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Bass, Berry & Sims
In a recent decision, the Office of Hearings and Appeals (OHA) affirmed a Small Business Administration (SBA) Area Office’s size determination and held that procedural deficiencies in a contractor’s Joint Venture Agreement…
United States
Government, Public Sector
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In a recent decision, the Office of Hearings and Appeals (OHA)
affirmed a Small Business Administration (SBA) Area Office’s
size determination and held that procedural deficiencies in a
contractor’s Joint Venture Agreement (JVA) and its supporting
addendum disqualified it from small business status for the subject
procurement.
Factual Background
On October 28, 2022, the U.S. Army Mission and Installation
Contracting Command (Army) issued a Request for Proposal for
construction of temporary training facilities. The Army set aside
the procurement entirely for small businesses and assigned North
American Industry Classification System (NAICS) code 532490, Other
Commercial and Industrial Machinery and Equipment Rental and
Leasing, with a size standard of $40 million. On December 1, 2023,
the Army announced that Colt-Sunbelt Rentals JV, LLC
(Colt-Sunbelt), a joint venture between an SBA-approved
mentor-protégé of Sunbelt Rentals, Inc. and Colt
Rentals LLC, was the apparent awardee.
On December 7, 2023, Critical Contingency Solutions, LLC (CCS),
an unsuccessful offeror, protested Colt-Sunbelt’s small
business size status, initially contending that Colt-Sunbelt was
not an SBA-approved mentor-protégé.
SBA Area Office Size Determination
On January 4, 2024, the SBA’s Area Office issued its size
determination, finding that Colt-Sunbelt was an approved
mentor-protégé, and due to a name change and
acquisition of the initial parties to the agreement, this
information had not yet been updated on SBA’s list of
approved mentors and protégés. However, the SBA Area
Office found that Colt-Sunbelt’s JVA was deficient since it
did not name a Responsible Manager.
Although the original JVA lacked specific information about the
subject procurement, Colt-Sunbelt submitted a Revised Addendum to
the JVA during the course of the SBA Area Office’s size
review, which contained information about the procurement. However,
contrary to JVA requirements under 13 C.F.R. § 125.8(b)(2) and
the terms of Colt-Sunbelt’s JVA, the Revised Addendum was
still unsigned, undated, and did not name the employee designated
as the Responsible Manager. Accordingly, the SBA Area Office
concluded that Colt-Sunbelt is not a small business for the subject
procurement.
Joint Venture Addendum Requirements
The requirements for mentor-protégé joint ventures
submitting offers for small business set aside contracts are
governed by 13 C.F.R. § 125.8, which among other things
details the necessary provisions and content for a JVA. In this
case, CCS challenged Colt-Sunbelt’s JVA due to its failure to
explicitly designate a Responsible Manager, in addition to other
procedural deficiencies, including a lack of signatures and
date.
Specifically at issue in this case, 13 C.F.R. §
125.8(b)(2)(ii) prescribes that all JVAs:
“Designat[e] a small business as the managing venturer of
the joint venture, and designat[e] a named employee of the
small business managing venturer as the manager with ultimate
responsibility for performance of the contract (the
“Responsible Manager”) [emphasis
added].”
OHA Appeal
Colt-Sunbelt appealed the SBA Area Office’s size
determination to OHA, arguing the following points:
-
- It did name a Responsible Manager in its JVA, and therefore,
the documentation was compliant with SBA regulations.
- It did name a Responsible Manager in its JVA, and therefore,
-
- They were denied due process by SBA’s Area Office.
The essence of Colt-Sunbelt’s appeal was that, upon a full
review of its proposal, JVA, and Revised Addendum, the SBA Area
Office should have surmised that the designated Contract/Project
Manager, who was named on several pages of its proposal, was an
employee of Colt Rentals LLC and intended to serve as the
Responsible Manager. Colt-Sunbelt also argued that it was denied
due process, as it was not given proper notice of all issues under
investigation by the SBA Area Office, including the formal adequacy
of its JVA.
Holding
OHA, relying primarily on its 2023 decision in Size Appeal
of Focus Revision Partners, SBA No. SIZ-6188 (2023) (Focus
Revision) affirmed the SBA Area Office’s decision. OHA
held that the JVA, as supplemented by the addendum, still did not
name a Responsible Manager with ultimate responsibility for the
performance of the contract as required by 13 C.F.R. §
125.8(b)(2), and the Revised Addendum was unsigned, despite
Colt-Sunbelt/Appellant’s JVA stipulating that a proper
addendum must be signed and incorporated “as an
amendment” into the JVA. Citing additional precedent, OHA
concluded that the appearance of a “Project/Contract
Manager” in Colt-Sunbelts’ proposal but not in the JVA
and Revised Addendum was inadequate for purposes of the
regulation’s requirements. OHA rejected Colt-Sunbelt’s
due process and lack of notice argument, stating that
“CCS’s initial protest questioned whether Appellant was
a valid joint venture, and Appellant thus knew, or should have
known, that its status as a joint venture would be under
review.” In sum, OHA affirmed the SBA Area Office’s
decision that Colt-Sunbelt failed to qualify as a small business
for the subject procurement.
Conclusion
OHA’s decision in this case once again showcases
SBA’s strict reading of the requirements for joint venture
documentation outlined in 13 C.F.R. § 125.8. Contractors
seeking to take advantage of SBA programs, like the
Mentor-Protégé Program, should be careful to follow
all requirements outlined in the governing regulations to avoid a
finding of affiliation and benefit from a small business size
status.
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