This week, the General Accountability Office (“GAO”) published a decision reaffirming its jurisdiction over protests of “mixed transaction” leases. Generally, GAO’s protest jurisdiction is limited to the procurement of goods and services, which does not include leases of federally-owned property. However, in certain circumstances, a transaction involving a lease includes a procurement of goods and services. GAO characterizes these as “mixed transactions” and has exercised jurisdiction over protests involving such transactions.
Specifically, GAO has outlined two categories of mixed transactions. The first involves transactions where the government agency receives a direct but intangible benefit that aids the agency in the discharge of its mission. The second are transactions where the agency receives a concrete and tangible benefit that involves the delivery of goods and/or services of more than de minimus value.
Last year, GAO addressed both categories in a protest by Blue Origin against NASA for use of a launch pad at the Kennedy Space Center. The original GAO decision held that NASA’s announcement for proposals was a mixed transaction under both categories. First, GAO determined that while there was no foreseeable future use of the launch pad by NASA, use of the launch pad by commercial entities would further NASA’s statutory mandate to encourage the commercial use of space. Second, GAO found that operations and maintenance of the launch pad by a commercial entity would provide NASA with the benefit of a functional and well-maintained launch pad at the end of the lease. In the end, GAO found in favor of NASA on the merits. Interestingly, NASA filed a request for reconsideration, asserting that GAO’s conclusion on jurisdiction was incorrect. NASA argued that GAO’s determination under the first category was inconsistent with previous GAO decisions. In particular NASA teed up the question as to whether the benefit to the agency’s mission must be related to its own direct benefit and use. Arguably, because NASA had no intention of using the launch pad again, any commercial use provided no direct benefit or use to NASA. NASA also contested that GAO’s findings under the second category did not correctly review the facts in the record. In its decision resolving the motion for reconsideration, GAO observed that NASA had “raised several significant arguments” as to why GAO should not have taken jurisdiction over Blue Origin’s protest, but denied the request for reconsideration because the protest was denied on the merits. That decision left open how jurisdiction over mixed transactions would be determined by GAO in subsequent cases.
This week’s protest decision reaffirmed GAO’s jurisdiction over mixed transactions, in particular, those falling within the second category. The decision involved a solicitation issued by the Navy for proposals to lease approximately 99,500 square feet of land at the Naval Base Point Loma in San Diego. Instead of rent in the form of cash payments, the Navy sought in-kind consideration in the form of Specific Maintenance Projects that would have equaled the fair market value of the leased premises. After the Navy canceled the Request for Proposals (“RFP”) due, in part, to concerns about changes in EPA guidance on chemical exposure risk on the property, Open Spirit filed a protest. While the Navy contested GAO’s jurisdiction because the RFP involved a lease of government land. GAO determined that the RFP was a mixed transaction because the Specific Maintenance Projects sought in compensation for the lease fell within the second category. This decision, however, leaves open the question NASA raised in the previous case related to the applicability of the first category of mixed transactions in situations where an intangible benefit to an agency’s mission is not for the agency’s own direct benefit and use.