Thou Shalt Not Wait Until the Last Minute to Submit an 8(a) Joint Venture Agreement to SBA for Approval
By Oles Morrison on November 4, 2015 | Posted in Bid Protests
A recent decision by GAO in FedServ-RBS JV, LLC, B-411790, provides yet another reminder to 8(a) joint ventures to submit proposed joint venture agreements to the U.S. Small Business Administration (“SBA”) for approval as early as possible. This case shows that waiting until the last minute to submit your joint venture agreement to SBA can result in the loss of a contract award.
Under SBA’s regulations, an entity submitting an offer as an 8(a) joint venture for an 8(a) set-aside procurement must have its joint venture agreement approved by SBA before it can be awarded the contract (13 CFR 124.513(e)(1)). If the procuring agency selects a 8(a) joint-venture for award, but then SBA informs the agency that it has not approved that offeror’s joint venture agreement, the agency can eliminate the offeror and award the contract to the next offeror in line (13 CFR 124.507(b)). Unfortunately, this scenario happened to FedServ-RBS.
The Army issued the subject RFP as an 8(a) set-aside. On June 4th (five days after proposals were due), FedServ-RBS, a joint venture offeror composed of FedServ (an 8(a)) and RBS (a non-8(a) small business), submitted its 8(a) joint venture agreement to SBA for approval. Twelve days later, SBA returned the joint venture agreement to FedServ-RBS with a list of issues requiring resolution before SBA would approve the agreement. Meanwhile, the Army evaluated proposals, and on June 25th selected FedServ-RBS’s proposal as the apparent awardee and requested SBA confirm whether FedServ-RBS was an approved 8(a) joint venture. But, FedServ-RBS did not re-submit its joint venture agreement to the SBA until July 2nd. By that time, SBA had already informed the Army that FedServ-RBS was not an approved 8(a) joint venture, and the Army had reevaluated the remaining offerors and determined that H&S Resources Corporation presented the best value to the government, and awarded H&S the contract. FedServ-RBS filed a bid protest to GAO, arguing that the Army did not allow sufficient time for the SBA’s consideration and approval of the joint venture agreement. GAO rejected this argument, and denied FedServ-RBS’s protest.
FedServ-RBS JV, LLC, is a good example of why an 8(a) joint venture should submit it joint venture agreement to SBA for approval before it even submits its offer. SBA commonly finds issues with 8(a) joint venture agreements when first submitted, but also provides useful guidance to the applicant that allows the applicant to easily remedy the issues and get the joint venture agreement approved upon re-submission. However, in order to ensure you have time to re-submit before the procuring agency makes its award decision, it is imperative that prospective joint venture sends in their initial submission to SBA as early as possible, so that SBA has time to review and provide comments on what needs to be corrected to gain approval.
Even where regulations do not require an 8(a) joint venture agreement to be approved by SBA prior to award, it is highly advisable for an 8(a) joint venture to seek pre-approval from SBA as early as possible. For instance, an 8(a) mentor-protege joint venture is eligible to bid as a joint venture on a small business set-aside outside the 8(a) program if the 8(a) protege itself qualifies as small under the applicable size standard (13 CFR 121.103(h)(3)(iii)). For these procurements, the SBA does not need to approve the 8(a) mentor-protege’s joint venture agreement prior to award. Nevertheless, 8(a) mentor-protege joint ventures should still get their joint venture agreements pre-approved by SBA even when bidding on small business procurements outside the 8(a) program, because if after award someone files a size protest and it turns out the joint venture agreement did meet all of SBA’s criteria for approval, the mentor and protege will be deemed to be “affiliated” and likely no longer eligible for that award based on their combined size. In fact, in the last year, multiple size protests have been sustained, and multiple contracts lost, for this very reason. See, e.g., IEI-Cityside, JV, v. U.S., 122 Fed. Cl. 750 (2015); Size Appeal of IEI-Cityside, JV, SBA No. SIZ-5664 (2015); Size Appeal of Kisan-Pike, A Joint Venture, SBA No. SIZ-5618 (2014).
Luckily for 8(a) joint ventures, even though SBA is not required to review proposed joint venture agreements prior to award, most SBA offices are willing to review and pre-approve proposed joint venture agreements at any time, even if the agreement is not connected to a specific procurement. In fact, SBA has proposed to make this practice part of its regulations. See Proposed Addition to 13 CFR 513(e)(1) (“A Participant may submit a joint venture agreement to SBA for approval at any time, whether or not in connection with a specific 8(a) procurement.”) The FedServ-RBS JV case serves as yet another reminder that 8(a) joint ventures would be well served to take advantage of this practice, and submit their joint venture agreements for approval as early as possible.
Image Courtesy of Flickr (licensed) by Christian Schnettelker