Government Contracts Monitor

GAO Affirms Past Performance Evaluation Benefits of Mentor-Protege Joint Ventures

March 31, 2014

One of the long-recognized advantages of mentor-protege joint ventures is to enable a developing company to shore up and expand its past performance experience by claiming the past performance experience of its mentor. This advantage is particularly significant in view of the ever-increasing importance being accorded to past performance in best value procurements.

The Government Accountability Office (“GAO”) recently stated that, in the absence of an express contrary solicitation provision, “there is no basis to preclude an agency from considering the experience and past performance of both partners” in a mentor-protege joint venture. Wolf Creek Federal Services, Inc., B-409187 (Comp. Gen. Feb. 6, 2014). GAO expressly cited the view of the Small Business Administration (“SBA”) in an earlier case that “it appeared contrary to the intent of SBA’s 8(a) mentor-protege program for a procuring agency to downgrade a proposal based on the lack of experience/past performance of a protege,” since “in order to be a protege, an entity must lack experience.” GAO therefore rejected a claim that the agency had treated the protestor unequally by crediting the awardee with the past performance of its joint venture partner, while not crediting the protestor – an Alaskan Native Corporation (“ANC”) subsidiary – for the past performance of its affiliated companies.

Wolf Creek involved a competitive 8(a) small business set-aside by the National Aeronautics and Space Administration (“NASA”) for an estimated $35 million contract for operations, maintenance, repair, janitorial and other miscellaneous services for certain NASA facilities. The solicitation stated that the award would be on a best value basis, considering, in descending importance, mission suitability, past performance and price, with the non-price factors being significantly more important than price.

Four proposals were received, including proposals from Wolf Creek and Helix Management Services (“HMS”). Wolf Creek was a wholly-owned, 8(a) certified, subsidiary of Chugach Alaska Corporation (“Chugach”), an ANC. HMS was a joint venture between Helix Enterprises, Inc., an 8(a) certified small business, and EMCOR Government Services (“EMCOR”). This joint venture was participating in SBA’s 8(a) mentor-protege program as defined at 13 C.F.R. § 124.520. EMCOR previously provided the subject services for NASA.

After evaluating initial proposals and obtaining limited clarification from Wolf Creek that references in its proposal to Chugach should be deemed to refer to Wolf Creek, NASA established a competitive range of two, limited to Wolf Creek and HMS. NASA entered into discussions with each of them, and then invited and evaluated final revised proposals from each. As to past performance, NASA found that Wolf Creek had not identified any past performance for itself, only for its affiliates. Because Wolf Creek’s proposal did not establish that Wolf Creek’s affiliates would have any meaningful involvement in performing the contract, NASA did not credit Wolf Creek with the past performance of its affiliates. NASA therefore rated Wolf Creek’s past performance as neutral. Since a neutral rating was not deemed a weakness or deficiency, NASA did not conduct discussions with Wolf Creek as to its past performance.

Wolf Creek was the low-priced offeror, at $26.9 million vs. HMS’s $29.3 million. Moreover, Wolf Creek matched HMS’s “very good” rating for mission suitability, albeit with slightly fewer points (818 of 1000 vs. 833). However, as noted above, Wolf Creek received only a neutral rating for past performance, while HMS was rated moderate. The Source Selection Authority (“SSA”) concluded that HMS offered the best value, despite its higher price, citing HMS’s superior technical and management approaches and allocation of sufficient resources for successful contract performance. The SSA stated that past performance was a “key discriminator” based on HMS’s moderate rating, indicating that HMS would be fully responsive to requirements and be successful in performance.

After a debriefing, Wolf Creek protested the award to GAO. Wolf Creek raised numerous arguments challenging the evaluation of its past performance proposal and the adequacy of the agency’s discussions.

GAO rejected all of Wolf Creek’s arguments. As to past performance, GAO stated that “While it is appropriate to consider an affiliate’s performance record where the affiliate will be involved in the contract effort or where it shares management with the offeror, it is inappropriate to consider an affiliate’s record where that record does not bear on the likelihood of successful performance by the offeror.” GAO concluded that the record in this case supported NASA’s determination that Wolf Creek’s proposal failed to show that the Chugach family of companies would contribute to Work Creek’s performance, and stated that it is “an offeror’s responsibility to submit an adequately written proposal that establishes [the offeror’s] capability and the merits of its proposed approach . . . .” As discussed at the outset above, GAO also rejected Wolf Creek’s unequal treatment argument vis-à-vis HMS’s past performance evaluation.

As to discussions, GAO stated that NASA was not required to discuss Wolf Creek’s lack of past performance where such was not viewed as a weakness or deficiency, and the nature and relevance of Wolf Creek’s past performance information was clear to the agency. GAO expressly rejected Wolf Creek’s argument that the fact that past performance became a “key discriminator” in the award determination meant that the lack of performance was viewed as a significant weakness. GAO stated that the SSA merely permissibly recognized that HMS’s moderate rating provided benefits beyond Wolf Creek’s neutral rating.

The recognized benefits to a developing company of being able to joint venture with a mentor and claim the mentor’s past performance experience will become increasingly important as SBA begins to implement Section 1347(b)(3) of the Small Business Jobs Act of 2010, Pub. L. No. 111-240, and Section 1641 of the National Defense Authorization Act (NDAA) for Fiscal Year 2013 (FY13), which respectively authorized SBA to establish new mentor-protege programs for Service-Disabled Veteran-Owned, HUBZone and Women-Owned small businesses, and all small business concerns, modeled on the current 8(a) mentor-protege program. See our recent article on SBA’s announcement that implementing these regulations will be a top priority for 2014.

Hopewell Darneille is the attorney responsible for the content of this article.