In an August 27, 2021 decision, GAO sided with protester InfoPoint LLC (“InfoPoint”), and the Small Business Administration (“SBA”) which was invited to submit comments, in finding that a Department of Defense (“DoD”) solicitation provision requiring a small business joint venture offeror to itself hold a facility clearance was inconsistent with the National Defense Authorization Act for Fiscal Year 2020 (“2020 NDAA”) and SBA’s regulation at 13 C.F.R. §121.103. GAO ruled that the 2020 NDAA “clearly and unambiguously prohibits DoD agencies, like the Air Force here, from issuing solicitations that require a joint venture, rather than the members of the joint venture, hold the required facility clearance.”
The underlying statutory and regulatory framework for GAO’s decision is located in three places:
- Section 644 of the Small Business Act, which states that, “[w]hen evaluating an offer of a joint venture of small business concerns, if the joint venture does not demonstrate sufficient capabilities . . . to be considered for award of a contract opportunity, the head of the agency shall consider the capabilities . . . of each member of the joint venture as the capabilities . . . of the joint venture.”
- Section 1629 of the 2020 NDAA, which directly addresses the requirement for joint venture facility clearances, providing that, “[a] clearance for access to a Department of Defense installation or facility may not be required for a joint venture if that joint venture is composed entirely of entities that are currently cleared for access to such installation or facility.”
- 13 C.F.R. § 121.103(h)(4), where SBA implemented these requirements, which as of November 2020 provides that, “[a] joint venture may be awarded a contract requiring a facility security clearance where either the joint venture itself or the individual partner(s) to the joint venture that will perform the necessary security work has (have) a facility security clearance.”
Here, InfoPoint is an unpopulated mentor-protégé joint venture under 13 C.F.R. §§ 125.8 and 121.103(h)(3) where both members possess the requisite security clearance. InfoPoint challenged the fair opportunity proposal request issued under the OASIS small business pool, which required that “[o]fferors shall possess or acquire a facility clearance equal to the requirement on the DD254 (Attachment 2) without additional authorization (i.e. National Interest Determination (NID)) by the proposal due date.” The Air Force argued broadly that none of the statutory or regulatory provisions cited by the protester or SBA prohibited this clearance requirement, and that the DoD’s regulations concerning security clearances should take precedence over any regulations issued by SBA. While the Air Force advanced four main defenses, GAO rejected each one of them. GAO ultimately agreed that the solicitation should be amended to permit joint ventures to be eligible for award where they are comprised of members that each hold the required facility clearance, like InfoPoint.
DoD contended that the 2020 NDAA was not effective until implementing regulations were in place, but GAO found that the 2020 NDAA provision did not direct DoD to issue regulations or otherwise take any action to implement the provision and found the NDAA effective upon enactment.
GAO also disagreed with DoD that the language of § 121.103(h)(4) that a “joint venture may be awarded a contract…” gave DoD discretion to choose whether the joint venture itself, or the individual members, were required to hold the required facility clearances, instead finding that this language defines the eligibility of joint ventures to receive awards where the joint venture members hold the required facility clearance.
GAO also found that DoD was not entitled to deference on this issue because DoD had not issued regulations interpreting the 2020 NDAA, so there was nothing to which GAO could defer, even if it found deference appropriate.
Finally, GAO found that the DoD regulations that DoD cited as conflicting with § 121.103(h)(4), such as 32 C.F.R. §§ 117.9(a)(5), (c)(5), were unavailing because, to the extent there was a conflict, the plain language of the NDAA would control. GAO noted that, while this pre-award protest was in the context of a small-business set-aside procurement for a task order, the 2020 NDAA does not, on its face, limit its application to small business joint ventures. It remains to be seen if other-than-small joint ventures may attempt to rely on this provision to challenge a requirement that a joint venture itself hold the facility clearance.
Going forward, contractors should keep in mind that DoD agencies are not permitted to utilize solicitation requirements that a small business joint venture itself must hold a facility clearance, rather than the individual members. Crowell will continue to monitor for further developments in this area.