Once again, an initial awardee has had its award revoked because of a noncompliant Joint Venture Agreement addendum. We see it happen regularly at SmallGovCon. And the decision in Colt-Sunbelt Rentals JV, LLC is yet another data point highlighting that SBA requires strict adherence to the joint venture agreement requirements in 13 C.F.R. § 125.8. Here, an incomplete joint venture agreement and its addendum resulted in a finding of affiliation which resulted in Colt-Sunbelt losing its small business status for the contract at issue.

First, a quick primer on mentor-protégé joint ventures. If a small business and a large business want to create a joint venture to pursue small business set-asides, they must be parties to an SBA approved mentor-protégé agreement (MPA) under 13 C.F.R. § 125.9, and the joint venture agreement must comply with the requirements in 13 C.F.R. § 125.8. This allows the small business and large business to work together as a joint venture while avoiding the danger of affiliation from collaborating as a joint venture. A finding of affiliation will mean the size of the parties will be combined for the procurement. And, as you could guess, affiliation between a small business and a large business for a small business set-aside is not exactly something that you want to happen. Note that, for a socioeconomic set-aside, such as under the 8(a) Program, a joint venture between, for instance, an 8(a) company and a small business must also meet strict joint venture requirements.

The Protest

Interestingly, the protest in Colt-Sunbelt began as a size protest which, thanks to a reporting error by the SBA, protested Colt-Sunbelt’s size on the belief that Colt-Sunbelt was not an active participant in the SBA’s Mentor-Protégé Program. However, upon Colt-Sunbelt’s production of the SBA approved MPA, that issue was resolved. But the investigation didn’t stop there.

While reviewing the size protest, the SBA’s Area Office reviewed the parties’ mentor-protégé joint venture agreement (JVA) and addendums related to the procurement at issue. The addendum submitted with the final offer was an unsigned sample addendum labeled “Ft. Polk Contract Addendum.” Colt-Sunbelt asserted that the JVA submitted with the proposal was “a placeholder until formal award was made.”

The joint venture also submitted a “revised Fort Polk Contract Addendum,” which was also not signed. Further, the revised addendum stated that the managing venturer would provide the “Project Manager” and that the non-managing venturer would provide the “Site Manager,” but they provided no name for either role.

After reviewing the relevant information, the Area Office found that the JVA was deficient because it did not name a Responsible Manager, as required by 13 C.F.R. § 125.8(b)(2)(ii).

The Appeal

The joint venture appealed the Area Office’s decision, claiming that the JVA met the requirements of 13 C.F.R. § 125.8(b)(2)(ii). It claimed that the revised addendum referred to the proposal which named the individual “as the Program Manager/Contract Manager and Authorized Negotiator in at least three instances,” and that the Area Office had the information needed to discern that this identified individual fulfilled the duties and tasks as a Project Manager.

In the end, OHA confirmed the Area Office’s finding that the JVA, the initial addendum, and the revised addendum all failed to identify the individual named as the “Responsible Manager.” The initial addendum itself was not signed nor dated. The revised addendum was not signed nor dated. And the agency did not have a duty to put the pieces together to identify the individual in the proposal that was intended to be the Responsible manager. Designation of the Responsible Manager in a document that is not a part of a JVA does not meet SBA’s requirements. Without the addendum, the JVA was likely missing other pieces of required information such as a list of major equipment, facilities, and other resources.

Conclusion

So, what did we learn here?

1. Joint ventures must make sure that all of the information required to be in a joint venture agreement is in the joint venture agreement or an addendum that is specifically incorporated into the joint venture agreement. It can’t be in a separate, unrelated document.
2. You must identify the Responsible Manager by name in the joint venture agreement and they must be designated as the “Responsible Manager,” not some other title that agencies and the SBA must hunt down and deduce.
3. An addendum must be signed and dated to be considered valid, and, if it is not, it will be treated as if it didn’t exist.

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The post Another One Bites the Dust: Incomplete Joint Venture Agreement Fails Once Again first appeared on SmallGovCon - Government Contracts Law Blog.