But My Affiliates ARE Me! GAO Rules Agencies May Limit Use of Affiliate Experience and Past Performance
On November 15, 2024, the Government Accountability Office (GAO) denied a protest where a mentor-protégé joint venture offeror attempted to use the past experience of a wholly owned subsidiary of the protégé member to satisfy a solicitation requirement. The requirement specified that joint ventures must submit a relevant qualifying project from either the protégé or the mentor-protégé joint venture itself. The AtVentures, LLC[1] protest reminds us to pay close attention to solicitation requirements and offers a different perspective when considering whether to spin-off a subsidiary.
The Facts
On October 20, 2023, AtVentures, LLC (AtVentures), a mentor-protégé joint venture between Maximus Federal Consulting, LLC (Maximus), as the mentor member, and Inoventures, LLC (Inoventures), as the protégé member, timely submitted its proposal for the General Services Administration’s (GSA) multiple indefinite-delivery, indefinite-quantity governmentwide acquisition contracts for a variety of services-based solutions, known as One Acquisition Solution for Integrated Services Plus (OASIS+).
On July 30, 2024, GSA notified AtVentures that its proposal was nonresponsive and eliminated from consideration for award. Importantly, the solicitation required mentor-protégé joint ventures to submit at least one relevant qualifying project from either the protégé or the mentor-protégé joint venture itself as a requisite for contract eligibility. Additionally, the solicitation allowed, under the scored evaluation elements only (past performance, certifications, clearances, etc.), for offerors to take credit for their subsidiaries so long as the subsidiary provided a meaningful relationship commitment letter.
AtVentures submitted a qualifying project from Maximus and another qualifying project from Inoventures’ wholly owned subsidiary, coupled with a meaningful relationship commitment letter. GSA found both submissions failed to meet the solicitation’s eligibility requirement that mentor-protégé joint ventures submit a qualifying project from either the protégé or the mentor-protégé joint venture. AtVentures presents two arguments: (1) GSA deviated from the solicitation requirements because the solicitation language pertaining to the meaningful relationship commitment letter allowed AtVentures to use Inoventures’ subsidiary to satisfy the contract eligibility requirement and (2) AtVentures argued that GSA’s determination usurped the Small Business Administration’s (SBA) authority to determine whether a small business meets definitive responsibility criteria.
GAO’s Holding
GAO disagreed with both arguments. In response to the first argument, GAO agreed with GSA that the solicitation language and subsequent Q&A clearly indicated that the mentor-protégé joint venture’s relevant qualifying project submission was separate from the meaningful relationship commitment letter in the scored evaluation elements. Consequently, Inoventures’ subsidiary and its meaningful relationship commitment letter failed to satisfy the mentor-protégé joint venture relevant qualifying project eligibility requirement.
On the second argument, GAO confirms the SBA’s exclusive authority to make responsibility determinations for small businesses under the SBA’s Certificate of Competency (COC) program. The COC program requires agencies refer matters to the SBA whenever a determination that a small business is not responsible would prevent the small business from receiving award. Importantly, GAO notes that this deference is only required after an agency evaluated the proposal on a non-comparative basis (e.g., pass/fail, go/no go, or acceptable/unacceptable) under one or more responsible-type evaluation factors, such as past performance. However, when an agency finds a proposal technically unacceptable, even if the basis is arguably responsibility-related, and the finding is based on the offeror’s failure to follow the solicitation requirements, referral to the SBA is not required. GAO found that AtVentures’ failure to submit a qualifying project from its protégé or from itself amounted to a failure to submit required documentation necessary for the agency to evaluate whether it met the applicable solicitation requirements and not that the agency made an improper responsibility determination.
Takeaways
- Read Each Solicitation: The Federal Acquisition Regulation allows agencies to consider affiliate, parent, and subsidiary past performance, but it is not required to. As such, agencies have the ability to limit how and when they consider such work in each solicitation. Moreover, while the SBA’s regulations require agencies consider such past performance for small businesses, this requirement is only limited to responsibility determinations. It does not preclude agencies from incorporating specific eligibility criteria into the solicitation.
- Is Spinning-Off the Right Move? Spinning off affiliates and subsidiaries of a business can be beneficial when attempting to enter a different line of business, future planning, and limiting liability. However, it is not 100% without risk, as agencies can limit the use of these businesses’ experience when submitting proposals. Entities should consider whether their business or joint venture has enough experience to satisfy minimum qualifications, such as the qualification in AtVentures, LLC, prior to spinning-off a portion of a business.
Attorneys in PilieroMazza’s Government Contracts and Bid Protests practice groups are well-versed in counseling GovCons on strategies to prevent protests and offer comprehensive representation when filing and defending protests is required. Please contact Cy Alba for more information. Special thanks to Krissy Cralle for her assistance with this blog.
____________________
If you’re seeking practical insights to gain a competitive edge by understanding the government’s compliance requirements, tune into PilieroMazza’s podcasts: GovCon Live!, Clocking in with PilieroMazza, and Ex Rel. Radio.
[1]B-421775.6 (Nov. 15, 2024)