In Caddell Construction Co., Inc. v. United States, 111 Fed. Cl. 49 (2013) the Court of Federal Claims addressed an agency’s evaluation of a joint venture offeror’s past performance. While recognizing that an agency typically has discretion when evaluating proposals, the court held, even when reconsidering its initial determination, the agency must, however, have and state a rational basis for its decision.

Caddell protested the award of a contract for the construction of an annex at the United States Embassy in Moscow to Desbuild, Incorporated-REC International Joint Venture (the JV). The State Department (DOS) had issued a solicitation (Phase I, Pre-qualification Notice), which contained three Pass/Fail technical evaluation factors. An offeror had to pass each factor to qualify for Phase II of the solicitation. One of the three factors was Technical Project Experience and Past Performance.

Offerors had to submit three examples of relevant work performed within the last five years. Relevant work was defined as “projects similar in scope, complexity, and dollar value (USD), in that order of importance. ” Joint ventures had to submit “for each partner, at least one, but no more than two, example of projects that are relevant to demonstrate technical project experience for the partners’ proposed role in the Project.” The Pre-qualification Notice stated that:

[B]ecause of applicable limits on subcontracting, project examples were intended to ‘demonstrate the Offeror’s  ability to self-perform at least 30-50% of the value of each  project example, ’ and, therefore, ‘[p]roject examples in  which the Offeror only acted as a General Contractor or did  not self-perform at least 30% of the work will not be considered relevant.

The Pre-qualification Notice also provided: “For Offerors who do not have individual projects representative of the project scope and complexity, DOS will evaluate the technical project experience demonstrated by the combined project examples.”

The Pre-qualification Notice also stated that the Percy Amendment, 22 U.S.C. § 302, which gives a 10% price preference to United States firms, applied to the project. To qualify for this preference, an offeror had to have performed “similar work in the United States or at a United States diplomatic or consular establishment abroad.” As evidence of project experience and past performance, the JV listed two Desbuild projects and three projects performed by REC. It also submitted a Percy Amendment Certification that listed three projects on which Desbuild was either a part owner or joint venture partner.

DOS evaluated the JV’s proposal and concluded that it failed the Technical Project Experience and Past Performance factor. The agency explained that while REC had enough relevant experience, Desbuild did not, because it had never worked on a project similar in scope, complexity, or dollar value. DOS also found that the JV did not qualify for the Percy Amendment’s preference, because Desbuild was just a minority joint venture partner on the only project submitted that was similar in size and scope to the Moscow project.

The JV requested a debriefing and reiterated how authority within the joint venture was to be allocated (i.e., Desbuild would have a “limited role” on the project and would not have United States citizens posted on-site) but provided no additional information. The JV also asked the agency why it had not looked at the JV’s “combined project examples,” as stated in the Pre-qualification Notice.

Four days later, DOS responded, stating that, after “extensive reevaluation” and “careful consideration, ” it was reversing its decision “due to the cumulative experience of the JV members.” No other explanation was provided.

The JV also sought reconsideration of the agency’s Percy Amendment determination. Desbuild explained that, on the submitted projects, it met the 30% threshold for self-performance as a joint venturer due to its numerous day-to-day responsibilities, thus making the project relevant for Percy Amendment determinations. That information had not been included on its original Percy Amendment Certification Form. Four days later, DOS reversed its decision and indicated that the JV did qualify for the price preference. Once again, the agency failed to provide any justification for its revised position.

As a result, the JV was allowed to submit a proposal and was ultimately selected for award. DOS stated that, while Caddell and the JV were equally technically qualified, award was made to JV because, its evaluated price was lower than Caddell’s offer after applying the Percy Amendment 10% price preference. 

Caddell Protest Sustained

Caddell protested the award, arguing that the JV should have been disqualified after Phase I and should have been evaluated without the price preference. In response, DOS pointed to the Pre-qualification Notice, which stated that “DOS will evaluate the technical project experience demonstrated by the combined project examples.”

The parties disagreed as to the meaning of “combined project examples.” While Caddell argued that each joint venture partner must qualify separately, the agency argued that this provision allowed DOS to consider either joint venturer’s experience. However, since DOS’s rationale was not in the administrative record, the court rejected it, finding the reversal to be arbitrary, as it was “unexplained, undocumented, and rapid” and “lacked transparency.” The court also sustained Caddell’s protest of the agency’s decision regarding the JV’s entitlement to the Percy Amendment preference again, concluding that the court had no way of knowing whether the agency had properly considered the additional information in the JV’s letter because DOS failed to provide documentation of the reevaluation. The court refused to look past the administrative record to discern the agency’s rationale, explaining that “having had the opportunity to explain its actions, it does not seem necessary to give the defendant yet another chance to fill in the gaps and to try to explain what may not be defensible.” 

General Rule on JV Past Performance

While the court did not address how the JV’s past performance should have been evaluated, FAR § 15.305(a)(2)(iii) states that the evaluation of an offeror’s past performance:

should take into account past performance information regarding predecessor companies, key personnel  who have relevant experience, or subcontractors that  will perform major or critical aspects of the requirement when such information is relevant to the instant acquisition. (Emphasis added).

This provision has been held to apply to joint ventures and provides that, in evaluating past performance, the agency should, but is not required to, consider the past performance of either JV participant. See Plasan Am., Inc. v. United States, 109 Fed. Cl. 561 (2013); MW-All Star Joint Venture, B-291170.4, 2004 CPD ¶ 98 at 3. 

Any requirement to consider either partner’s experience, however, exists only if the agency says that it will do so in the solicitation. If an agency decides to look at the past performance of either JV participant, that past performance must be “reasonably predictive” of performance on the contract to be awarded.

Before submitting an offer, a JV should carefully examine the solicitation to see if the agency has specified how it will evaluate past performance, i.e., will it evaluate the joint venture as an entity, or will it look at the relevant experience of each member

If the solicitation states that joint ventures will be evaluated as an entity, but the JV itself has never performed any relevant projects, it is possible that the agency may treat it as “an offeror without a record of past performance” and, therefore, even if one or both of the joint venture members has extensive experience, the JV may be given a neutral rating. In such circumstances, it would make sense to ask the agency to add something to the solicitation like this: “In the event that an offeror is a joint venture that has not itself previously performed relevant work, the agency will determine the role that each partner will play in the performance of this contract and evaluate that portion of its past performance, if any, that is reasonably predictive of its ability to perform its role on this contract.”

If the solicitation states that the past performance of either JV participant will be evaluated, entering into a joint venture with a more experienced firm may be helpful if that partner’s past performance is “reasonably predictive” of performance of the joint venture. This means that the JV should make clear in its proposal that the JV member with relevant experience will perform those services on the contract. 

If the solicitation is vague and does not specify how past performance will be evaluated, the agency has discretion to evaluate past performance either of the joint venture as an entity or of either joint venture partner, as long as the agency has a rational basis for doing so.