Government Contracts Monitor

The Entity May Exist, but Is It Approved? The Complex World of Joint Ventures and 8(a) Awards

August 30, 2016

The 8(a) set-aside program of the Small Business Administration (SBA) provides small businesses with contracting opportunities that might otherwise be far beyond their reach. An 8(a) award is ultimately between the agency and the SBA, with the successful offeror acting as a subcontractor to the SBA and performing the contractor. Significantly, the program allows 8(a) entities to combine resources with other small businesses—certified as 8(a) or otherwise—and form a Joint Venture (JV) in order to compete for larger awards. It is crucial, however, that 8(a) participants using JVs follow the guidelines to the letter, as GAO recently made clear in its decision in Alutiiq-Banner Joint Venture, B-412952 (July 15, 2016).

The procurement involved NASA’s effort to award a single Indefinite Delivery/Indefinite Quantity contract for human resources support services at its facility in Houston, Texas. The RFP set aside the award for 8(a) firms and contemplated a five year contract term with a ceiling of $24.6 million. Proposals were to be first evaluated for technical acceptability, then those found acceptable would be evaluated to determine which offered the best value to the government, considering past performance and price.

Of the seven proposals NASA received in response to the solicitation, only those of the awardee and the protestor were found technically acceptable. Awardee, CTRMG-GAPSI JV, LLC (CGJV), then received a past performance rating of “very high confidence,” with an evaluated price of $15.3 million. The protestor, Alutiiq-Banner JV (ABJV) received a past performance rating of “high confidence,” and its price was $14.5 million. The Source Selection Authority (SSA) determined that CGJV’s higher past performance rating justified the price premium of about 5 percent. For this reason, the contract was awarded to CGJV.

ABJV then protested on a number of grounds, including the assertion that CGJV was not eligible for award under the 8(a) program. GAO agreed with ABJV on that ground. The protestor argued that CGJV was ineligible for award because its official corporate registration was not filed until April of 2016, after the SSA’s March 22 decision to award to CGJV and the Contracting Officer’s March 23 determination that CGJV was eligible for award and responsible. According to ABJV, the awardee is not the same firm that submitted the proposal, but instead a newly-created entity that is legally distinct and not approved by SBA for award of an 8(a) set-aside contract.

In response, the agency argued that CGJV was eligible because it had consistently used the same Data Universal Numbering System (DUNS) number, and Commercial and Government Entity (CAGE) code and had been previously determined by SBA to be an 8(a) eligible business. Each business entity contracting with the federal government must have its own CAGE code and DUNS number. NASA’s position was that, since CGJV met both of these requirements at the time of award, it had been registered with the same CAGE code and DUNS number since 2014, and any inconsistency in the name of the awardee was an insignificant clerical issue. CGJV’s proposal had identified it as an SBA-approved 8(a) JV, and the CO’s award decision had included an undated letter from the SBA stating that CGJV was an eligible 8(a) contractor.

Since the protest ground related to the SBA’s approval of CGJV for the set-aside award, GAO requested SBA’s views concerning whether CGJV was the same entity that SBA had previously approved for award as a joint venture. The SBA responded that CGJV was indeed the same entity that it had approved for award as a JV in 2014, but it went on to explain that CGJV was not eligible for award in this case. SBA regulations require an approved 8(a) JV to submit an addendum to its approved joint venture agreement, for approval by SBA, before the award of each contract to the JV. The SBA must then determine whether or not to approve the addendum. It was undisputed that CGJV had not met this requirement, but CGJV and NASA both argued essentially that the contract award should be stayed pending the necessary approval by the SBA.

GAO noted, however, that its statutory mandate to resolve bid protests within 100 days of filing did not allow for the requested delay because it establishes no exceptions to the time limit. Further, CGJV had failed to seek the SBA’s approval before contract award as required by the 8(a) program and, as a result, the SBA lacked any basis to approve the award. Because the SBA regulations require such submission and approval as preconditions for contract award to an 8(a) JV, GAO agreed with the SBA that the award was improper.

If CGJV had been more careful to follow the applicable rules and seek the SBA’s approval before the award was made, it might have had a nearly $25 million contract. Instead, its misstep rendered it entirely ineligible for award. 8(a) joint venturers need to make sure they understand the rules and follow them precisely. Otherwise, they could be left out of the competition as well.