GAO Affirms Timeline for SBA Approval of Joint Venture Agreements

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The U.S. Government Accountability Office (GAO) recently affirmed that joint venture (JV) agreements need not be approved by the Small Business Administration (SBA) prior to submission of a proposal for an 8(a) set aside contract.See BGI-Fiore JV, LLC, B-409520 (May 29, 2014).

The case arose in the context of a pre-award protest of NASA's decision to eliminate of BGI-Fiore’s proposal from competition for an 8(a) set aside contract.  NASA rejected the proposal of BGI-Fiore, JV, LLC, a JV between an 8(a) firm and a JV partner, because the JV was not “certified” by the SBA prior to submission of the JV’s proposal for the contract.  According to NASA, the JV was not an eligible offeror because the RFP contained a FAR provision--specifically, FAR 52.219-18(a), “Notification of Competition Limited to Eligible 8(a) Concerns”— that requires companies who are responding to an 8(a) set aside solicitation to be “certified” 8(a) Participants prior to submitting a proposal.

In its protest, BGI-Fiore argued that: (1) NASA erroneously relied on FAR 52.219-18(a), because this provision applied only to 8(a) firms, themselves, not JVs between 8(a) firms and JV partners, which are not required to be “certified” 8(a) participants;  and (2) moreover, the SBA’s regulations and Standard Operating Procedures (SOP) for the 8(a) Program, which trump any conflicting FAR provisions, unambiguously allow JVs to bid on contracts before a JV Agreement is formally approved by the SBA.  The SBA weighed in on the case and essentially corroborated each of BGI-Fiore’s arguments.

The GAO agreed, holding that a correct and harmonious reading of FAR 52.219-18(a) with the SBA’s regulations only requires the 8(a) participant members of an 8(a) JV to be 8(a) certified prior to the submission of a proposal, while 8(a) JV agreements need not be approved until the time of award.

The BGI-Fiore, JV, LLC, supra, decision is important because it clarified that, going forward, agencies may not eliminate JV’s from 8(a) competition based on FAR 52.219-18(a). In addition, this case further confirmed that, that in the case of a conflict between the FAR and SBA’s regulations, the GAO will look to SBA in determining which provision best implements SBA’s policies.

 


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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