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Pre and Post Award Bid Protest

Does a Joint Venture Need Security Clearance if All Parties Already have the Necessary Clearance?

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When bidding on a government contract, the company and/or its employees may need a specific security clearance in order to work on a project. Security clearances are based on an individual’s position and their need to access materials, attend meetings, and/or have access to areas that require a security clearance. There are two types of clearances: Personnel Security Clearances (PCL) and Facility Security Clearance (FCL). Government agencies that issue clearances often refer to clearances as “eligibility for access.”

Security clearances can be issued by many United States government agencies, including the Department of Defense (DoD). The DoD issues more than 80 percent of all clearances. For joint ventures operating under the Small Business Administration’s (SBA) regulations, dealing with security clearances can be an issue. Some contracting officers insist a joint venture obtains an FCL, even when all joint venture members hold the necessary clearance. In the following protest, InfoPoint LLC (InfoPoint) protested such a request to the U.S. Government Accountability Office (GAO).

InfoPoint LLC GAO Appeals B-419856 
Decision issued August 27, 2021

THE Solicitation

On April 22, 2021, the Air Force issued a Fair Opportunity Proposal Request (FORP) to provide command and control, intelligence, surveillance, and reconnaissance (C21SR) support services for the Air Force Air Combat Command. The solicitation stated that proposals will be evaluated based on technical capability, past performance, and price. The technical capability was evaluated on a pass/fail basis, with the past performance factor “significantly more important” than price. The solicitation required an offeror possess a top-secret facility clearance at the time of proposal submission, stating “[i]f an Offeror does not have the required clearance at the time of proposal submission, the proposal will not be evaluated and is not eligible for award.” 

When asked for additional clarification from prospective bidders, the Air Force further stated an offeror comprised of two or more contractors bidding on the project through a joint venture must obtain the necessary security clearance for the entire joint venture, even if each member of the joint venture had sufficient security clearance. The Air Force relied upon regulations in the Department of Defense Manual (DoDM) and Air Force Manual (AFMAN) to justify this requirement. InfoPoint and its joint venture partner both held the necessary security clearance required under the Air Force solicitation for C2ISR services. However, they did not have a separate security clearance for the joint venture. According to the Air Force, the joint venture was ineligible for the award.

The protest

InfoPoint filed a protest on May 21, 2021, prior to the solicitation’s close date of May 24, 2021. InfoPoint argued the FOPR provision improperly required a small business joint venture offeror to hold a facility clearance, even when the individual joint venture members held the required clearances. Furthermore, InfoPoint argued the solicitation provision was inconsistent with the SBA and violated the SBA regulation 121.103. The SBA joined the protester’s argument and further argued the SBA regulation cited by the protester was and is consistent with a provision in the National Defense Authorization Act for Fiscal Year 2020 (2020 NDAA), which specifically prohibited the facility clearance requirement in the FOPR. 

The 2020 NDAA, enacted on December 20, 2019, contained a provision directly addressing a joint venture’s facility clearance: “SEC. 1629. TERMINATION OF REQUIREMENT FOR DEPARTMENT OF DEFENSE FACILITY ACCESS CLEARANCES FOR JOINT VENTURES COMPOSED OF PREVIOUSLY-CLEARED ENTITIES. 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.”

On appeal, InfoPoint and its partners argued the Air Force’s additional requirement for a separate security clearance did not have a valid justification, especially because they had formed an “unpopulated” joint venture, meaning the joint venture was merely a shell organization that did not employ any actual human beings. The work would be performed entirely by InfoPoint employees and its partner’s employees. Therefore, everyone working on the project would be an agent of a business organization with the required security clearance. 

The Air Force countered by relying on the DoDM and AFMAN regulations cited in the solicitation, and further argued the DoD and its agencies had been delegated the authority from Congress to regulate what security clearances are necessary for performing work on defense installations. Additionally, the Air Force contended the term “may”, used in SBA regulation 121.103, granted procuring agencies discretion to choose whether to require the joint venture or the individual joint venture members, to hold the required facility clearances. Furthermore, they argued that implementing the plain language of the 2020 NDAA would create challenges arising from conflicts with existing DoD regulations and policies.

The Outcome

The GAO deferred to the SBA regarding the SBA regulation 121.103. The SBA responded that the language used in section 121.103 was clear regarding the eligibility of a joint venture to receive the award when the joint venture partner performing the classified work held the appropriate facility clearance. The GAO agreed with the SBA on this point.

Regarding the Air Force’s arguments against 2020 NDAA Sec. 1629, the GAO found that none of the existing regulations cited by the Air Force provided a valid reason that the 2020 NDAA should not apply to this solicitation. Even though the statute conflicted with what the Air Force noted are existing regulations, it did not provide a basis to avoid following the statute. Since InfoPoint and its business partner both had the required security clearance for this project, the GAO did not include in their decision whether a joint venture could be required to hold a separate security clearance when only some, but not all, of the members, had the required level of clearance.

THE TAKEAWAY

The GAO’s decision regarding this protest relied heavily on the wording in the 2020 NDAA Sec. 1629. Although Congress included this statute in the 2020 NDAA, they may not include this language in future versions. Therefore, a joint venture cannot assume it does not need separate security clearance as this will likely vary from project to project.

The best practice is to apply for and obtain the appropriate security clearance(s) for the joint venture as soon as possible and avoid this issue. If the joint venture is unable to get the proper security clearance, there is a possibility they may still be eligible for a DoD contract. This depends on Congress’s language in the applicable NDAA act(s) for a particular project. 

If you have questions regarding whether you need to obtain a separate security clearance for your joint venture and DoD project, contact us. Whitcomb, Selinsky, PC has a team of experienced attorneys ready to help.

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About the AuthorDavid Tscheschke, Esq.

When David counsels clients, he keeps potential business concerns in mind. This is due to his extensive knowledge of business administration and economics. By identifying critical business or industry issues early on, David tailors his advice to address any concerns he has identified during his initial research and discovery. This mindset allows David to focus on delivering value to every client.

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