February 28, 2023
COURT DECISION A REMINDER TO GOVERNMENT CONTRACTORS: REGISTER JOINT VENTURE IN SAM BEFORE SUBMITTING BIDS
Now, what was that thing again?
Now, what was that thing again?
I know it’s something I said I need to get done at some point.
But what was THAT THING??
What was that…ahh, I can't remember now but I’m sure it will come back to me at some point.
Who hasn’t said or thought this at one time or another? And in the mad dash to get a proposal submitted under the deadline, there can be a number of “that things” that need to get done.
The number of “that things,” both big and little, can be compounded even further when multiple companies are scrambling together in order to submit a proposal as a joint venture. For example, for mentor-protégé joint venturers in the SBA's Mentor-Protégé program, one of the big things they may have to do is obtain approval of their mentor-protégé agreements by the SBA before they submit their offers if they want to avoid affiliation rules.
And one of the seemingly little things that all joint venture partners have to do is register the joint venture separately in the System for Award Management (SAM). As two companies recently learned, however, it’s a little thing…until it isn’t.
Thalle/Nicholson Joint Venture v U.S.
In Thalle/Nicholson Joint Venture v U.S., the U.S. Army Corps of Engineers (USACE) ultimately excluded from consideration a proposal by the Thalle/Nicholson Joint Venture because the joint venture failed to comply with FAR clause 52.204-7(b)(1), which states that an offeror is required to be registered in SAM when submitting an offer.
USACE apparently didn’t catch the omission until after it had completed its discussions with all of the offerors, including the Thalle/Nicholson Joint Venture, over the deficiencies in their proposals. In fact, the Thalle/Nicholson Joint Venture was permitted to submit a final revised proposal that was subsequently reviewed by the USACE evaluation board. However, USACE eventually discovered and received confirmation that, although the joint venture partners were registered, the joint venture itself was not registered with SAM by the time it submitted its bid. The agency, thus, went on to award its contract to another bidder.
The Thalle/Nicholson Joint Venture protested the award to the Court of Federal Claims, which upheld USACE’s award to the competitor.
In its ruling, published on February 15, 2023, the Court gives no indication why the joint venture partners did not register the joint venture in SAM. Perhaps it was an oversight. Or perhaps they believed only joint venture partners were required to register.
But as the Court noted, both FAR clause 52.204-7(b) and FAR 4.1102 require offerors to be registered in SAM when submitting offers, and neither excludes joint ventures from this requirement. Indeed, when the FAR Council last updated FAR 52.204-7 in 2018, it rejected the idea of creating an exception to the SAM registration requirement for joint ventures in which the JV partners were registered.
Earlier Decisions And The SBA's Instructions
The Thalle/Nicholson decision is no less than the fourth since January 2022 in which the Court of Federal Claims has found that the SAM registration requirement in 52.204-7(b) applies separately to joint ventures and not just the joint venture partners. In two separate cases decided in 2022 - Top Guard, Inc. and CGS-ASP Security JV LLC - GAO, similarly, rejected protests that were filed after a government agency excluded proposals from consideration because the bidding joint ventures were not registered in SAM by the time their proposals were submitted. Moreover, the SBA, for its part, has posted online guidance informing contractors that a joint venture wishing to submit an offer as a small business must be separately identified in SAM under its own name with its own CAGE code and Unique Entity Identifier, with individual partners listed as the immediate owners.
Thalle/Nicholson, therefore, is just the latest reminder to government contractors that they should register their joint ventures separately in SAM before they submit their bids. Contractors should consider seriously submitting all of their registration information as early as possible, well in advance of any proposal deadlines, because under FAR 52.204-7(b) a business is not considered to be registered in SAM until its taxpayer identification number is validated with the IRS and the SAM registration is marked “active” - all of which may take at least five weeks to be completed.
Why Remembering The Little Things Matters
As we noted in our white paper on joint ventures, Using Joint Ventures To Capture Federal Government Contracting Opportunities, joint ventures offer government contractors an array of benefits, including opportunities to (i) bid on set-aside contracts they might not otherwise qualify for on their own; (ii) avoid affiliation rules, and (iii) leverage the past performance, capacity, financial resources and expertise of their joint venture partners. But in order to give themselves the best chance of obtaining these benefits, government contractors need to make sure they get the big and little things done that will enable them to be eligible to submit their bids on behalf of their joint venture.
Indeed, as we see in Thalle/Nicholson, the cost of not getting a seemingly little thing done like getting a joint venture registered in SAM is not limited simply to the time, resources and energy spent on a lost bid. As the Court observed in that case, the administrative record showed that the agency, in fact, was prepared to award what turned out to be a $76 million contract to the Thalle/Nicholson Joint Venture…until it discovered that the joint venture was not registered in SAM.