COFC Confirms: Mentor-Protege JVs from the Same Mentor Can’t Bid Against Each Other

Those who work within the federal government contracting world are likely to have noticed that, lately, many large indefinite delivery, indefinite quantity (IDIQ) contracting vehicles are soliciting offers. However, with large contracting vehicles, which are often worth billions of dollars and promise many awards, there are often many protests. And Polaris, Transformation Twenty-One Total Technology Next Generation 2 (T4NG2), and Chief Information Officer – Solutions and Partners 4 (CIO-SP4), to name just a few of such solicitations, are no exception. Although many bid protests are filed with the Government Accountability Office (GAO), the Court of Federal Claims (COFC) also has jurisdiction over such matters, and COFC decisions are usually more indepth and the review of information from the agency more robust than at GAO.. This post will discuss the first of three main issues SH Synergy, LLC v. United States, and, because there is so much useful information packed into the decision’s 75 pages, we’ll plan a separate post for other issues.  

First, a very general description of the process offerors must endure while responding to these large IDIQ solicitations. Throughout the proposal drafting process, potential offerors plan and strategize to organize teams and submit proposals that they believe will be among the best of the best, and, therefore, have the highest likelihood of landing a coveted award—and even then, it does not guarantee award of any actual work. It merely awards the offeror the opportunity to submit a proposal for a task order under the IDIQ. Offerors join together in strategic teams intended to best target the solicitation’s requirements, whether through formal joint ventures or less formal teaming arrangements. In addition to the sheer magnitude of time dedicated to preparing a solid team and proposal, offerors also spend tens of thousands of dollars, or even hundreds of thousands, throughout this initial proposal process. Taking the foregoing into account, it is easy to see why so many protests occur.

Now, on to the real reason you all are here. SH Synergy, LLC v. United States, No. 22-CV-1466 (Fed. Cl. Apr. 21, 2023) is a COFC decision that takes a look at, among other things, small business joint ventures’ participation in the Polaris solicitation. Small business joint ventures include either the option of joint ventures created by parties in a formal Mentor-Protégé Agreement (MPA) per 13 C.F.R. § 125.9, or small business joint ventures created between multiple small businesses. While all types of small business set-asides allow for small business joint ventures, general small business joint ventures, which can include any type of socioeconomic category per 13 C.F.R. § 125.8(a), are the most applicable in this situation. If you are interested, you can find the requirements of joint ventures for the other socioeconomic categories here, here, and here.

From a mile high view, the SBA’s Mentor-Protégé Program permits, small business protégés to work with their (most often) other than small business mentor, with reduced risk of affiliation. Notably, a mentor may have more than one protégé, up to three to be exact, but SBA regulations require that a mentor with multiple protégés abide by a couple of additional rules. First, the protégés may not be competitors of each other, and the mentor must demonstrate that the additional mentor-protégé relationship will not adversely affect the development of either protégé. Second, a mentor with more than one protégé may not submit competing offers through separate joint ventures, each with one protégé. And therein lies the first issue: SH Synergy and VHC Partners, both plaintiffs protesting the solicitation, shared the same mentor, and because of this fact, neither of the joint ventures were permitted to bid on the small business pool.

The court first noted that 13 C.F.R. § 125.9’s plain language was clear: “[a] mentor that has more than one protégé cannot submit competing offers in response to a solicitation for a specific procurement through separate joint ventures with different protégés.” Additional language within § 125.9 and the Federal Register further supported SBA’s intent to have § 125.9 apply both before and after admission to the Mentor-Protégé Program. Therefore, any restrictions within § 125.9 applied to both joint ventures, including the restriction that prohibits different joint ventures that share the same mentor from submitting competing bids.

Once COFC determined that § 125.9 applied to mentor-protégé relationships after admission to the program, it turned its focus to the protesters’ next argument; that submitting offers at the IDIQ level, instead of at the task order level, does not include competing offers, as that term is used in § 125.9. Unfortunately for the protesters, their reasoning here fell short as well. This was because language within the solicitation stated that “GSA will evaluate, verify, and rank the proposals against one another to ensure only the highest-rated, technically qualified offerors receive award.” Even though the first phase of evaluations only involved the self-scoring to determine whether offerors can meet the needs of GSA, the eventual ranking and verification process “inherently compares the relative strength of each proposal against proposals submitted by competing offerors.” Essentially, because offerors would eventually be ranked against each other, the protesters would violate § 125.9 if both submitted proposals to the small business category. Note, however, that because one of the protesters was a woman-owned small business, and the other was a service-disabled veteran owned small business, they were permitted to submit a proposal to the WOSB or SDVOSB pool, as applicable, because each pool was compared only with those offerors in the same pool, and not all offerors generally.

And with that, came the end of the protesters’ first claim, in which we learned that:

  1. SBA’s rules governing its Mentor-Protégé Program, and any joint ventures created in association with it, apply both before and after admission to the program; and
  2. Competition between joint ventures does not need to occur in the very first round of evaluations for offers to be considered “competitive bids,” eventual competition at any phase of evaluation is enough to restrict mentor-protégé joint ventures that share a mentor from submitting an offer in the same pool.

This is an important decision showing that agencies will enforce the restriction on a mentor’s protegés from competing against each other, and good on the agency for doing so.

Questions about this post? Or need help with a government contracting legal issue? Email us.

Looking for the latest government contracting legal news? Sign up for our free monthly newsletter, and follow us on LinkedInTwitter and Facebook.