The SBA has finally provided an answer to a longstanding question regarding joint ventures and security clearances. Namely, whether or not the joint venture itself must hold a clearance or whether its members having one is enough.
In its recent rulemaking, SBA made some much-needed changes, including scrapping the the 3 in the 3-in-2 rule, modifying joint venture requirements, and consolidating the 8(a) and All Small mentor-protégé programs. But one of the less headline inducing changes may prove to be one of the most impactful. Drum roll . . . by law, a joint venture can now rely on its constituent members for its security clearance, instead of having to obtain its own.
This may sound counter-intuitive. A joint venture is nothing but the sum of its parts after all. But many agencies over the years have not seen it that way.
SBA conceives of a joint venture as a temporary association of two or more entities which combine their resources to perform a federal government contract. And the joint venture itself is required to be unpopulated—i.e., the individuals performing the contract must be employed directly by the venturer companies, not the joint venture itself. So, in SBA’s view, a joint venture, while normally a separate entity, doesn’t perform any work; rather, it’s a conduit through which other entities perform a contract.
Despite this, some agencies—for procurements requiring a facility security clearance—have required the joint venture itself to separately hold a facility security clearance, even when one of its members already holds a clearance. This has led to situations where two companies, both of whom have facility clearances, form a joint venture to bid on work and thereby become ineligible for the contract because the joint venture itself does not possess a clearance. How does that make sense?
It doesn’t. Overall, these well-meaning, but ill-conceived contractual requirements have hurt joint venturer offerors vis-à-vis their non-JV competitors.
SBA has now acknowledged that this double-clearance requirement makes little sense and revised its regulations accordingly. Under the new rule, a “joint venture may be awarded a contract requiring a facility security clearance where either the joint venture itself of the individual partner(s) to the joint venture that will perform the necessary security work has (have) a facility security clearance.” So, now a joint venture offeror can either use its own security clearance, or it can rely on a joint venturer’s clearance—if that venturer will perform the work requiring a clearance.
The new rule contains two qualifications, however. First, if the contract’s primary and vital requirements (those associated with the procurement’s principal purpose) require a security clearance, then the lead small business venturer must possess the requisite clearance. And second, if the work necessitating a security clearance is ancillary to the procurement’s principal purpose, the venturer performing the work must possess the required facility security clearance.
So, there you have it. Such a simple change, but one that will streamline joint venturing. If you have any questions about this issue or other ones related to joint venturing, give us a call at 913-354-2630.