A former 8(a) protege was not automatically entitled to take advantage of the past performance it obtained as part of a mentor-protege joint venture, in a case where the former mentor would not be involved in the new contract.

In a recent bid protest decision, the GAO held that a procuring agency erred by crediting the protege with the joint venture’s past performance without considering the extent to which that past performance relied on the mentor–and the extent to which the mentor’s absence under the new solicitation might impact the relevance of the past performance as applied to the new work.

The case, Veterans Evaluation Servs. Inc., B-412940 et al. (July 13, 2016), involved a solicitation by the VA to acquire medical disability examination services. The VA issued the RFP seeking to award several large IDIQ contracts. Each contract carried a minimum value of $3.7 million and a top value of $6.8 billion. (That’s billion-with-a-b for those scoring at home.)

The RFP split the services area to seven districts throughout the United States and abroad. The VA intended to award two contracts per district 1 through 6, and required the contractors to propose to locate, subcontract with, and train a network of healthcare professionals to perform the examinations.

VetFed Resources, Inc. had been performing the incumbent contract as part of an 8(a) mentor-protege joint venture with QTC Medical Services, Inc.  The mentor-protege arrangement apparently had expired by the time that proposals were due under the RFP.  VetFed independently submitted proposals for districts 1, 2, and 5.  In districts 1 and 5, VetFed proposed to use QTC as its major subcontractor, making available QTC’s provider network and infrastructure. But for district 2, VetFed did not propose to use QTC as its subcontractor.

After evaluating competitive proposals, the VA awarded contracts to VetFed for districts 1, 2, and 5.  In its evaluation of all three districts, the VA rated VetFed’s past performance as good.

Three unsuccessful competitors filed GAO protests challenging the results of the VA’s evaluation.  All three protesters argued that in district 2, VetFed would not be able to take advantage of QTC’s provider network and infrastructure. The protesters argued that VetFed’s good past performance rating was a result of VetFed’s having access to the resources of its former mentor, and that without that access, VetFed did not deserve a good rating.

GAO wrote that “[a]n agency may attribute the experience or past performance of a parent or affiliated company to an offeror where the firm’s proposal demonstrates that the resources of the parent or affiliate with affect the performance of the offeror.” In this regard, “the relevant consideration is whether the resources of the parent or affiliated company–its workforce, management, facilities, or other resources–will be provided or relied upon for contract performance . . ..” For this reason, “it is inappropriate to consider an affiliate’s record where that record does not bear on the likelihood of successful performance by the offeror.”

In this case, GAO wrote that “VetFed’s relevant past performance example is a contract it performed in close cooperation with QTC; the firms performed using a mentor-protégé arrangement, and there is no dispute that QTC’s provider network and IT infrastructure played a material part in VetFed’s successful performance of the predecessor contract. . . . Since the record here does not show that the agency gave consideration to this question, we conclude that its assignment of a good rating to VetFed for its past performance in district 2 was unreasonable.” GAO sustained this part of the protest.

Given SBA’s strong interest in how mentor-protege joint ventures are treated, it is somewhat surprising that GAO didn’t seek SBA’s input on this aspect of its decision–especially since the decision is troubling from the perspective of 8(a) proteges like VetFed. While GAO’s decision is a logical outgrowth of GAO’s longstanding case law regarding the past performance of affiliates, the particular context is unique, and the SBA’s comments might have been instructive.

In sum, GAO essentially said that a protégé might not get full past performance credit for work it performed in a mentor-protégé arrangement unless the mentor sticks around (in this case as a subcontractor). This is bad news for the protégés of the world, who presumably enter into these relationships in large part for the purpose of gaining experience and knowledge so that they can perform larger contracts on their own in the future. Especially with the new universal mentor-protege program coming online on October 1, it will be important for everyone–mentors, proteges, and contracting officers alike–to fully understand exactly how past performance of mentor-protege joint ventures is to be treated.