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As we’ve stressed about the mentor-protégé program, the Small Business Administration’s (SBA) primary concern is that the program benefits the small business protégés.

Past performance is a particularly delicate topic for small businesses, presenting something of a what-came-first-the-chicken-or-the-egg question.  Past performance is not strictly required in order to win prime federal contracts, and its weighting and restrictions can vary greatly by procurement.  For example, FAR 15.305 prohibits an offeror without a record of relevant past performance from being evaluated favorably or unfavorably under past performance.  Nonetheless many small businesses find it exceedingly difficult to break into the federal market without a record of past performance.

Of concern when SBA initially established the All-Small Mentor-Protégé Program was how past performance would be treated for small business joint ventures authorized under 13 C.F.R. § 125.9.  SBA initially required procuring agencies to consider not only the past performance and experience of the joint venture but also of the joint venture members.  In the recent rulemaking, SBA broadened the regulation to provide for contracting agencies to consider not only past performance and experience, but also the capabilities, of the joint venture members.

The Small Business Act

The Small Business Act requires that agencies in certain circumstances evaluate the individual partners of a joint venture and to attribute those evaluations to the joint venture itself if the joint venture does not demonstrate sufficient capabilities or past performance itself:

When evaluating an offer of a joint venture of small business concerns for any multiple award contract above the substantial bundling threshold of the Federal agency, 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).

The Prior Joint Venture Evaluation Provision

In establishing the All-Small Mentor-Protégé Program, SBA provided for contracting agencies to consider not only the past performance and experience of the joint venture, but also those of its members:

When evaluating the past performance and experience 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 individually by each partner to the joint venture as well as any work done by the joint venture itself previously.

13 C.F.R. § 125.8(e).  The joint venture regulations for other statuses contained similar language regarding past performance and experience for 8(a) joint ventures (§ 124.513(f)), SDVOSB joint ventures (§ 125.18(b)(5)), for WOSB joint ventures (§ 127.506(f)), or HUBZone joint ventures (§ 126.616(f)).

The Revised Joint Venture Evaluation Provision

As part of its rulemaking, SBA expanded the provision on the evaluation of “past performance and experience” to also cover “capabilities … business systems and certifications” and added a prohibition on agencies requiring a protégé to individually meet the same criteria as other offerors.  These changes drive home that procuring agencies must consider joint ventures in the aggregate.

In full, the amended regulation reads:

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.

13 C.F.R. § 125.8(e).  (SBA did not initially propose revising the past performance and experience provisions regarding 8(a) joint ventures (§ 124.513(f)), SDVOSB joint ventures (§ 125.18(b)(5)), for WOSB joint ventures (§ 127.506(f)), or HUBZone joint ventures (§ 126.616(f)).  But, SBA issued a correcting amendment effective January 14, 2021 to conform the regulations.  Now, each of these provisions are analogous.)

In its commentary of the final rulemaking, SBA explained that this enhancement was at least partially the result of a commentator pointing out that some procuring activities have required that the protégé of a mentor-protégé joint venture be able to individually satisfy the requirements.  SBA disagrees that this is reasonable.  Nonetheless, SBA concluded in the commentary to its recent rulemaking that: “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.”

The amendments to the joint venture evaluation provision appear driven by three important concepts:

  1. That the protégé must already have some experience in the type of work to be performed under the contract. Nowhere has SBA specified that a joint venture is limited to bidding on set-aside contracts issued under the same NAICS code for which SBA approved the mentor-protégé agreement—indeed, SBA’s recent revision to 13 C.F.R. § 125.9(d)(1)(iii) makes clear that a joint venture can bid on work under more than the single NAICS code identified in the mentor-protégé agreement.  Nonetheless, SBA seems to expect that the protégé have some experience in the NAICS code under which the joint venture bids.
  2. That the purpose of the joint venture is to allow the protégé to be able to perform requirements that it could not meet by itself.
  3. That the protégé must bring something to the table other than its size or socio-economic status—in other words, the protégé should have some experience or past performance. (Although with respect to this—there can often be a large gap between the experience of past performance that a small business has and what an agency has deemed to be relevant past performance for purposes of a particular procurement.)

How this amendment impacts existing GAO caselaw on the evaluation of joint ventures created pursuant to a mentor-protégé relationship?

Over the past few years, GAO has had the opportunity to assess challenges to solicitation criteria concerning the evaluation of joint ventures as well as the reasonableness of agency’s evaluation of the past performance and experience of joint ventures created pursuant to an SBA-approved mentor-protégé relationship.

In the pre-award context, GAO previously rejected a challenge that a solicitation improperly required all members of a small business mentor-protégé joint venture to have systems, certifications, and clearances in order to earn points under the evaluation scoring criteria.  In ADVENTureOne LLC; Apogee Engineering, LLC, B-408685.23, Sept. 20, 2019, 2019 CPD ¶ 329, a small business argued that the scoring criteria of an RFP for award of new contracts in the OASIS small business pool contracts was unduly restrictive because it improperly limited a mentor-protégé joint venture’s ability to earn points.  The RFP provided that “systems, certification and clearances ‘are not minimum or mandatory requirements,’” but that offerors may earn points under the scored evaluation for meeting such criteria.  For joint ventures, the RFP provided that such offerors could only earn points for these criteria if either the joint venture or all members of the joint venture met the criteria.  While the protester argued that 13 C.F.R. § 125.8(e) prohibited such an evaluation scheme, GAO concluded that neither statute (including the Small Business Act at 15 U.S.C. § 644(q)(1)(C)) nor regulation (including 13 C.F.R. § 125.8(e)) required GSA to treat the capabilities of any member of the joint venture as the capabilities of the joint venture.

Of note, GAO concluded that 15 U.S.C. § 644(q)(1)(C) did not apply because it was limited to circumstances where the joint venture itself “does not demonstrate sufficient capabilities or past performance to be considered for award of a contract opportunity.”  Since the amended regulation is not so limited, it seems likely that had GAO been interpreting the agency’s requirements under the amended regulation, the decision would have come out differently.

In the post-award context, GAO has issued multiple decisions upholding the concept that an agency can consider the experience and/or past performance of a joint venture member where not otherwise prohibited by the solicitation:

  • 22nd Century Techs., Inc.,B-417478.3, B-417478.4, Feb. 24, 2020, 2020 CPD ¶ 74: GAO concluded that the agency reasonably permitted a SBA-approved joint venture to rely on the experience and past performance of its individual joint venture partners.  In particular, GAO ruled that, under the STARS II IDIQ contract, the agency reasonably interpreted the requirement that the “prime contractor” provide past performance contract profiles permits a vendor to submit and the agency to consider information submitted by the partners of an SBA-approved 8(a) joint venture.
  • Gunnison Consulting Group, Inc., B-418876, B-418876.3, B-418876.4, Oct. 5, 2020, 2020 CPD ⁋ 344: In this CIO-SP3 task order procurement, the solicitation provided that while an offeror can rely on the experience of a major subcontractor, it nonetheless had to propose at least one experience reference from the prime vendor that holds the CIO-SP3 SB contract. The protester argued that the joint venture failed to submit a relevant experience example for itself because it relied on two relevant experience examples from the mentor joint venture partner and one from its proposed subcontractor.  GAO concluded that the distinction between offeror and major subcontractor did not create a requirement that a joint venture offeror submit an experience example of its own and, relying on 22nd Century Techs., Inc., supra, GAO ruled that the agency reasonably credited the joint venture with the mentor’s performance in line with 13 C.F.R. § 125.8.

These types of challenges are likely to be decided in a similar fashion for past performance and experience and beyond to “capabilities … business systems and certifications.”

There is another line of caselaw regarding the evaluation of joint ventures at GAO concerning the consideration or weighting an agency is required to give to a particular type of past performance or experience.

For example, in a procurement for award of new OASIS contracts, GAO denied a challenge to a solicitation term that limited the number of experience projects that may be submitted in a mentor-protégé joint venture’s proposal for a large business mentor firm.  The agency argued in Ekagra Partners, LLC, B-408685.18, Feb. 15, 2019, 2019 CPD ¶ 83 that the solicitation was consistent with the Small Business Act (15 U.S.C. § 644(q)(1)(C)) and SBA’s regulation (13 C.F.R. § 125.8(e)) as these only required consideration be given to the experience of the mentor and protégé joint venture members—not that equal consideration be given.  GAO ultimately denied the protest, as neither procurement laws nor regulations prohibited the solicitation term and the agency provided a reasonable basis for its inclusion (e.g., allowing a mentor-protégé joint venture rely primarily upon the mentor’s experience provides a “‘fundamentally unfair competitive advantage’ as compared to small businesses that are not part of such joint ventures” and in order to ensure that the small business protégé is capable of performing the work).

Of significance here is that in response to GAO’s invitation to opine on the arguments in Ekagra, SBA agreed that “neither SBA regulations nor the Small Business Act specifically address the relative consideration that an agency must give to the past performance of a large business mentor in a mentor-protégé joint venture, as compared to a small business protégé.”  GAO reported that:

SBA further states that, although it may address this matter in future regulations, “presently SBA’s regulations are limited to stating that the agency ‘must consider work done individually by each partner to the joint venture,”’ including a large business mentor.

As it currently stands, the amended regulation contains language similar to what GAO interpreted here—that “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.”  (While the amended regulation also states that “[t]he partners to the joint venture in the aggregate must demonstrate the past performance, experience, business systems and certifications necessary to perform the contract,” this does not seem to expressly speak to weighting.)

Relatedly, GAO has denied a challenge to the rating of substantial confidence for the past performance for a SDVOSB joint venture where the protester where the protester argued that the agency had to give the same weight to a proposed subcontractor’s past performance as it would to the past performance of a non-managing joint venture member.  In K2 Solutions, Inc, B-417689, Sept. 24, 2019, 2019 CPD ¶ 330, the record revealed that agency gave slightly more weight to the past performance of the joint venture managing partner as opposed to the non-managing partner and then gave significantly more weight to the combined past performance of the managing and non-managing partners than to the past performance of subcontractors.  An unsuccessful offeror argued that since the agency used the term non-managing partner and subcontractor interchangeably in the solicitation, the past performance of both should be given equal weight.  GAO disagreed, as no statute, regulation, or prior precedent required the agency to treat a subcontractor and non-managing partner the same—noting that the RFP’s evaluation scheme was consistent with the SBA’s regulations.

GAO’s caselaw on weighting means that it remains important for offerors to understand exactly what the evaluation criteria provides for before submitting a proposal for a set-aside either as a joint venture or in which another joint venture may be bidding.  Until GAO has opportunity to consider the amended regulation’s inclusion of “capabilities … business systems and certifications” int 13 C.F.R. § 125.8(e), offerors should be aware that agencies may try to read similar restrictions into the evaluation of a joint venture’s “capabilities … business systems and certifications.”

The National Defense Authorization Act for Fiscal Year 2021 on the Evaluation of Small Businesses’ Past Performance as Part of a Joint Venture

To date, SBA’s regulations have concerned the evaluation of the joint venture when the joint venture is competing in a procurement.  But, Congress has legislatively addressed how agencies are to evaluate a small business’ past performance as part of a joint venture.  As we have discussed elsewhere, Section 868 of National Defense Authorization Act for Fiscal Year 2021 amends 15 U.S.C. § 644 to allow a small business concern, if it has no relevant past performance of its own, to rely on the performance of a joint venture in which it took part.  The small business is required to describe its duties and responsibilities as part of the joint venture within its proposal.  SBA must issue rules implementing these changes within 120 days of enactment of the NDAA.  (Note, Section 868 also amends 15 U.S.C. § 637 to require prime contractors to provide small business concerns with a record of the entity’s past performance as a subcontractor so that the small businesses may use that record in future proposals.)