Be Careful in Drafting JV Agreements

In Senter, LLC v. United States, 2018 WL 2228207, Case No. 17-1752C (Fed. Cl. May 4, 2018), the Court of Federal Claims (COFC) upheld a Small Business Administration (SBA) determination rejecting a Joint Venture (JV) agreement and finding that the Senter JV was not eligible for award of a SBA small business set-aside contract for 8(a) small businesses as approved by the SBA.

The SBA regulations require a JV to be “unpopulated” – i.e., require the personnel who will perform the work be employed by the members of the JV, not by the JV, in order for the JV to be eligible for a set aside contract. See 13 CFR 121.103(h). Senter was the apparent successful offer and the agency requested an eligibility determination from the SBA. In connection with its eligibility determination, the SBA considered various documents submitted by Senter, including its proposed JV agreement, an initial addendum to the JV agreement submitted in response to questions from the SBA, and a revised addendum which revised the JV agreement. The SBA concluded that Senter failed to provide a legally sufficient JV agreement and to adequately describe the vehicle the JV would use to subcontract the work between its two members, and that it therefore was not eligible for the award. Senter then challenged that determination in the COFC.

In upholding the SBA’s determination, the COFC first observed that “it is clear from the record that the documents Senter submitted to the SBA contained a dizzying array of inconsistencies and ambiguities pertinent to its status as populated or unpopulated.” Id. at *8. With respect to the revised addendum, the COFC noted “[f]ar from offering clarity [it] compounded the confusion.” Id. at *9. Accordingly, the COFC found the SBA’s conclusions that the addendum was not legally sufficient and did not adequately describe the subcontracting vehicle that the JV would use to split the work were “thoroughly supported by the record.” Id. The COFC also observed that the SBA regulations “provide detailed guidance on the information that must be included in a JV agreement,” as well as on differentiating a populated JV from an unpopulated one. Id. at *10. Accordingly, the COFC stated it was up to Sentra “to ensure that the [JV] agreement, as amended and revised by the addendum, met the SBA’s standards for program eligibility, including the requirement that the JV be unpopulated.” Id. at *10.

Your Teammate’s Past Performance: “Don’t Leave Home Without It”

In Tantara Corp., B-416003.2, 2018 WL 2461492 (May 23, 2018), the US Government Accountability Office (GAO) rejected a protester’s contention that the agency had improperly failed to consider its teammate’s past performance.

The RFP required offerors to demonstrate past performance in six areas in the scope of work for the services to be performed under the contract, and to do so by submitting past performance questionnaires (PPQs) showing past performance and experience on recent and relevant projects. The agency found the protester had submitted past performance covering only three of the six scope requirements and assigned it a past performance rating of “satisfactory” based on its assessment of the protester’s past performance in those three areas. The protester’s proposal did not include PPQs for any projects performed by its teaming partner/proposed subcontractor.

GAO first rejected the protester’s claim that its proposal had, in fact, addressed its past performance in all six of the scope areas and found no basis to question the agency’s assessment that the proposal had not addressed three of the six areas. GAO then addressed the protester’s contention that the agency had failed to credit it with the prior experience of its teaming partner.

On that issue, GAO pointed out the RFP stated “‘[o]fferors may increase the [SSEB’s] level of confidence by demonstrating previous teaming between the offeror and Major Subcontractors on relevant projects.’” Id. at *8. It also stated “‘[o]fferors may increase the SSEB’s level of confidence if the role of the offeror or team member on relevant submitted projects is similar to or more significant than the role the offeror or team member is expected to perform on this contract.’” Id.

GAO rejected the protester’s argument that the RFP only required “teaming experience, in similar roles on relevant projects.” Rather, it found that the RFP required a “qualitative evaluation of ‘how well the contractor performed on past projects,’” and thus contemplated an assessment of how well the teaming partner had performed on its previous projects. Accordingly, GAO upheld the agency’s decision not to credit work previously performed by the teaming partner in the absence of information on how well it had performed that work. As noted above, the offeror did not submit PPQs for its teammate and GAO also rejected the protester’s attempt to rely on information outside of the PPQs, stating the RFP clearly provided for the evaluation of information contained within the PPQs. Id. at 9, n.6.

Conclusion

The COFC’s decision in Senter demonstrates the importance of clarity and consistency in drafting teaming agreements and in responding to the SBA’s questions regarding those agreements. It also illustrates the importance, particularly in the SBA context, of ensuring a teaming agreement meets applicable regulatory requirements. The GAO’s decision in Tantara illustrates the importance of carefully reviewing and understanding the terms of an RFP, including provisions relating to teaming partners, and the importance of including all of the information regarding the team required by the RFP in the team’s proposal. Both decisions also illustrate the deference that is likely to be accorded to the judgment procuring agencies on the sufficiency of information provided by an offeror relating to a teaming arrangement.