be resolved in order to prevail in a protest, the hopeful protester will not find any relief from the GAO.

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