Mentor-Protégé Joint Ventures and Past Performance

Schoonover & Moriarty LLC

Joint ventures (whether mentor-protégé or otherwise) are great vehicles to pursue federal contracts. They offer considerable versatility and allow two or more firms to combine their efforts to gain a competitive edge.

But how does a joint venture demonstrate past performance? Can it use its members past performance in a proposal? Can an agency limit the past performance that a protégé and mentor can individually contribute for past performance evaluation purposes?

Let’s explore these questions using a recent GAO decision where GAO sustained a protest on grounds relating to a mentor-protégé joint venture’s past performance: Yang Enterprises, Inc., B-418922.4 et al. (Comp. Gen. May 20, 2021). In this post, we’ll only discuss a small portion of the overall protest and decision.

The procurement contemplated a best-value tradeoff evaluation scheme, using three factors: technical, past performance, and cost/price. For past performance, the solicitation noted that it would evaluate the relevancy of joint venture partners’ past performance examples by focusing on whether the joint venture proposed that specific partner to perform the work. In other words, for purposes of relevancy, the agency wanted the joint venture partner with relevant experience to perform the corresponding work under the contract.

It’s there that things went sideways. The agency credited the joint venture awardee with the mentor partner’s relevant experience, even though the mentor would not perform the corresponding work under the contract. The agency defended itself by arguing that its evaluation complied with SBA’s regulations, which allow the joint venture “in the aggregate” to demonstrate past performance.

GAO, however, disagreed.

GAO noted that SBA’s new regulation at 13 C.F.R. 125.8(e) doesn’t apply to the dispute because it post-dated the solicitation’s issue date. Thus, the relevant regulation was the former 13 C.F.R. 125.8(e), which required the agency to consider work done by each venturer and the joint venture itself. Under that regulation, an agency could determine how much consideration it wanted to give each partner’s experience, including a mentor partner. And an agency could limit the experience that a certain joint venture partner could provide. So, the regulation did not prohibit the solicitation’s past performance scheme.

But the agency didn’t follow the evaluation criteria. It gave the awardee joint venture past performance credit for the mentor’s past performance even though the mentor wouldn’t perform similar tasks under the contract. The agency’s non-compliance with the evaluation criteria doomed the agency’s evaluation.

In my mind, the interesting question is whether the agency’s evaluation scheme would survive under SBA’s new 13 C.F.R. 125.8(e)–i.e., the one GAO said didn’t apply in the protest. Based on its terms, it might not.

The new, current 13 C.F.R. 125.8(e) reads this way:

When evaluating the capabilities, past performance, experience, business systems and certifications of an entity submitting an offer for a contract set aside or reserved for small business 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 protégé firm 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.

So now, when considering a joint venture’s past performance, an agency must look at the joint venture “in the aggregate.” This may suggest that agency can’t require the joint venture partner with the relevant performance to perform the actual work. Likewise, there doesn’t appear to be much flexibility for an agency to limit a joint venture partner’s contribution to the joint venture’s overall past performance.

That said, we do know from SBA’s final rule, implementing the current 13 C.F.R. 125.8(e), that SBA wants a protégé venturer to bring some experience to the table. While an agency can’t require a protégé to individually meet all the evaluation requirements, it can require the protégé to meet some. Here’s what SBA said:

SBA disagrees that a procuring activity should not be able to require a protégé firm to individually meet any evaluation or responsibility criteria. SBA intends that the protégé firm gain valuable business development assistance through the joint venture relationship. The protégé must, however, bring something to the table other than its size or socioeconomic status. The joint venture should be a tool to enable it to win and perform a contract in an area that it has some experience but that it could not have won on its own.

In the end, an evaluation criterion requiring a protégé partner to perform the work for which it has the past performance experience doesn’t seem to comport with the rule’s intent. If the protégé must have past performance, how could the protégé use the joint venture relationship to gain additional experience and build its past performance portfolio? It seems to me that the rule seeks, to some extent, to help protégé venturers leverage their mentor’s past performance so that they can secure and perform work for which they wouldn’t have the relevant past performance to independently win.

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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