As part of the SBA’s 8(a) Business Development Program, participants are permitted to form mentor-protégé relationships and to establish joint venture (JV) entities eligible for award of 8(a) set aside contracts. Before a mentor-protégé JV can be eligible for set-aside awards, its JV Agreement has to be approved by the SBA Office of Business Development. Approval is conditioned upon compliance with applicable regulations, including 13 C.F.R. § 124.513. After award of a set-aside contract, other offerors have the option of filing a size protest with the SBA challenging the awardee’s status as small.
In Size Appeal of Trident, LLC, SBA No. SIZ-5315 (Jan. 24, 2012) [pdf], the SBA Office of Hearings and Appeals (OHA) held that an SBA area office has no authority to review the substance of an 8(a) mentor-protégé JV agreement as part of a size appeal if it has already been approved by the SBA Office of Business Development and determined to be in compliance with applicable regulations. In that case, Trident appealed the area office’s determination that it was “other than small” and accordingly ineligible for award of an 8(a) set-aside for weather observation and forecasting services.
During the size appeal that arose following award to Trident, a mentor-protégé JV under the 8(a) Program, the area office examined the JV’s compliance with 13 C.F.R. § 124.513 and ultimately determined that: (1) Trident was bringing very little expertise or resources to the JV; and (2) the management structure of the JV did not comply with § 124.513(c). Accordingly, the area office granted the size appeal.
On appeal, OHA determined that the area office’s grant of the size appeal was based upon a clear error of law. Specifically, it found that the area office had no authority to revisit and re-analyze the JV’s 8(a) mentor-protégé JV agreement during a size appeal when the Office of Business Development has already approved the agreement and determined that it complied with applicable regulations.
Overall, this OHA decision is good news for 8(a) mentor-protégé JV’s. Small businesses can rely on the SBA’s approval of a mentor-protégé JV agreement and be confident that, in the context of a size appeal, the area office will not be allowed to question whether the JV complies with applicable regulations.