Extraordinary Actions v. Day-to-Day Decisions for Joint Ventures: A Cautionary Tale

Back in 2020, we discussed an SBA Office of Hearings and Appeals (OHA) decision stating that the managing venturer must control every aspect of the joint venture. This position, which we questioned in that article, has changed since that time, and we explored the changes to the regulatory language in question not long thereafter. But this regulatory language was still vague. Since that time, there has been much case law development. The Court of Federal Claims (COFC) held in 2022, “[a] minority owner’s control over “extraordinary” actions, such as actions intended to protect the investment of minority shareholders, will not result in a finding of negative control” and applied this idea to a populated joint venture. Swift & Staley, Inc. v. United States, No. 21-1279, 2022 WL 1231428 (Fed. Cl. Mar. 31, 2022), aff’d, No. 2022-1601, 2022 WL 17576348 (Fed. Cir. Dec. 12, 2022). It now appears, fairly established at this point, that non-managing venturers can have a say in what can best be described as “extraordinary actions.” These are the sorts of decisions that can completely change the trajectory of the joint venture. But contractors must still be very careful in giving the non-managing venturer a say in the joint venture’s decisions. As one firm learned the hard way in a recent COFC case, a joint venture with too many actions controllable by the non-managing venturer may end up ineligible for set-asides. Here, we explore this decision.

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COFC: Lapsed SAM Registration During Proposal Evaluations Makes Offeror Ineligible for Award

It’s a tale as old as time, and I’m not talking about “Beauty and the Beast.” I’m talking about an offeror who failed to comply with the registration requirements in FAR 52.204-7. What’s FAR 52.204-7? It’s the FAR provision that requires, among other things, all offerors to be registered in the System for Award Management, or SAM as it is better known. And, as we have seen many times before, there is no way around this rule. Often, failure to be registered in SAM limits an offeror’s eligibility before award is made, making the offeror ineligible for award. However, this time, it affected the award that had already been made, resulting in the court entering a preliminary injunction against the government continuing with its original award.

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Exception to the Rule: Evaluating Price at IDIQ Versus Order Level Is a Limited Exception

A recent COFC decision yielded some important insights about government contracting. We already wrote about some joint venture aspects of the decision. But the decision also touched on whether GSA’s solicitation violated federal procurement law by excluding price as an evaluation factor at the indefinite delivery indefinite quantity (IDIQ) level for a procurement.

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COFC Part II: Evaluation of Mentor-Protégé Joint Ventures

A couple of weeks ago, I explored the Court of Federal Claims case of SH Synergy, LLC v. United States. In that blog, linked below, I looked at the first question raised in the protest that centered on the question of whether a mentor with two approved mentor protégé joint ventures with two different protégés under the SBA’s Mentor-Protégé Program is restricted from placing competing offers for a solicitation, in this case GSA’s Polaris solicitation. The answer to that was yes, they are restricted pursuant to 13 C.F.R. § 125.9. Because this decision was chocked full of useful information, and as promised, I’m back to look at the second issue tackled in this mammoth COFC opinion: did the solicitation’s terms, which required mentor-protégé joint ventures, woman-owned small business joint ventures, and service-disabled veteran owned small business joint ventures to be evaluated in the same manner as offerors, generally, violate procurement regulations? As you will see, the answer to that question is also yes, and it appears that this decision has already had an impact on other procurements.

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COFC Confirms: Mentor-Protege JVs from the Same Mentor Can’t Bid Against Each Other

Those who work within the federal government contracting world are likely to have noticed that, lately, many large indefinite delivery, indefinite quantity (IDIQ) contracting vehicles are soliciting offers. However, with large contracting vehicles, which are often worth billions of dollars and promise many awards, there are often many protests. And Polaris, Transformation Twenty-One Total Technology Next Generation 2 (T4NG2), and Chief Information Officer – Solutions and Partners 4 (CIO-SP4), to name just a few of such solicitations, are no exception. Although many bid protests are filed with the Government Accountability Office (GAO), the Court of Federal Claims (COFC) also has jurisdiction over such matters, and COFC decisions are usually more indepth and the review of information from the agency more robust than at GAO.. This post will discuss the first of three main issues SH Synergy, LLC v. United States, and, because there is so much useful information packed into the decision’s 75 pages, we’ll plan a separate post for other issues.  

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Third Time’s the Charm: Protest Sustained by COFC Due to Failure to Conduct Discussions and Flawed Price Reasonableness Evaluation

Proving that an agency acted improperly in its source selection process can be a difficult task for any protester. In theory, for a best value tradeoff decision, the agency’s decision and the process to come to that decision seems easy: the agency does a tradeoff between cost and non-cost factors, and that which is most advantageous to the government is awarded. How hard could it be? And the decisions handed down by the Government Accountability Office (GAO) and the Court of Federal Claims (COFC) seem to confirm that it isn’t that hard, seeing as many cases challenging a best value decision are denied. This is, in large part, due to the discretion agencies are afforded in their source selection decisions. Whether an agency conducts discussions during the source selection process is one of many procurement factors that is left up to the agency’s discretion. But, every so often, a decision comes along to prove that there are limits to an agency’s discretion, and in this case, the agency’s discretion overstepped its bounds with its price reasonableness decision and the unjustified decision to not perform discussions.

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Agencies Do Not Have Unlimited Discretion to Cancel Solicitations, Says the COFC

In its recent decision, the Court of Federal Claims decided whether and when an agency can cancel a FAR part 15 procurement and start from scratch. Agencies have historically been afforded extremely broad discretion in cancelling solicitations. But in this case, the court agreed with the protester that cancellation was wrongful. It also laid out the details of a proper versus improper solicitation cancellation quite nicely. Thus, this landmark decision provides crucial guidance on the subject for agencies and federal contractors alike.

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