Joint Ventures And GAO Protests: Protester Must Have “Standing”

For a member of a joint venture to file a GAO bid protest on behalf of the joint venture, the member must have the authority to do so.  If a JV Member’s authority to act is in question, the GAO will dismiss the protest for lack of standing.

In a recent decision, the GAO dismissed a bid protest filed by a joint venture member because the other joint venture member disputed the protester’s right to act on the joint venture’s behalf.

In InSpace 21, LLC, B-410852, B-410852.3 (Dec. 8, 2014), the Air Force issued a request for proposals for operations, maintenance, and sustainment services at two missile ranges.  PAE Applied Technologies LLC and Honeywell Technology Solutions created a joint venture InSpace21 LLC, to compete for the procurement.

After evaluating proposals, the agency made award to one of InSpace’s competitors.  One of PAE’s vice presidents (who was also on InSpace’s board) filed a GAO bid protest on behalf of the joint venture.

And that’s when things got interesting.

The day after the protest was filed, Honeywell submitted a letter to the GAO asserting that PAE did not have the authority to file a protest on behalf of the joint venture.  Honeywell argued that InSpace’s joint venture operating agreement “prevents a protest from being filed without the unanimous vote of the Management Board,” and that “[u]nanimous consent is not present.”  Honeywell asserted that, based on the lack of a unanimous vote, InSpace was not an interested party to file a bid protest.

PAE disagreed with Honeywell’s interpretation of the operating agreement, and asserted that the operating agreement required only a majority vote to authorize a protest, rather than a unanimous one.  PAE asserted that it had majority authority to file a protest, and nothing more was required.

The GAO noted that its Bid Protest Regulations only permit GAO to decide a protest if the protester is an “interested party.”  The protester has the burden of demonstrating that it is an interested party.  Further, in the case of a JV, “[t]he joint venture, not any individual firm, is the appropriate interested party to protest the contracting agency’s action.”

The GAO wrote that PAE and Honeywell have “conflicting interpretations of the terms of the joint venture’s operating agreement, and as such, disagree regarding whether the protester is authorized to file this protest on behalf of the joint venture.”  GAO continued, “[a]lthough [PAE] and Honeywell ask that our office resolve this issue, the disagreement is a dispute between private parties, which as our case law explains, our office will not review.”  Because of the unresolved dispute, PAE “has not shown that it has the authority to file this protest on behalf of the InSpace joint venture.”  The GAO dismissed the protest.

The GAO’s decision in InSpace is a reminder of how important it is that a joint venture have clear and concise governing documents.  Here, two large, sophisticated contractors could not agree on what their own joint venture operating agreement said regarding bid protests–and as a result, the protest was dismissed.

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