Joint Venturers Beware – Underestimating the Importance SAM Registrations Can Sink Your Proposal
Protests filed at the U.S. Court of Federal Claims (“COFC”) differ in many ways from protests before the U.S. Government Accountability Office (“GAO”). For example, protests before GAO are uniform given that they are decisions of the same office, whereas COFC protest decisions sometimes diverge because each judge is autonomous and their decisions are not binding on other judges of the court. So, because COFC decisions are not binding in other protests, it is noteworthy when they arrive at the same legal principles, especially when the issue is substantive. That occurred in a recent pair of protests brought by CGS-ASP Security JV LLC (“CGS”) and by Thalle/Nicholson Joint Venture (“Thalle/Nicholson”) regarding System for Award Management (“SAM”) registration requirements and joint ventures.
CGS-ASP Security JV
In CGS-ASP Security JV, LLC v. United States, 162 Fed. Cl. 783 (Dec. 14, 2022), the protester challenged its exclusion from competition because it did not have an active SAM registration at the time it submitted its proposal. Here, the solicitation was issued on October 13, 2021 and its instructions explicitly stated that offerors, including joint ventures, must have an active SAM registration at the time of proposal submission and that offerors that did not have an active SAM registration at the time of proposal submission would be excluded from evaluation and award.
The solicitation also included Federal Acquisition Regulation ("FAR") 52.204-7, which contains similar requirements. Although CGS formed its joint venture on December 22, 2020, it did not incorporate itself until October 26, 2021 and, therefore, it did not receive its tax identification number (“TIN”) until November 5, 2021. As such, CGS did not submit its application for registration in SAM until November 15, 2021, or a just shy of a month after the agency issued the solicitation. So far so good since proposals, after a series of extensions by the government, ultimately were not due until December 15, 2021. However, during the SAM registration process, CGS received an email stating that its TIN had to be validated by the IRS and that validation could take up to two days to complete. CGS subsequently received an email stating that its TIN validation had failed.
Thereafter, CGS engaged in earnest but ultimately futile attempts to resolve the matter with the IRS or GSA. After being excluded from the competition, CGS initially filed a protest at GAO arguing that GSA, the IRS, or both, failed in their obligations to process CGS’s SAM application and that any resulting delay and its lack of an active SAM registration was the fault of the government and not CGS. In addition, CGS argued that the lack of an active SAM registration at the time of proposal submission was curable as a simple clarification to its proposal and was not a reasonable basis to exclude it from the competition because SAM registrations have traditionally been a matter of responsibility that can be resolved before award. GAO found CGS’s arguments unpersuasive and denied the protest, so CGS turned to COFC.
At COFC, while CGS advanced additional and more nuanced arguments than before GAO, the gist of CGS’s protest remained the largely same. The court also denied CGS’s protest. The crux of the court’s decision to deny CGS’s protest was because GSA advises contractors who receive a new TIN should expect to wait up to five weeks to complete the validation process, that the solicitation at issue in the case did not contain language that would allow the contracting officer to relax SAM requirements, and that the 2018 amendments to FAR 52.204-7 requires an active registration at the time of proposal submission rather than the more lenient, pre-2018 version of the clause that accepts compliance as long as the offeror is registered prior to award.
The court, like GAO, found no reason to adopt or extend to this case any other cases where a SAM registration had been deemed excusable so long as any issues could be corrected before award. In addition, the court found that neither GSA nor the IRS was responsible or had an obligation to shepherd CGS’s application through to completion or that an agency is bound by any prior practice that it may have followed. Rather, the court held that the solicitation and the regulations cited therein defined and controlled the agency’s actions and authority even if they differed from any prior course of conduct by the government. Accordingly, because the court found that CGS was warned and had ample time to initiate the SAM registration process months earlier than it did, the risk of loss fell on CGS.
Thalle/Nicholson Joint Venture
Just two months after Judge Holte issued the decision in CGS-ASP Security, Judge Dietz issued the decision in Thalle/Nicholson Joint Venture v. United States, Case No. 22-755 (Feb. 15, 2023). In Thalle/Nicholson, the protester challenged the agency’s decision to award a contract to a competitor and the agency's decision that Thalle/Nicholson was ineligible for award due to its failure to register in SAM at the time of proposal submission, as required by FAR 52.204-7.
Here, Thalle/Nicholson argued, among other things, that its failure to be registered in SAM at the time it submitted its proposal cannot form the rational basis of the agency’s determination that it was ineligible for award of the contract. The court did not bite and found that the record showed that the agency reasonably determined that Thalle/Nicholson’s proposal was ineligible because the company was not registered in SAM at the time of proposal submission, as required under FAR 52.204-7. Accordingly, the court concluded that because Thalle/Nicholson was not in compliance with the SAM registration requirements under FAR 52.204-7, the agency’s decision that the company was ineligible for award was rational. In so doing, the court cited Judge Holte’s decision in CGS-ASP Sec., JV, LLC v. United States.
Beyond that initial argument, the court was likewise unpersuaded at Thalle/Nicholson’s attempts at framing the issue as one of responsibility not responsiveness and its argument regarding the propriety of the agency’s discussions. Notably, the court also determined that had the agency allowed Thalle/Nicholson to remain in the competition by registering in SAM after it submitted its proposal, it would have constituted a waiver of the requirement under FAR 52.204-7 that an offeror be registered in SAM prior to submitting its bid. The court was “not aware of any legal basis” for granting such a waiver and ultimately found that doing so “would allow an agency to waive a FAR provision with mandatory language without pursuing the FAR's mandatory procedures when agencies seek to deviate from the FAR.”
The CGS and Thalle/Nicholson protest decisions serve as important lessons to contractors, especially those forming joint ventures. Depending on the solicitation terms, it may not enough for the members of a joint venture to be registered in SAM because as demonstrated by the protests, the joint venture itself, as the offeror, may need be registered in SAM prior to proposal submission.
Further, these cases also show that not only must joint ventures take a close look at their timelines, including when to form a company so as to start the SAM registration process as soon as possible. Joint venture offerors also must scrutinize the solicitation language, review whether any more lenient alternates to FAR 52.204-7 are in the solicitation (and, if not, consider asking the agency to extend the proposal due date or for similar relief), and should not rely on arguments that SAM registrations are a clerical or responsibility matter that can be cured prior to award or that GSA or that any other agency involved in the SAM registration process is responsible for facilitating the completion of a SAM registration.
Finally, as these protests show, COFC (and GAO) will ordinarily review such matters as a substantive solicitation requirement which cannot be relaxed, waived, or cured and, therefore, joint venture offerors must pay careful attention to these now far more significant considerations in forming their joint ventures and preparing their proposals.
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