How agencies evaluate past performance of joint ventures has been a somewhat confusing topic for federal contractors over the past few years. We’ve written about many of the key aspects of the evolution of this rule on SmallGovCon, from the earlier final rule to recent decisions interpreting that rule. The proposed rule would clarify how SBA thinks agencies should review past performance for joint ventures, but it also invites comment from contractors. This is an area where input from the federal contracting community could really have an impact on the final version of SBA’s rule.
First, a little background on the current rule. The version of the rule dealing with joint venture past performance went into effect in November 2020. That rule currently states:
When evaluating the capabilities, past performance, experience, business systems and certifications of an entity submitting an offer for a contract set aside or reserved for small business as a joint venture established pursuant to this section, a procuring activity must consider work done and qualifications held individually by each partner to the joint venture as well as any work done by the joint venture itself previously. A procuring activity may not require the protégé firm to individually meet the same evaluation or responsibility criteria as that required of other offerors generally. The partners to the joint venture in the aggregate must demonstrate the past performance, experience, business systems and certifications necessary to perform the contract.
As we’ve discussed, agencies could vary on how each agency qualitatively considers each venturers’ qualifications and experience on each contract. The rule did not specify how the agency must count the work that each venturer (not in a mentor-protégé relationship) brings to the table. In some cases, an agency might give more evaluation credit to joint ventures where both venturers bring relevant experience and capabilities to the table.
In a recent GAO case, for example, GAO noted that SBA regulations simply require agencies to “consider the work and qualifications of the individual members of the MPJV as well as the MPJV, itself, and provides that ‘partners to the joint venture in the aggregate must demonstrate the past performance, experience, business systems and certifications necessary to perform the contract.’” GAO interpreted the updated terms as providing mentor-protégé joint ventures with flexibility, through the ability to “replace any experience project from the protégé or the MPJV with one from the mentor or a subcontractor–while still providing details about the protégé’s capabilities.”
The SBA federal register commentary specifically mentions the Court of Federal Claims case SH Synergy, LLC v. United States, 165 Fed. Cl. 745 (2023). We wrote about that case here, noting that the judge looked at the primary experience projects that each offeror had to submit and all all offerors were required to submit primary relevant experience projects with the same contract value: $10M. With an even application, protégés would be harmed if they were required to submit the same size project as a large offeror. Therefore, because the solicitation assigned points in the same manner to all offerors, the solicitation violated § 125.8(e). And, in the end, COFC agreed, and required GSA to amend the solicitation to be in compliance with § 125.8(e).
SBA looked at how agencies, GAO, and courts have interpreted the requirement for agencies to consider past performance of joint venturer members. Cases such as SH Synergy have “caused some confusion as to what past performance a procuring activity can require of a protégé joint venture partner and how that past performance should be evaluated.” SBA noted that, because of the 40% workshare requirement for a protege member of a joint venture, “some procuring activities require protégé joint venture partners to demonstrate some level of past performance as part of a joint venture’s offer.”
SBA continued: “Although SBA’s current regulation provides that a procuring activity may not require the protégé firm to individually meet the same evaluation or responsibility criteria as that required of other offerors generally, it does not provide guidance on what a procuring activity could require. This rule proposes to provide such guidance.”
So, SBA is proposing that the agency can “require some past performance at a dollar level below what would be required of joint venture mentor partners or of individual offerors.” SBA provides an example:
The procuring activity may require a protégé joint venture partner to demonstrate one or two contracts valued at $10 million or $8 million, but may not require the protégé to demonstrate successful performance on five similar contracts and may not require the protégé to demonstrate successful performance on contracts valued at $20 million. In addition, if a procuring activity requires a protégé joint venture partner to demonstrate successful performance on two contracts valued at $10 million or more, successful performance by the protégé firm on those $10 million contracts shall be rated equivalently to successful performance by the mentor partner to the joint venture or any other individual offeror on $20 million contracts.
The rule proposes to remove the language in 125.8(e) that currently states: “A procuring activity may not require the protégé firm to individually meet the same evaluation or responsibility criteria as that required of other offerors generally.” In its place, the rule would expand on this concept by using this language: “A procuring activity has discretion whether to require a protégé member of a joint venture to demonstrate some level of past performance and/or experience. Where it does so, the procuring activity may not require a protégé firm to individually meet all the same evaluation or responsibility criteria as that required of other offerors generally.”
Therefore, this language would make clear that the agency can’t require the protege member of the joint venture to meet the same past performance or experience requirement as the mentor or offers generally. It also seems to say that an agency can require no protege experience, and that is acceptable. The example is a little confusing. Does it mean the value of the experience project must be 50% or less than the minimum value? Also, does it mean total number of projects is capped at 40% of the total needed? Or, is the SBA merely providing an example of what might be acceptable but leaving interpretation up to later decisions?
This is a good start, but a little more clarity would be welcomed. Please remember to comment on this issue on or before October 7, 2024.
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