GAO: SBA’s Five-Day 8(a) Eligibility Deadline Applies To JVs

Before an agency can award an 8(a) contract, the prospective awardee must first be deemed eligible for award under the 8(a) business development program criteria by the Small Business Administration. The SBA has a tight deadline to make this determination—a mere five days.

But what happens when the SBA’s eligibility evaluation is more complicated than a determination of whether the awardee meets the program’s basic eligibility requirements? The GAO recently addressed this issue in FedServ-RBS JV, LLC, B-411790 (Oct. 26, 2015), where the GAO held that the applicable regulations do not require the agency to stay its proposed award beyond five days pending the SBA’s approval of an 8(a) joint venture agreement.

The protest’s relevant facts read like a timeline. On April 28, the U.S. Army Corps of Engineers issued a solicitation as an 8(a) set aside. Proposals were due by May 29. FedServ-RBS JV—a joint venture between FedServ, Inc. (an 8(a) participant) and Re-engineered Business Solutions, Inc. (not an 8(a) participant)—timely submitted its proposal to the Corps.

On June 4, FedServ-RBS JV submitted its joint venture agreement to the SBA for approval. The SBA District Office returned FedServ-RBS JV’s 8(a) application on June 16 because it was incomplete and failed to meet some of the regulatory requirements.

On June 25, the Corps determined that FedServ-RBS JV was the best value under the solicitation and named it the apparent awardee. The Corps notified the SBA of this determination and requested a determination of FedServ-RBS JV’s eligibility for award on that same day. This notification triggered the SBA’s five-day window to determine FedServ-RBS JV’s eligibility for award, pursuant to 13 C.F.R. 124.507(b).

The next day, FedServ-RBS JV’s President and CEO returned from business travel and opened the SBA’s June 16 letter. FedServ-RBS JV then responded on July 1, by mailing its revised joint venture application to the SBA District Office.

Also on July 1, the SBA District Office notified the Corps that it determined that FedServ-RBS JV was not an approved 8(a) joint venture and, thus, not eligible for an award. At the time the SBA made this determination it had not yet received FedServ-RBS JV’s revised joint venture application; it did not receive this information until the next day, on July 2.

Upon receipt of the SBA’s notice, the Corps made a new best value determination and named a different 8(a) contractor the prospective awardee. This new awardee was determined by the SBA to be eligible and, on July 9, the Corps awarded a contract to this company.

FedServ-RBS JV filed a GAO bid protest, claiming that the Corps did not allow sufficient time for the SBA’s consideration and approval of FedServ-RBS JV’s joint venture agreement. According to FedServ-RBS JV, the 8(a) regulations “implicitly require sufficient time be afforded for the fair consideration by the SBA of the joint venture agreement.”

When an agency awards an 8(a) contract it must first submit the identity of the awardee to the SBA for confirmation that the awardee is, in fact, an eligible for award under the 8(a) program criteria. The SBA, in turn, has five working days to determine the awardee’s eligibility. If the SBA finds the awardee to be eligible under the program, it should be awarded the contract. But if the prospective awardee is not eligible under the 8(a) program, the agency may identify the next offeror in line for award and submit that firm to the SBA for an eligibility determination.

In this case, the identified awardee was a joint venture, and the SBA’s regulations require that a joint venture agreement be approved by the SBA prior to award of an 8(a) contract to that joint venture.  However, the SBA did not receive FedServ-RBS JV’s revised joint venture application until the five-day period had elapsed.

The GAO rejected FedServ-RBS JV’s contention that the SBA should have told the Corps that a revised joint venture agreement was expected soon, instead of merely informing the Corps that FedServ-RBS JV was ineligible. GAO explained that there is not “any provision in [the applicable regulations] that would require the SBA to qualify for the procuring agency the details of its eligibility determination, explain the reasons for its determination, or provide the status of its review of an 8(a) joint venture agreement.”

The GAO also disagreed with FedServ-RBS JV’s argument that the Corps should have afforded the SBA more than five days to review the joint venture agreement before proceeding with another award.  The GAO wrote: “FedServ-RBS concedes . . . and the SBA and the Corps agree, that there exists no express provision of the regulations that would compel an agency to stay award of the contract until the SBA’s review is complete.”

As FedServ-RBS JV demonstrates, it is critical for an 8(a) joint venture to be approved by the SBA prior to award.  Here, FedServ-RBS JV waited 10 days to open the letter from the SBA District Office.  And after FedServ-RBS JV opened the letter, it took six more days for its revised joint venture application to reach the SBA District Office. By then, the five-day window had passed.

The FedServ-RBS JV case is a useful overview of the SBA’s approval process for 8(a) contracts. But beyond that, it’s an important practical lesson that a joint venture seeking SBA approval should never let SBA mail go unopened.

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