When it Comes to Joint Venture Experience, Perfection May Be Hard to Attain(X)

On January 23, 2023, in AttainX, the Government Accountability Office (GAO) sustained the protest of an award to an 8(a) joint venture based on, among other reasons, a finding that the agency’s evaluation of the joint venture’s experience was inconsistent with the Small Business Administration (SBA) regulations concerning joint ventures (JVs), citing 13 C.F.R. § 125.8(e) and 13 C.F.R. § 124.513(f).

The protest involved a General Services Administration (GSA) solicitation for IT services to maintain and modernize the USDA Farm Loan Programs systems and applications. The solicitation required offerors to submit a description of their “similar experience” on other contracts. In response, an 8(a) joint venture (MiamiTSPi) submitted two experience examples:

• One experience example had been performed by both the 8(a) managing venturer, MTS, and the small business minority venturer, TSPi, but as a different 8(a) certified joint venture, MTSPi LLC. 
• The second experience example had been performed by only TSPi, the non-8(a) small business minority venturer. 

GSA evaluated MiamiTSPi as Acceptable under the “similar experience” factor and ultimately made award to MiamiTSPi. Disappointed offeror AttainX protested, arguing, among other things, that even though GSA had only rated MiamiTSPi as Acceptable under “similar experience” as opposed to a higher rating, GSA unreasonably neglected to evaluate the risk associated with the fact that the experience examples submitted by MiamiTSPi were not performed by the joint venture proposed as the prime contractor nor performed individually by the “managing member” of the joint venture.

Adopting a novel interpretation of SBA regulations, GAO agreed with the protester. Although the evaluators concluded that MiamiTSPi’s experience examples were similar in size, scope, and complexity to the requirements of the solicitation, GAO noted that, for the awarded contract, the managing venturer would have to manage and perform at least 40 percent of the work. In addition, although the solicitation did not require each member of a joint venture to submit individual experience examples, GAO opined that the SBA regulations required GSA to consider the experience of each individual member of the joint venture – and to consider downgrading the experience rating if both members (or the JV itself) did not submit experience references. To support this conclusion, GAO cited 13 C.F.R. § 125.8(e), which provides that, when evaluating experience of a small business joint venture, an agency “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.” While relying on this language to support its holding, GAO’s decision does not address the latter portion of § 125.8(e), which provides that the partners to the joint venture “in the aggregate” must demonstrate the experience necessary to perform the contract. Moreover, GAO’s position is arguably inconsistent with the language of the Small Business Act itself, which provides, “if the joint venture does not demonstrate sufficient capabilities or past performance to be considered for award of a contract opportunity, the head of the agency shall consider the capabilities and past performance of each member of the joint venture as the capabilities and past performance of the joint venture.” 15 U.S.C. § 644(q)(1)(C) (emphasis added).

It is not unusual for a small business joint venture, such as one formed by a mentor and protégé, to lack any prior experience examples performed by the JV itself, which is why SBA’s regulations specifically allow for experience or past performance of the JV members to be considered on behalf of the JV, and why SBA’s regulations direct agencies to evaluate JV experience “in the aggregate.” Thus, the fact that MiamiTSPi offered an experience example performed by a JV formed by the same parties makes GAO’s decision even more surprising. (The decision does not make clear how the parties actually performed that contract other than to note that the protester argued that the non-8(a) member was the one to “manage” that contract.) It is also notable that GAO opted not to solicit input from SBA with respect to the interpretation of SBA’s regulations.

GAO’s docket reflects that, on February 2, 2023, MiamiTSPi filed a request for reconsideration, so there is a possibility that GAO will reverse course on this decision.