 | Recently, during the proposal process, we were asked by a Client to confirm at what point an SBA 8(a) Joint Venture must be approved by the SBA. Upon further consideration, we realized that there generally tends to be confusion surrounding Joint Ventures with respect to Federal contracting, so we thought we would do a blog post addressing the basics of which Joint Ventures need approval and at what point approval is required before a contract can be awarded to a JV. |
ONLY 8(A) JOINT VENTURES REQUIRE PRIOR APPROVAL BY SBA
We often come across conversations where individuals are under the impression that if you are a small business, all Joint Ventures (JV) pursuing Federal contracts must be approved by the SBA. This is not the case. Rather, the only JVs that require prior approval by the SBA are 8(a) JVs that intend to pursue 8(a) set-aside contracts. The second part of that sentence is really the key - thus, if the JV does not intend to pursue 8(a) set-aside contracts, then the JV would not need to be approved by the SBA.
Now, keep in mind that HUBZone, WOSB and SDVOSB Joint Ventures are required to meet certain requirements in order to pursue set-aside contracts; however, SBA does not have a separate certification process for certifying these other JV types.
8(A) JOINT VENTURES MUST BE APPROVED BY AWARD DATE, NOT BY PROPOSAL SUBMISSION
Getting back to what prompted our client to approach us with the question of when an 8(a) Joint Venture must be approved - essentially, the client was putting together a proposal in response to a Request for Proposal (RFP) and came across language in the RFP that stated:
"When proposing a joint venture, all members of the joint venture shall sign the SF 33 unless a written agreement by the joint venture is furnished with the proposal designating one firm with the authority to bind the other member(s) of the joint venture. In addition, a copy of the joint venture agreement shall be submitted with the proposal in Volume IV. Failure to comply with the foregoing requirement may eliminate the proposal from further consideration. The Offeror shall ensure that it complies with the applicable requirements of 13 CFR Part 124, 13 CFR Part 125, and 13 CFR Part 126 respectively. The joint venture shall include a copy of its SBA approval of the joint venture arrangement, if applicable."
This particular RFP was an 8(a) competitive procurement and the client was planning to submit a proposal as an 8(a) JV. The client's JV application, although it had been submitted to the SBA, had not yet been approved and it was unlikely the JV would be approved by proposal submission - hence the reason for the client's concern over the above language in bold.
During the Q&A process, the following dialogue on this issue ensued between interested vendors and the contracting office:
QUESTION: "Volume IV, Section I, Tab 3 states that the joint venture shall include a copy of its SBA approval of the joint venture arrangement, if applicable. However, it is our understanding that a joint venture may be awarded an 8a set-aside contract so long as the SBA approves the joint venture before award. Please confirm that submitting a fully executed joint venture agreement with the proposal is acceptable so long as the SBA approves the joint venture prior to award."
ANSWER: "A SBA approved joint venture agreement shall be provided. No exceptions."
Here, as will be discussed, the contracting office's position is incorrect and goes against established legal precedent. In a 2014 decision, the GAO addressed the exact issue of when an 8(a) JV, submitting as the offeror in response to a solicitation, had to be approved by the SBA. The procuring agency in that case took the position that FAR 52.219-8 required the 8(a) JV to be approved at the time of proposal submission. As part of this protest, the SBA provided a legal opinion and its position on the matter. The SBA's position was that FAR 52.219-8 only required that the 8(a) JV partner be certified and in compliance with all 8(a) regulations at the time of proposal submission and that the 8(a) JV could compete for an award so long as SBA approved the JV prior to the time of contract award.
In support of this position, the SBA pointed to the preamble to the SBA's JV regulations, which stated:
Joint ventures are tied to procurements and often there is insufficient time to obtain SBA's approval between the issuance of a solicitation and the submission of an offer. Therefore, SBA has permitted joint ventures to be approved on 8(a) procurements after the submission of offers, as long as the approval takes place prior to the actual award.
The GAO agreed with the SBA and adopted the SBA's interpretation of the regulations. Therefore, to be clear, 8(a) JVs cannot be required to submit proof of the JV's approval by SBA with its proposal.
So, what to do if you find yourself in a similar situation? One option would be to email the POC on the solicitation and gently remind them of the legal precedent on the issue. Our recommendation, however, would be to reach out to your SBA Business Opportunity Specialist or the Agency's OSBDU Representative and ask them to communicate this to the contracting office. I'm sure the contracting office will be grateful for the gentle reminder, since anyone eliminated from competition based on an 8(a) JV not being approved at the time of proposal submission would have a valid and sustainable protest.
NOTE: VOSB AND SDVOSB JOINT VENTURES FOR VA SET-ASIDES MUST BE CERTIFIED BY PROPOSAL SUBMISSION
The discussion above does not pertain to VOSB or SDVOSB JVs that are pursuing set-aside work with the Department of Veterans Affairs (VA). VOSB/SDVOSB JVs intending to pursue set-aside work with the VA must go through the VetBiz certification process. In addition, the JV must be approved and registered in VetBiz as of the proposal submission date.
If you have any questions about Joint Ventures, please contact us at info@holomuaconsulting.com or at (808) 369-9710.
