Under the Department of Veterans Affairs’ Veterans First contracting program, an eligible service-disabled veteran-owned small business must be listed as a verified SDVOSB in the VA’s Vendor Information Pages to qualify for a SDVOSB award.  But does this requirement apply to joint ventures?

Yes, according to the VA—and the GAO has upheld the VA’s interpretation.  In A1 Procurement JVG, B-404618.3 (July 26, 2011), A1 Procurement LLC and Green Carpet Landscaping & Maintenance, Inc. created a joint venture, named A1 Procurement JVG.  A1 Procurement LLC was a SDVOSB firm verified in the VetBiz system.  Green Carpet was not a SDVOSB.

The VA rejected the joint venture’s proposal because the joint venture was not listed in the VetBiz database.  The joint venture filed a bid protest with the GAO, arguing that the VA should have accepted its offer because the managing partner, A1 Procurement LLC, was listed in the database, and that a joint venture should not be required to be separately listed if the managing venture is listed.

The GAO disagreed.  It held that the VA’s regulations “do[] not exempt a joint venture from the requirement that it must be listed in the VetBiz database to be eligible for award.”  Because A1 Procurement JVG was not listed in the database, the GAO held that the VA reasonably rejected the joint venture’s proposal.

The A1 Procurement decision is disheartening for any SDVOSB thinking of joint venturing for a VA set-aside.  To qualify, you must go through the hassle of submitting the joint venture itself to the VetBiz application process—which, as contractors know, can take months to complete.  Further, since the SBA’s “three in two” rule effectively limits each joint venture to three federal contract awards (in most cases), the parties will eventually have to create new joint ventures and repeat the process.

The GAO seemed to leave the door open to qualifying a joint venture without a separate certification if the joint venture is not a separate legal entity.  But what constitutes a “separate legal entity” is a whole other can of worms, and an argument can be made that it is legally impossible to create a joint venture that is not a separate legal entity.  More importantly, the VA’s regulations require joint ventures to be legal entities, seeming to foreclose the option of getting around the certification requirement by using a non-legal entity joint venture.

So, until we receive further clarification, SDVOSBs appear to have two teaming options for VA set-asides: separately verify the joint venture in the VetBiz database, or throw the joint venture idea out the window, and pursue a prime/subcontractor relationship instead.