The Government Accountability Office (GAO) has issued an important new decision in the protest of AttainX,Inc ., B-421216, B-421216.2, Jan. 23, 2023, 2023 WL 1860802. The decision addresses how agencies must evaluate the prior experience and past performance of joint venture members when a joint venture bids on a small business set-aside. This case law likely will drive changes in how joint ventures pursue set-aside opportunities and alter the way some agencies evaluate joint ventures’ proposals in competitions for federal contracts.
Regulatory Background
We have previously discussed the Small Business Administration’s (SBA) changes to its joint venture regulations over the past few years, including regulations governing agencies’ evaluation of a joint venture’s past performance, prior experience, and capabilities. (New Small Business Rules: Capabilities of Small Business Joint Venture Members and First-tier Subcontractors and New Small Business Regulation: Reliance on past Performance Gained as a Subcontractor or Joint Venture Member, for example.) These changes have largely favored joint ventures by allowing a joint venture offeror (which, under current regulations, is unpopulated and has only a limited time in which to win contracts) to rely upon the past performance, prior experience, and capabilities of its member companies in the aggregate.
It is often the case (particularly in the context of mentor-protégé joint ventures) that the joint venture’s managing member (which always must be a small business in small joint venture) may be significantly less experienced than its minority member. Indeed, under the mentor-protégé program, the minority member is frequently a large business. Although the SBA regulations are clear that the managing member must make meaningful contributions to the joint venture’s success, there is no express regulatory requirement that the managing member—the small business—must provide some of the prior experience or past performance for any given procurement. If the joint venture itself does not have prior experience or past performance (which is often the case), the regulations simply direct agencies to consider the prior experience or past performance of the individual member companies, which “in the aggregate” must meet the necessary requirements:
Capabilities, past performance and experience. 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.
13 C.F.R. § 125.8(e).
In practice, unless a solicitation specifically requires otherwise, small business joint ventures often have submitted proposals where the only relevant past performance comes from the non-managing member, perhaps supplemented by subcontractors.
Case Analysis
And that is what happened in the protest of AttainX, Inc. The procurement was a small business set-aside task order competition, limited to holders of the General Services Administration’s (GSA) 8(a) STARS III government-wide acquisition contract. As relevant here, the Request for Quotations (RFQ) provided for the evaluation of vendors’ similar experience. The RFQ required vendors to submit a minimum of two similar experience examples “that reflect and identify experience on [current or recent] projects.” For each project example submitted, “the contractor shall explain in a detailed narrative how the characteristics of the selected contract relate to the overall project for which they are being considered.”
The eventual awardee was a joint venture between an 8(a) small business (as managing member) and a non-8(a) small business (as the minority member). The GAO noted the record was not clear whether the two members were an SBA-approved mentor-protégé pair (which would not have been necessary to maintain the 8(a) status of the joint venture).
For its two similar experience projects, the joint venture submitted one contract performed by its more experienced non-managing member and a second contract performed by one of the same member’s other joint ventures. The record did not establish that the managing member had any role at all in either of these two contracts. The record also suggested the evaluators may not have understood that the joint venture cited for one of the experience projects was a different (though similarly named) joint venture from the one submitting a quotation here. Considering these two projects, the agency evaluated the awardee’s similar experience as “acceptable.” In light of the joint venture’s “exceptional” ratings for the other non-price factors, the agency rated the joint venture’s quotation as “exceptional” overall, and found its much lower price justified award to it, rather than the next-in-line competitor, AttainX, which had slightly higher technical merit but a much higher price.
AttainX protested. Among various protest grounds, AttainX argued the awardee’s “acceptable” rating for similar experience was unreasonable because the agency failed to consider the fact that none of its experience examples came from the joint venture’s managing member. The agency countered that nothing in the solicitation required each member of a joint venture to submit its own experience examples, and thus the agency had discretion to evaluate favorably a quotation where all the experience examples came from a single member (or from other joint ventures in which that member performed).
The GAO disagreed, citing the small business regulation requiring that “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,” 13 C.F.R. § 125.8(e) (emphasis added); see also 13 C.F.R. § 124.513(f). The GAO appears to have read the regulation to mean that, if a joint venture offeror does not submit experience references in its own name, then the procuring agency must consider experience references from each of the joint venture’s members, even if the solicitation does not require references for each member. It is not enough for the agency to consider the experience of either member:
Notwithstanding the fact that the solicitation does not require examples from the joint venture itself or the individual members, the SBA regulations require the agency to evaluate each joint venture member individually when the joint venture itself does not demonstrate it has the required experience; the agency does not have license to ignore SBA regulations in its evaluation.
. . .
Because [the awardee] did not submit experience for the joint venture and the agency’s evaluation is based on a consideration of only one joint venture member’s experience, we conclude that the agency failed to properly evaluate [the awardee’s] quotation in accordance with SBA regulations.
For this reason, and on the basis of additional errors found in the evaluation and best value analysis, the GAO sustained the protest.
Takeaways
Offerors, agencies, and protest counsel alike should all pay attention to the AttainX decision:
- In procurements with past performance or experience evaluation factors, joint venture offerors without their own past performance or experience should do their utmost to demonstrate the past performance or experience of each of their joint venture members. The SBA regulations are clear that agencies may not hold protégés to the same standards as other offerors, but AttainX illustrates the risk of relying entirely on a single joint venture member for all past performance or experience.
- Although it was already clear that agencies were permitted to require some prior experience from protégé/managing members, most observers likely assumed that, in the absence of a specific solicitation requirement, agencies had discretion to allow either joint venture member to supply the required experience. AttainX now makes clear that agencies must consider the experience of each member, at least for joint venture offerors that do not have relevant experience in the name of the joint venture itself.
- The GAO held that the agency was required to “consider” each joint venture member’s experience or lack thereof, but it did not hold that a joint venture without experience from both members was ineligible for award. Nor did the GAO hold that agencies are required to evaluate adversely those joint ventures without experience from both members. It simply held agencies must “consider” that fact as part of the experience evaluation. Indeed, at least in the context of a past performance evaluation (rather than an experience evaluation), an agency is arguably prohibited from evaluating a joint venture unfavorably if its managing member lacks relevant past performance. See 41 U.S.C. § 1126(b) (“If there is no information on past contract performance of an offeror or the information on past contract performance is not available, the offeror may not be evaluated favorably or unfavorably on the factor of past contract performance.”); FAR 15.305(a)(2)(iv) (“In the case of an offeror without a record of relevant past performance or for whom information on past performance is not available, the offeror may not be evaluated favorably or unfavorably on past performance.”). Future protest decisions are likely to sketch the outlines of what agencies may, must, and must not do.
- Rightly or wrongly, traditional small businesses with solid past performance often complain of small businesses with no past performance of their own using the joint venture regulations to win set-aside contracts with the past performance of their large business mentors. Those traditional small businesses and their protest lawyers will find AttainX a useful tool in future bid protests against awards to some joint ventures.