BEWARE 8(a)s - A Teaming Agreement can be Seen as a Breach of Your Program Agreement!

An 8(a) firm entered into a Teaming Agreement (TA) and SBA determined that it needed to be reviewed by them prior to execution. Because the participant did know TAs were included in the approval requirement of their 89a) Program Agreement, they were eventually terminated from the program.

1. General Facts

   In Appeal of Accent Services Co., Inc., SBA No. BDP-421 (2011) a program participant, Accent Services Co., Inc., a janitorial services company, entered into a Strategic Alliance Agreement ("SAA") with Contract Acquisitions Group, LLC. It also entered into a Master Subcontract Agreement ("MSA") with Teltara, LLC. Eventually Accent and Teltara found a suitable contract through joint marketing and entered into a Teaming Agreement with Teltara, LLC.

2. What was the original issue with the marketing and business development done by the 8(a)?

   The issue of whether or not a TA has to be approved when it involves an 8(a) contract began when a formal size determination concluded that Petitioner was affiliated with Teltara, LLC and Contract Acquisitions Group as a result of entering into the MSA and the SAA and thus was considered to be "other than a small business concern."

3. The Appeal of the Termination Letter to SBA Office of Hearings and Appeals

   Through an appeal to the SBA Office of Hearings and Appeals, it was determined that they were not affiliated, but it did not end there. After losing its case, the SBA, within about a month, terminated Accent Services Co for breaching the terms of its program agreement by entering into the teaming agreement with Teltara. The letter stated that as a result of the May 26, decision reversing the formal size determination, Petitioner has overcome the first ground cited in SBA's February 18, Letter of Intent to Terminate. The SBA went on to say, "that Petitioner failed to overcome the second and third grounds because Petitioner has "consistently failed to notify SBA of any changes ... that adversely affect its 8(a) program eligibility" and it failed to notify SBA of the MSA, the SAA, and Teaming Agreement. The Termination Letter stated that the SBA only learned of the MSA and the SAA when Petitioner attempted to terminate the agreements to avoid possible suspension or debarment; and it only learned about the Teaming Agreement on March 21, 2011, in Petitioner's response to the Letter of Intent to Terminate. SBA acknowledged that it was aware that Petitioner worked with Teltara and CAG on several contracts, but claimed that Petitioner did not disclose the extent of its relationship with these two companies and therefore Petitioner materially breached the Participation Agreement.The Administrative Law Judge upheld the decision to terminate by saying, "The SBA's June 15, 2011 determination to terminate Petitioner from further participation in the 8(a) BD program is NOT ARBIRTRARY, CAPRICIOUS, OR CONTRARY TO LAW. See 15 U.S.C. ? 637(a)(9)(C); 13 C.F.R. ? 134.406(b). The determination is upheld, and Accent Services Company, Inc.'s appeal is denied."

4. What Does this Case Mean?

   This case stands for a lot of issues - most of which are bad for 8(a) program participants. First - that while most of the guidance and advice 8(a)s receive from their SBA Business Development Specialists with regard to teaming and marketing agreements is that they do not get involved - apparently if they want to, the rules were interpreted by SBA to say they have to approve all teaming agreements that may involve an 8(a) contract..... or is that what it means. The judge stated the reason for reviewing the agreement and supporting SBA's responsibility to review the Teaming Agreement was, "Because a teaming agreement has the potential to negatively affect the continued eligibility of a Participant it is important that these agreements, as they relate to the performance of a section 8(a) contract, be submitted to the SBA by the Participant prior entering into them. That is why this provision was included in the Participation Agreement." By this argument the law was extended past the Legislative intent (in my opinion) to say that all teaming agreements must be reviewed. What is the problem here - while SBA has the best of intentions it does not have the manpower to review all these agreements. They already require 30 days to review an 8(a) joint venture. Does this also mean that although the regulations state that SBA must approve all 8(a) joint ventures that they must also approve any joint venture. It seems a JV would have a lot more potential to cause "the potential to negatively affect the continued eligibility of a Participant it is important that these BDP-421 agreements, as they relate to the performance of a section 8(a) contract, be submitted to the SBA by the Participant prior entering into them..."? The answer - I do not know. But if this happens to you, and I hope it does not - call immediately. We can be reached at 229-244-1527 or [email protected]