Timing and Joint Ventures: More than Meets the Eye

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Obermayer Rebmann Maxwell & Hippel LLP

In today’s competitive market, more and more businesses are choosing to pursue new contract opportunities as Joint Ventures (or, “JVs”).  JVs allow companies to combine capabilities, which allows them to not only perform better after award, but to be a more attractive competitor during source selection.  No doubt, forming a joint venture can open up new doors – and new contracting opportunities – for federal contractors.  However, joint venturing is not without its pitfalls.  There is a lot of JV-hype out there, and it often causes contractors to think the JVs are a one-size fits all solution, or that they are an easy-breezy, loosey-goosey way to increase revenue.  Not necessarily so, if you want to use them correctly and avoid risk.  We’ve blogged many times before about the various legal requirements involved with correctly setting up a small business JV, and the requirements of the related mentor-protégé program.  Certainly, those legal requirements are of critical importance when forming a JV.   But they aren’t all you need to think about.  As if the complicated legal framework wasn’t enough, a recent GAO case makes it clear that there are also any number of practical administrative/timing considerations you must take into account when forming a JV and using that JV to compete for new work.

In Continuity Global Solutions-Secure Me Security JV, B-419875, a JVs inability to get registered in SAM cost them a contract award.   In that case, the Department of State had issued a Request for Proposals (RFP) seeking proposals for local guard services at a US embassy in Bahrain.  The RFP expressly notified offerors that to be eligible for award, the firm submitting the proposal must be registered in System for Award Management (SAM) prior to award.  It incorporated FAR 52.204-7, System for Award Management, (Oct. 2013), which provides “[b]y submission of an offer, the Offeror acknowledges the requirement that a prospective awardee shall be registered in the SAM database prior to award, during performance, and through final payment of any contract . . . resulting from this solicitation.” The RFP further advised offerors that, “[i]f the Offeror does not become registered in the SAM database in the time prescribed by the Contracting Officer, the Contracting Officer will proceed to award to the next otherwise successful registered Offeror.”

Continuity Global Solutions-Secure Me WLL Security Joint Venture (CGS-SM) timely submitted its proposal on February 15.  It was not registered in SAM at the time it submitted its proposal.  When, almost two months later, on April 14, the Agency requested CGS-SM to verify that it would be registered in SAM prior to award, the JV responded that it had initiated the SAM registration process and expected the registration to become active within two weeks.  However, when almost six weeks later, on May 27, CGS-SM was still not SAM-registered, the agency notified the JV that it was not going to get the award.  Although CGS-SM had, in fact, submitted the lowest-priced, technically acceptable proposal, the fact that the JV was still not registered in SAM kicked it out of the competition. The agency determined that CGS-SM was not eligible for award because it was not yet registered in SAM at the time of award.  Award went to the next contractor in line. The JV protested, but to no avail; the protest was dismissed.

This case is a painful reminder that contractors need to consider practical and administrative factors as well as legal and business issues when forming a JV.  Not the least of these is timing.  Things like getting registered in SAM, having to first go through mentor-protégé approval, getting verified as a SDVOSB in VetBiz, etc., can push back JV negotiations or result in a delay between JV formation and the JV actually being able to compete for or win awards.  It is critically important to take all of this into account before beginning the JV process.  Always think ahead.  Don’t assume the timing or details will work out; confirm that you will be able to use your JV when, and in the way, you hope, to maximize your award opportunities.  Otherwise, what is the point?

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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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