GAO Confirms Agency Must Consider Experience of Each Partner in a Small Business Joint Venture

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Earlier this year, the Government Accountability Office (GAO)—in AttainX, Inc., B-421216, B-421216.2 (Feb. 9, 2023)—clarified that in evaluating the experience of a mentor-protégé joint venture (JV) for a small business set-aside procurement, the agency must evaluate each JV member’s experience individually, as well as any experience of the JV itself. After the decision was issued, the protestor requested GAO reconsider its ruling, alleging the decision contained an error of law. GAO now denied that request in a ruling with significant implications for small business JVs, especially mentor-protégé JVs where the managing member or protégé does not have any experience.

The Facts

MiamiTSPi, LLC—an 8(a) small business JV between Miami Technology Solutions, LLC (MTS), the managing and 8(a) small business member, and Technology Solutions Provider, Inc. (TSPi), the minority and non-8(a) small business member—submitted a proposal for a task order under the Streamlined Technology Acquisition Resources for Services (STARS) III contract that was set-aside for small businesses. The solicitation required offerors to submit at least two experience examples for projects within the last five years. The solicitation did not expressly require each member of a JV offeror to submit an experience example.

MiamiTSPi submitted two projects to demonstrate its similar experience. The first example described work performed by TSPi through a different JV—MTSPi, LLC—of which TSPi and MTS were members. The second example was a prime contract awarded and performed by TSPi. Both examples included narratives that described, at length, the work performed by TSPi under those projects, but neither example described any work performed by MTS or mentioned MTS.

In evaluating MiamiTSPi’s quote under the similar experience factor, the agency concluded there was a very high probability of successful contract performance with a low degree of risk based on the two similar experience samples provided. Critically, however, the agency failed to note that both examples represented work performed only by TSPi. In fact, the record showed the evaluators appeared not to have noticed which entity performed work on the example projects before crediting both experience examples to the JV itself. In its protest, AttainX argued the agency erred by failing to consider the experience examples relied upon by MiamiTSPi were performed by TSPi. GAO sustained this portion of the protest.

Request for Reconsideration

On reconsideration, MiamiTSPi alleged that GAO’s decision contained an error of law in the way that it interpreted applicable SBA regulations. The applicable SBA rule regarding the evaluation of 8(a) JVs provides that:

  • When evaluating the capabilities, past performance, experience, business systems, and certifications of an entity submitting an offer for an 8(a) contract as a joint venture established pursuant to this section, a procuring activity must consider work done and qualifications held individually by each partner to the joint venture as well as any work done by the joint venture itself previously. A procuring activity may not require the 8(a) Participant to individually meet the same evaluation or responsibility criteria as that required of other offerors generally. The partners to the joint venture in the aggregate must demonstrate the past performance, experience, business systems, and certifications necessary to perform the contract.

SBA has similar rules for small business mentor-protégé, SDVOSB, HUBZone, and EDWOSB/WOSB JVs. 

MiamiTSPi argued that the second portion of this rule prohibited the agency from negatively evaluating the 8(a) member of the JV, MTS, for failing to submit any experience references. According to MiamiTSPi, the requirement that “the partners to the joint venture in the aggregate must demonstrate the . . . experience . . . necessary” is a mandate for the agency to accept just one partner’s experience as the experience of the JV itself. GAO disagreed and found MiamiTSPi’s interpretation of this rule to be unreasonably expansive.

GAO held as follows:

  • Contrary to the MiamiTSPi’s contention, nothing in the rule prohibits an agency from applying any evaluation or responsibility criteria to the 8(a) partner of the JV. The rule simply provides that the agency may not require the 8(a) partner to meet the same evaluation or responsibility criteria as that of other offerors. GAO explained the clarifying second portion of the rule (highlighted above) is meant to explain the application of the first sentence, not to nullify it.
  • Read together, SBA’s rule directs agencies to consider, in the aggregate, the work done, and qualifications held individually by each partner to the JV and, in that consideration, prohibits agencies from requiring the protégé or 8(a) partner to individually meet the same criteria as the mentor or non-8(a) partner.
  • Even though the regulations do not mandate a specific degree of consideration, the agency must consider to some degree the experience of both partners to the JV.

 Takeaways

  • Small business JVs, and mentor-protégé JVs in particular, should recognize that even though SBA regulations indicate JV partners, in the aggregate, must demonstrate the past performance and experience necessary to perform, that does not mean a JV can blindly rely on the experience of just one JV member. As AttainX makes clear, the procuring agency has an underlying obligation to consider, to some degree, the experience of each partner to the JV, even when the JV is between an SBA-approved mentor and its small business protégé.
  • While this case was analyzed in the context of SBA’s 8(a) and mentor-protégé JV regulations, it has equal application in the context of an SDVOSB, HUBZone, or EDWOSB/WOSB JV, as the JV regulations for those programs are drafted similarly as it relates to the evaluation of past performance and experience.
  • Small business JVs would be wise to carefully review the experience and past performance criteria of any solicitation they wish to pursue so they understand whether the agency intends to place specific weight on the experience of each JV member, particularly when one JV member does not have any experience. If the solicitation is silent on that point, the JV may want to consider submitting clarifying questions or working with counsel to explore a possible pre-award protest.
  • If an agency, like the agency in AttainX, fails to document that it considered the experience or past performance of each JV member, GAO may find the evaluation unreasonable. Indeed, the real issue in AttainX was that the agency: (1) failed to recognize the mentor-protégé JV awardee did not submit any experience for the JV itself or for its managing member; (2) mistook the experience submitted for MTSPi (another JV) as that of MiamiTSPi; and (3) maintained the position that “all similar experience examples submitted by MiamiTSPi were from either MiamiTSPi or one of its underlying joint venture partners[.]”

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. Attorney Advertising.

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