The Government Accounting Office (GAO) recently issued MiamiTSPi, LLC-Reconsideration, an important decision concerning a procuring agency’s obligation to consider, when evaluating a joint venture, the experience of not only the joint venture itself but also the individual joint venture partners. While many contractors have historically viewed this regulatory requirement as an advantage—allowing small, protégé joint venture partners to rely on and leverage the experience of their “big” joint venture partners—this new opinion turns that thinking on its head. Here, GAO held that an agency’s favorable evaluation of a joint venture’s “Similar Experience” was unreasonable (and the reconsideration of the award therefore required) because the agency did not consider the joint venture’s failure to submit examples of the managing member’s individual past experience.

In this case, MiamiTSPi, LLC (the JV), a joint venture composed of (1) Miami Technology Solutions, LLC (MTS), an 8(a) company and the managing JV member and (2) Technology Solutions Provider, Inc. (TSPi), a small business and minority JV member, submitted a quotation in response to a total small business set-aside solicitation issued under FAR 16.5 by the General Services Administration on behalf of the U.S. Department of Agriculture (the Agency). The most important evaluation factor was Similar Experience, and the Request for Quotation instructed vendors to submit a minimum of two Similar Experience example projects. The solicitation did not require each member of a joint venture to submit individual Similar Experience examples.

The JV submitted two projects. The first involved work performed by non-managing JV member TSPi in its capacity as a joint venture member of MTSPi (MTSPi being a different joint venture composed of MTS and TSPi). The second project involved work performed by TSPi individually as a prime. Neither example described any work performed by the JV or by MTS.

The JV was assigned a Similar Experience rating of “Acceptable” and was ultimately awarded the contract. Competitor AttainX subsequently protested, alleging (among other things) that the Agency had improperly evaluated the Similar Experience factor. Specifically, AttainX argued, the Agency should have considered the JV’s failure to submit examples of contracts performed by the JV itself, or by managing JV member MTS, as indicative of risk.

The GAO sustained the protest, citing the Small Business Act and its implementing regulations at 13 CFR 125.8(e) and 13 CFR 124.513(f), and reasoning that:

[n]otwithstanding the fact that the solicitation does not require examples from the joint venture itself or the individual members, the SBA regulations require the agency to evaluate each joint venture member individually when the joint venture itself does not demonstrate it has the required experience; the agency does not have license to ignore SBA regulations in its evaluation.

Because the “record lack[ed] any type of acknowledgment … that the only experience examples submitted were for … TSPi,” this “indicat[ed] that the evaluators never even considered the limited nature of the experience examples included in MiamiTSPi’s quotation.” (Emphasis added.)

MiamiTSPi requested reconsideration, arguing that the GAO had failed to consider that portion of 13 CFR 124.513(f) prohibiting the negative evaluation of an 8(a) joint venture partner based on a lack of relevant experience. Relatedly, the JV claimed that prior GAO precedent, rather than requiring the Agency to consider each JV member’s individual Similar Experience, instead required the Agency to consider the Similar Experience of either joint venture partner as being that of the joint venture itself.Under this interpretation, the Agency was permitted to attribute to MiamiTSPi the two Similar Experience examples listed in the JV’s quotation, despite the fact that both examples were performed not by the JV but by JV member TSPi. It is exactly this line of thinking that many small business joint ventures have habitually relied upon in recent years.

The GAO denied reconsideration and refuted the JV’s arguments First, GAO reasoned that 13 CFR 124.513(f) did not prohibit an agency from applying any evaluation criteria to an 8(a) joint venture partner, only from requiring that the 8(a) joint venture partner meet the same evaluation criteria as other offerors generally. The GAO noted that this was consistent with SBA’s legislative intent (acknowledging it would be unreasonable to require a protégé concern to have the same level of past performance/experience as its large business mentor, but nonetheless requiring a small business protégé to have some experience). The GAO therefore concluded that the regulations “requir[e] the consideration, in the aggregate, of the experience of each partner to the joint venture” while, at the same time, prohibiting an agency from “hold[ing] the protégé or 8(a) partner to the same standard as required for the mentor or non-8(a) partner of the joint venture or the joint venture itself.” In other words, when evaluating a joint venture’s experience, an agency has to consider each individual joint venture member’s experience, though perhaps it may “grade” the 8(a) member on a less demanding curve.

Regarding earlier precedent, the GAO noted that, while prior cases had held that an agency could reasonably attribute the past performance of one joint venture partner to the joint venture itself, GAO “never reached the question of whether it would be proper for the agency to consider the experience of only the mentor partner to the joint venture.” (Emphasis in original.) And GAO did not find that leap in logic persuasive. “Even though the regulations do not mandate a specific degree of consideration” (or “address the relative consideration that an agency must give to the past performance of a large business mentor … as compared to a small business protégé”), it is nonetheless “clear that the agency must consider to some degree the experience of both partners of the joint venture.” (Emphasis in original.) Because the record here lacked evidence of any degree of consideration, the Agency’s evaluation was unreasonable.

The potential implications of this decision are wide-ranging. As a threshold matter, though this case was analyzed in the context of 8(a) regulations, there are analogous VOSB/SDVOSB, HUBZone, and EDWOSB/WOSB joint venture regulations, so contractors should be aware that this same rationale would almost certainly apply to other types of small business joint ventures as well. Accordingly, all small business joint ventures should be wary. They cannot rely solely on the past performance or experience of their mentor/non-managing joint venture members, or expect an agency to evaluate a joint venture positively based on the past performance or experience of only the non-managing joint venture partner. Rather, agencies must give some level of consideration to each individual joint venture member’s prior experience and past performance.  

Because “no specific degree of consideration is mandated,” the question becomes how much consideration would be enough. In the AttainX/MiamiTSPi case, there was nothing in the record showing any consideration—it seemed like the Agency might actually have missed the fact that neither of the submitted projects involved MTS.  It is quite possible that the GAO would have ruled differently had the record instead demonstrated that the Agency acknowledged this fact, and accounted for it in the assignment of the “Acceptable” rating. We will have to wait for future cases to see.

Either way, going forward, it would be wise for joint ventures (and their constituent contractors) to think carefully about their proposal efforts in light of this decision. Relatedly, smart contractors will carefully review any target solicitations to ascertain if, in the wake of AttainX and MiamiTSPi, clarifying questions need to be asked or preaward protests lodged to ensure proper consideration of joint venture partners’ experience and past performance. Finally, contractors should take a close look at awards made to any competitor joint ventures that might have been unduly reliant on one joint venture partner’s prior experience. Those awards might be far from secure.