The Government Accountability Office (GAO) recently upheld a decision by the Department of the Navy to award a contract to Secise LLC, a joint venture under the Small Business Administration’s (SBA) Mentor-Protégé Program. This decision came in response to a protest filed by Global Technology and Management Resources, Inc. (GTMR), which argued that Secise was ineligible for the award because it did not hold the necessary Indefinite Delivery, Indefinite Quantity (IDIQ) contract. Despite these objections, GAO ruled that Secise’s joint venture with Don Selvy Enterprises, Inc. (DSE) was permissible under the terms of the contract and relevant SBA regulations.

The issue at the heart of the protest was whether Secise, which does not hold the SeaPort Next Generation (NxG) IDIQ contract, could receive a task order through its joint venture partner, DSE, which does hold such a contract. The SeaPort NxG contract included a provision allowing affiliated companies to submit proposals through the contract of an affiliated entity, provided the affiliate was clearly identified in the proposal and the Prime MAC holder (DSE in this case) was listed as the entity legally responsible for the task order.

GTMR challenged the Navy’s interpretation of these provisions, arguing that only the contract holder, DSE, should be allowed to submit proposals and that any other arrangement violated procurement regulations. However, GAO found that the contract’s language specifically permitted affiliates, like Secise, to participate through the Prime MAC holder’s contract as long as all the requirements were met. Secise, through DSE’s contract, submitted a proposal clearly identifying itself as the prime contractor, and DSE, as the Prime MAC holder, took responsibility for the award. The Navy acted in compliance with the contract’s terms, and thus, the protest was denied.

In addition to this core issue, GTMR raised concerns about the proposal’s compliance with the limitation on subcontracting clause, which requires that at least 50% of the work be performed by the small business prime contractor or similarly situated entities. GTMR argued that the proposal, on its face, showed that more than half of the work would be performed by large business subcontractors, including Secise’s mentor, Precise Systems, Inc. GTMR claimed that this arrangement violated the limitations on subcontracting, rendering Secise ineligible for the award.

The GAO, however, ruled that the proposal was compliant because Secise, as a joint venture under the Mentor-Protégé Program, shared the same small business status as its Protégé, DSE. The Mentor-Protégé joint venture was entitled to perform the work as the prime contractor, even though the mentor, Precise, would be performing a significant portion of the work. GAO found no evidence that the proposal, on its face, violated the subcontracting limitations. Moreover, GAO emphasized that compliance with the limitation on subcontracting clause is generally a matter of contract administration, which falls outside the scope of bid protests unless there is a clear indication of noncompliance in the proposal itself.

GTMR’s protest highlights the complexity of federal procurement regulations, particularly when it comes to the involvement of joint ventures and small business programs. The SBA’s Mentor-Protégé Program is designed to facilitate partnerships between small businesses and more established firms, allowing them to leverage the resources and expertise of larger companies while maintaining their small business status. This case illustrates how these partnerships can create unique challenges in the procurement process, especially when it comes to determining eligibility for contracts and compliance with subcontracting requirements.

For the Navy, the decision to award the task order to Secise through DSE’s contract reflects the flexibility built into the SeaPort NxG contract, which allows affiliated companies to participate in task orders as long as they adhere to the contract’s terms. The GAO’s ruling affirms that the Navy acted within its authority in issuing the task order to Secise and underscores the importance of clear contract language in navigating complex procurement processes.

For contractors, this decision serves as a reminder of the importance of carefully reading and understanding the terms of IDIQ contracts and solicitations, particularly when it comes to joint ventures and subcontracting limitations. Contractors must ensure that their proposals comply not only with the terms of the solicitation but also with the underlying contract provisions that govern their eligibility for awards. Failure to do so can result in costly protests and delays in the procurement process.

The implications of this decision extend beyond the specific facts of this case. As the federal government continues to promote small business participation in procurement, joint ventures like Secise will likely play an increasingly prominent role in securing contracts. The GAO’s decision provides important guidance on how agencies should evaluate proposals from joint ventures and affiliated entities, particularly under IDIQ contracts with subcontracting limitations.