A recent SBA decision showcased the strict manner in which SBA interprets its joint venture agreement rules. After an agency awarded a contract to a joint venture entity, SBA determined the joint venture was ineligible due to fairly small deficiencies in a joint venture agreement. It’s a situation that no federal contractor wants to encounter. SBA requires strict adherence to the requirements that must be contained in nearly all joint venture agreements. Unfortunately, one company learned this lesson the hard way.
The case, Gray Venture, LLC, SBA No. VET-276, 2022 (July 21, 2022), arose when the Missile Defense Agency (MDA) released a Request for Proposal (RFP) in May 2021. This RFP was released as a service-disabled veteran owned small business (SDVOSB) set aside. Gray Venture, LLC (Gray Venture)–a joint venture comprised of GEBC, LLC, an SDVOSB, and Thompson Gray, Inc. GEBC’s SBA approved mentor–and separate company Strategic Alliance Solutions, LLC (SAS) were among the offerors…
OHA agreed with the SBA and DD/GC on two issues. First, OHA held that Gray Venture’s failure to specifically name a Responsible Manager in any of the agreements meant Gray Venture’s JVA was not in compliance with 13 C.F.R. § 125.18(b)(2)(ii). Additionally, OHA noted that the Operating Agreement and the Teaming Agreements were not specific to the RFP because they were executed prior to the RFP’s release. As such, Gray Venture’s lack of specificity with regard to the source of labor, negotiation, and contract performance was “fatal,” and did not comply with the regulatory requirements of 13 C.F.R. § 125.18(b)(2).
There are a couple lessons to be learned from Gray Venture’s situation. First, follow the requirements set forth for joint venture agreements because SBA requires strict adherence to the regulations. Second, always include a project-specific addendum if your joint venture agreement does not include the specificity required by SBA rules. And third, do not leave room for interpretation by assuming reviewers at SBA or any other agencies will simply infer necessary information.
