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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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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Federal Court Confirms Strict SDVOSB Unconditional Ownership Requirements

As we’ve discussed, the SBA will soon take the reins over from VA to run the certification process for Veteran-Owned Small Businesses (VOSBs) and Service-Disabled, Veteran-Owned Small Businesses (SDVOSBs). Self-certification for SDVOSBs will go away on December 31, 2023, so be sure to get your SDVOSB ownership and control documents up to snuff in order to stay compliant with the SDVOSB rules. One of those rules concerns unconditional ownership by the veteran. A recent federal court case sheds some additional light on that topic, as explored in this post.

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Agency’s Decision to Cancel FAR Part 8 Solicitations and Move the Work to Existing Multiple Award Contract Was Flawed, Says COFC

We already blogged on the COFC’s landmark Rule of Two decision in Tolliver Grp., Inc. v. United States. But the court’s two-part holding (in favor of the plaintiffs on both counts) was just too impactful for a single blog. Not only did the court fault the agency for failing to do a Rule of Two analysis before using an IDIQ, it also said that the agency failed to justify the decision to cancel the solicitations and switch contract vehicles under the Administrative Procedure Act (APA) standard of review, which the court called a “highly deferential”–but not “toothless”–review.

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COFC Says Agency Must Consider Rule of Two Before Using Multiple-Award IDIQ Contract Vehicle

The United States Court of Federal Claims (COFC) has ruled that an agency has to conduct a small business Rule of Two analysis before it can use an existing multiple-award indefinite delivery indefinite quantity (MAIDIQ) contract vehicle to procure services.  This is a landmark decision, given that GSA Schedule contracts are exempt from the Rule of Two.  

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Supreme Court Declines to Hear VA Rule of Two Challenge

The U.S. Supreme Court declined to hear a case Monday that could have upended the Rule of Two’s priority over the AbilityOne program for U.S. Department of Veterans Affairs’ procurements.

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COFC Rejects Agency’s Basis for Default Termination

The Court of Federal Claims recently reversed an agency’s default termination of a contractor that had experienced numerous performance issues and delays. The agency claimed that performance was “incurably behind schedule,” despite the contractor’s proposed recovery schedule.

The court held that the agency lacked a reasonable belief that the contract could not be timely completed.

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