United States: Mentor Protégé Joint Venture Experience: GAO Confirms Agency Must Consider Experience Of Each Member

A recent ruling by the Government Accountability Office (GAO) may have significant implications for small business joint ventures (JV)—especially mentor-protégé JVs where the protégé does not have any experience.

TAKEAWAYS

• GAO confirmed that an agency is required to consider, to some degree, the experience of each JV member (including JVs between a mentor and small business protégé).
• Even if the solicitation itself does not require each JV member to submit experience, GAO may find an agency's evaluation unreasonable if an agency fails to document that it considered the experience of each JV member.
• JV proposals should clearly demonstrate the experience of each of its JV members.

Earlier this year, GAO sustained the bid protest of AttainX, Inc., B-421216 et al. (Jan 23, 2023), where the protestor argued that the agency's evaluation was inconsistent with Small Business Administration (SBA) regulations requiring agencies to consider the experience of the individual members of the JV if the JV itself does not demonstrate experience. The awardee was MiamiTSPi, LLC, an 8(a) small business joint venture, composed of an 8(a) small business as the managing member and protégé, and another small business as the minority member and the mentor. The awardee JV sought reconsideration of the GAO's decision. In MiamiTSPi, LLC-Reconsideration, B-421216.3 (May 11, 2023), GAO recently denied the request and provided further clarification on its interpretation of the SBA regulations regarding proposal evaluation for mentor-protégé JVs.

Initial Protest

In this acquisition, the solicitation required offerors to submit at least two experience references, but did not expressly require each member of a JV to submit an experience reference. The awardee JV submitted two experience references, both of which described work performed by the minority member. The agency's evaluation of the JV's quote concluded there was a very high probability of successful contract performance with a low degree of risk based on the two similar experience references provided. Importantly, however, the agency failed to notice that both references represented work performed only by the minority member.

AttainX's protest challenged the agency's award, alleging that the agency's evaluation violated the SBA's regulations concerning JVs. More specifically, the protester argued that the agency unreasonably evaluated the awardee's quotation under the "similar experience factor" because both references it submitted related only to work managed by the JV minority member, and neither reference described any work performed by the JV or the JV's managing member. GAO agreed with the protestor and concluded that the agency improperly failed to consider the experience of each JV partner in evaluating its experience. Although the solicitation did not require experience from the joint venture itself or the individual members, GAO concluded that the SBA regulations require the agency to evaluate each joint venture member individually when the joint venture itself does not demonstrate that it has the required experience.

Request for Reconsideration

The awardee's request alleged that GAO's decision contained an error of law with respect to its interpretation of applicable SBA regulations. The awardee JV argued that GAO failed to consider the SBA regulations that prohibit the agency from negatively evaluating the 8(a) partner for its lack of relevant experience, and that the regulations required the agency to consider the similar experience of each JV member as being that of the joint venture itself. Based on this interpretation, the awardee JV contended that the agency properly considered the two references of one of the JV partners and reasonably attributed that experience to the JV itself.

GAO disagreed with this "unreasonably expansive" interpretation, stating:

GAO further stated that its conclusion in the initial protest is consistent with the SBA regulations, which do not "mandate a specific degree of consideration for the mentor and the protégé firm," but do "require agencies to consider the experience of both the mentor and protégé members of the joint venture." Thus, even though the regulations do not mandate a specific degree of consideration, the agency must consider to some degree the experience of each partner to a joint venture.

GAO's decisions in AttainX, LLC and MiamiTSPi, LLC-Reconsideration illustrate the risk of a JV relying entirely on a single JV member for all of its experience references. Going forward, this decision will likely impact how joint ventures pursue set-aside opportunities and how agencies evaluate JV proposals.