The Small Business Administration recently denied an appeal by a disqualified joint venture on a small business set-aside contract. The SBA found that — even though the JV was able to show evidence of an SBA-approved mentor-protégé agreement — the agreement was expired at the time the JV bid for the contract. The lack of an active agreement was determined by the SBA to be fatal to the JV’s attempt to bid on the contract.
The JV in question is Wiss Joint Venture, a partnership between Dae Sung LLC, an 8(a) participant, and its mentor LB&B Associates Inc. Without the protection from affiliation provided by the mentor-protégé program (and, more precisely in this case, evidence of a current and up-to-date agreement approved by the SBA), Wiss and Dae Sung were considered affiliated and too large to compete for the set-aside contract.
The Wiss JV case – and other recent SBA cases on the topic, such as North Star Magnus Pacific Joint Venture – is significant in the current government contracting climate for a few reasons. Of course, the cases tell us that 8(a) mentor-protégé program participants should be sure that their SBA-approved JV agreements are current before bidding on a contract. But, even beyond the surface level, the cases demonstrate the importance of planning ahead, entering into strategic partnerships, and always documenting your work:
- First, the Wiss case highlights the importance of the up-coming expansion of the SBA’s mentor-protégé program. As we’ve discussed extensively on this site (see conversations here and here), the changes will open up the current protection afforded only to 8(a) program participants to all small businesses. In the short term, this will lead to potentially unprecedented access to small business set-aside work – particularly for large businesses that are currently too large to compete for those contracts. However, we wonder whether the big picture result of the expansion will lead to small businesses without a large business dance partner being boxed out of the set-aside game.
- Second, the decision reminds us of the importance of teaming arrangements in federal contracting. As we discuss here, teaming on federal projects can lead to increased contracting opportunities – but also come with a fair amount of risk if you pick the wrong partner. In the Wiss case, there is absolutely nothing to suggest that the relationship between Dae Sung and LB&B is anything but solid – but there was obviously some level of miscommunication leading to an expired mentor-protégé agreement and, as an end result, a missed contracting opportunity.
- Third, and finally, the case emphasizes the importance of documentation on federal projects. Given the ever increasing number of federal regulations requiring compliance, it is essential for contractors to create a file and document important activities. Indeed, in the Wiss case, the JV argued that the SBA’s Illinois District Office approved an extension of the lapsed mentor-protégé agreement when it conducted Dae Sung’s annual 8(a) program review, but it could not provide the evidence.