An 8(a) joint venture was unable to show that its mentor-protege agreement had been renewed by the SBA for a particular year–and the missing reauthorization caused the joint venture to be ineligible for a small business set-aside contract.
In a recent decision, the SBA’s Office of Hearings and Appeals held that an 8(a) joint venture could not avail itself of the mentor-protege exemption from affiliation when there was no evidence to show that the SBA had renewed the mentor-protege relationship for the year in which the joint venture’s proposal was submitted.
OHA’s decision in Size Appeal of Wiss Joint Venture, SBA No. SIZ-5729 (2016) involved an Air Force solicitation for ground-based training system contractor logistics support. The solicitation was issued as a small business set aside.
Wiss Joint Venture submitted a proposal on April 15, 2015. After evaluating competitive proposals, the Air Force announced that Wiss was the apparent successful offeror. An unsuccessful competitor then filed an SBA size protest, alleging that Wiss’s joint venture partners were affiliated.
The SBA Area Office determined that Wiss was a joint venture between Dae Sung, LLC, an 8(a) Program participant, and LB&B Associates, Inc., a non-8(a) firm. In August 2009, the SBA Illinois District Office approved an 8(a) mentor-protege agreement between Dae Sung and LB&B. The Illinois District Office reauthorized the mentor-protege relationship for one-year periods for each year from August 2010 through August 2014, and also reauthorized the relationship in 2016. However, neither Wiss nor the Illinois District Office could provide any evidence that the mentor-protege relationship had been reauthorized between August 2014 and the 2016 reauthorization.
The SBA Area Office found that Dae Sung and LB&B could not demonstrate that they were parties to an approved SBA 8(a) mentor-protege relationship as of April 2015. The SBA Area Office issued a size determination finding Dae Sung and LB&B to be affiliated. The affiliation rendered Wiss ineligible for the Air Force contract.
Wiss filed an appeal with OHA. Wiss contended that the SBA Area Office had erred by finding that no mentor-protege relationship existed. Wiss pointed out, for example, that during Dae Sung’s annual 8(a) program review, Dae Sung submitted documents showing that it was still in a mentor-protege relationship with LB&B, and the Illinois District Office never objected or questioned the continued existence of the relationship.
OHA found that Wiss’s circumstance was “highly analogous to OHA’s decision in Size Appeal of North Star Magnus Pacific Joint Venture, SBA No. SIZ-5715 (2016).” In North Star, OHA found that a joint venture could not avail itself of the mentor-protege exception from affiliation because the protege’s SBA District Office had not approved an extension of the mentor-protege agreement as of the date the joint venture submitted its proposal.
In this case, because neither Wiss nor the Illinois District Office could produce a document demonstrating that the mentor-protege relationship had been extended after August 2014, “it appears that the mentor-protege agreement had expired at the time [Wiss] submitted its proposal.” Without an approved mentor-protege agreement in place as of April 2015, Wiss “cannot utilize the exception to affiliation for mentor-protege joint ventures . . ..” OHA denied the size appeal, and affirmed the SBA Area Office’s size determination.
In this case, there is no evidence that the Illinois District Office didn’t want the joint venture relationship to continue after August 2014. In fact, the District Office formally approved the relationship again in 2016. Instead, the most likely explanation is that the formal approval simply fell through the cracks.
It’s not clear from the case whether Dae Sung pushed the District Office to send a formal approval, but if so, it doesn’t sound like it pushed hard enough. As the Wiss Joint Venture case demonstrates, that slip of paper from the SBA District Office can make a world of difference.