For years, it had been difficult for joint ventures to get Facility Security Clearances to go after DoD contracts where a facility clearance was required. The DoD and many contracting officers had long required that the joint venture entity itself, rather than each individual joint venture member, have the FCL. SBA thought it had fixed this problem when it updated its joint venture rules in November 2020 to eliminate the need for the joint venture to have an FCL, as we wrote at that time. But DoD contracting officers had been ignoring this rule, setting up a showdown at GAO to decide if the SBA’s rule did actually apply to the DoD.
The decision, InfoPoint LLC, B-419856 (August 27, 2021), involved an Air Force procurement for command and control, intelligence, surveillance, and reconnaissance (C2ISR) support services. The Solicitation stated: “Offerors shall possess or acquire a facility clearance equal to the requirement on the DD254 (Attachment 2) without additional authorization (i.e. National Interest Determination (NID)) by the proposal due date. If an Offeror does not have the required clearance at the time of proposal submission, the proposal will not be evaluated and is not eligible for award.” Plus, the Air Force noted in response to a question that “[t]he individual partners to the [joint venture] having the [facility clearance] is not sufficient.”
InfoPoint, a joint venture, protested that the solicitation requirement that a small business joint venture offeror hold a facility clearance was inconsistent with SBA’s recent rule change. SBA joined the argument and noted that the solicitation term was inconsistent with the National Defense Authorization Act (NDAA) for fiscal year 2020, which specifically prohibits requiring a joint venture to have an FCL separate from its members.
Here is a little background on SBA’s rule change regarding joint venture FCL requirements. In the commentary to the final rule, SBA stated that:
SBA understands that some procuring agencies will not award a contract requiring a facility security clearance to a joint venture if the joint venture itself does not have such clearance, even if both partners to the joint venture individually have such clearance. SBA does not believe that such a restriction is appropriate.
The SBA rule allows a joint venture to rely on the security clearances of its members. The rule states:
4) Facility security clearances. A joint venture may be awarded a contract requiring a facility security clearance where either the joint venture itself or the individual partner(s) to the joint venture that will perform the necessary security work has (have) a facility security clearance.
(i) Where a facility security clearance is required to perform primary and vital requirements of a contract, the lead small business partner to the joint venture must possess the required facility security clearance.
(ii) Where the security portion of the contract requiring a facility security clearance is ancillary to the principal purpose of the procurement, the partner to the joint venture that will perform that work must possess the required facility security clearance.
The 2020 NDAA provision in section 1629 stated:
TERMINATION OF REQUIREMENT FOR DEPARTMENT OF DEFENSE FACILITY ACCESS CLEARANCES FOR JOINT VENTURES COMPOSED OF PREVIOUSLY-CLEARED ENTITIES. A clearance for access to a Department of Defense installation or facility may not be required for a joint venture if that joint venture is composed entirely of entities that are currently cleared for access to such installation or facility.
GAO held that “section 1629 of the NDAA specifically states, and the plain meaning of the statute leads us to conclude, that it unambiguously prohibits DOD from requiring that a joint venture hold a facility clearance if the members of the joint venture hold the required facility clearances.” GAO also confirmed that:
The SBA regulation at section 121.103 is consistent with the 2020 NDAA, where the regulation states that joint ventures may be awarded contracts requiring facility clearances where either the joint venture itself or the individual partners to the joint venture hold a facility clearance. The SBA regulation therefore provides how procuring agencies should evaluate whether small business joint ventures are eligible for the award of contracts that require facility security clearances. Under the regulations, the relevant inquiry is whether the joint venture itself, or the individual partners that make up the joint venture, hold a facility security clearance
The Air Force argued, among other things, that GAO “should give deference to the statutory delegation of authority to DOD concerning security clearances” and that “the plain language of the 2020 NDAA” would conflict with existing regulations and policies.
GAO rejected the Air Force’s arguments, noting that “the plain language of the 2020 NDAA states that DOD ‘may not’ require that a joint venture hold a facility clearance where the members of the joint venture hold the required facility clearances.” Similarly, SBA’s rules allowing the joint venture to not hold an FCL is SBA “is consistent with the 2020 NDAA with regard to the issue raised by the protester–whether DOD may require a joint venture to hold a facility clearance even where the members of the joint venture individually hold the required facility clearances.” Thus, SBA’s rules constitute an additional reason to grant the protest.
Bottom line, GAO affirmed that a joint venture does not have to hold the facility clearance where its members do hold the required facility clearance. This is a strong affirmation of SBA’s rules and Congressional intent regarding joint ventures. It should make it easier for small businesses joint ventures to go after awards requiring facility clearances, which is a good result for small businesses.
Need help with a government contracting legal matter? Email us or give us a call at 785-200-8919.
Looking for the latest government contracting legal news? Sign up here for our free monthly newsletter, and follow us on LinkedIn, Twitter and Facebook.