BNUMBER: B-274956
DATE: January 15, 1997
TITLE: Chattin/Ashton, Inc., A Joint Venture
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Matter of:Chattin/Ashton, Inc., A Joint Venture
File: B-274956
Date:January 15, 1997
James W. Taylor, Esq., Burger & Plavan, for the protester.
Sherry Kinland Kaswell, Esq., Department of the Interior, for the
agency.
Christina Sklarew, Esq., and Michael R. Golden, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.
DIGEST
Bureau of Indian Affairs reasonably determined that a joint venture,
comprised of an Indian-owned firm and a firm which was not
Indian-owned, did not qualify as an Indian economic enterprise
eligible for award under Buy Indian set-aside procurement where the
joint venture failed to clearly demonstrate that the Indian-owned firm
would control the joint venture.
DECISION
Chattin/Ashton, Inc., A Joint Venture protests the rejection of its
bid submitted under invitation for bids (IFB) No. SB-96-0011, which
was issued by the Bureau of Indian Affairs (BIA), Department of the
Interior, for road construction on the Tohono O'Odham Nation, Arizona.
The protester contends that the agency improperly determined that the
joint venture, comprised of Chattin Industries, Inc., an Indian-owned
firm, and The Ashton Company, Inc., which is not Indian-owned, did not
qualify for award as an eligible Indian economic enterprise.
We deny the protest.
The IFB was issued on June 17, 1996, as a total set-aside for
Indian-owned concerns pursuant to the Buy Indian Act, 25 U.S.C. sec. 47
(1994). The IFB required Indian economic enterprises to prepare a
Representation Declaration as part of their bids, certifying their
status as eligible Indian economic enterprises. The IFB defined
"Indian economic enterprise" to mean:
"any business entity (whether organized for profit or not) which:
(1) is at least 51 percent owned by one or more Indian(s) or an
Indian tribe(s); and (2) one or more of those owners must be
involved in daily business management of the economic enterprise;
and (3) the majority of the earnings of which accrue to such
Indian person(s)."
The IFB stated, further, that these requirements had to exist when the
firm's bid was submitted, at the time of award, and during the term of
the contract.
Five firms, including Chattin/Ashton, submitted bids. When bids were
opened, it was apparent that Chattin/Ashton had submitted the lowest
price. However, the contracting officer had some concerns about the
joint venture's eligibility as an Indian-owned economic concern and
requested some additional information to clarify the issue. After
reviewing Chattin/Ashton's response, the agency concluded that there
was some question whether Chattin, as the Indian-owned concern, would
receive a majority of the earnings under the contract and whether its
owner would exercise control over the project.
The certification of eligibility as an Indian economic enterprise that
Chattin/Ashton submitted with its bid showed that Chattin, which was
designated as the Managing Party, has a 51-percent interest in the
joint venture, while Ashton's interest is
49 percent. The agency questioned whether Chattin would, in fact,
receive
51-percent of the earnings under the contract, since the joint venture
agreement showed that Ashton would provide any funding necessary, and
would receive
10-percent interest from the joint venture on its loan; in addition,
Ashton would perform a number of administrative services, such as
preparing the accounts payable, providing accounting services,
preparing tax returns, providing safety training, and preparing the
bid, for which it would be compensated at an unspecified rate. The
contracting officer also questioned whether the joint venture
agreement would allow Chattin to exercise control over the project or
even be sufficiently involved in the daily management of the joint
venture. Although Chattin was to be in the role of "Managing Party,"
the joint venture agreement provided that Chattin's authority would be
"subject to the superior control and authority of the Management
Committee," which would hold the ultimate decision-making authority.
The Management Committee was to consist of two members, one from each
of the two firms, with each member holding equal power. Any disputes
between the two members were to be resolved by a third-party
arbitrator. The contracting officer further noted that Ashton would
provide the equipment for the project; Ashton's office would be the
joint venture's principal place of business; Ashton's experience was
more directly relevant to the work that was to be performed. The
contracting officer concluded that Chattin/Ashton did not meet the Buy
Indian Act's eligibility requirements and rejected its bid. Award was
made to Blaze Construction as the second low bidder. This protest
followed. Chattin/Ashton protests that the agency's ineligibility
determination was unreasonable.[1]
As the protester recognizes, defining the criteria that a firm must
meet to qualify as an Indian enterprise and the quantum of evidence
required to establish compliance with the established criteria falls
within the broad discretion of the agency. See Yellowhorse Indus.,
B-250282, Jan. 12, 1993, 93-1 CPD para. 35. Our Office will not disturb
decisions regarding such eligibility unless they are shown to be
arbitrary, unreasonable, or in violation of law or regulation.
Arrowhead Constr., Inc./FNF Constr., Inc., B-251707; B-251708, Apr.
19, 1993, 93-1 CPD para. 334. Further, in order for an economic
enterprise, such as a joint venture, to be eligible for award under a
Buy Indian set-aside, pursuant to BIA policy, the Indian owner must
control the joint venture, as evidenced by its having a majority
ownership interest in the joint venture; the Indian owner must be
involved in the daily business management of the joint venture; and
the Indian owner must receive the majority of any profits earned by
the joint venture. Id.
Here, we think the agency could reasonably conclude that
Chattin/Ashton failed to demonstrate that the Indian partner would
exercise management and control of the joint venture, and that the
rejection of the protester's bid was therefore reasonable.
Notwithstanding Chattin's 51-percent interest in the joint venture,
Chattin was to hold only 50 percent of the voting power on the
Management Committee, the governing body of the joint venture.
Specifically, the management committee is vested with authority "to
act for and bind the parties to the Joint Venture in connection with
all or any part of the performance of said contract." Any actions
taken on behalf of the Joint Venture would require unanimous agreement
by the Management Committee. After listing a number of duties the
Project Manager was to fulfill, the joint venture agreement stated
that "[n]otwithstanding this delegation of authority, the Management
Committee may at any time direct the Project Manager in any manner by
unanimous vote." In the event a unanimous agreement cannot be reached,
the joint venture agreement's disputes provision requires the dispute
to be settled by arbitration. In these circumstances, where the
Indian-owned firm does not have sufficient voting power to prevail in
a dispute regarding the performance of the contract or the operation
of the enterprise, the Indian owner cannot be said to control the
joint venture. See Arrowhead Constr., Inc.,/FNF Constr., Inc., supra;
Yellow Horse Inds., supra.
Chattin/Ashton argues that the agency has erred by applying the wrong
standard. Instead of requiring management and control of the
contract, the protester states, the BIA manual requires "daily
business management of the economic enterprise." 20 BIA Manual sec.
2.1.c (1990). Notwithstanding this assertion, we note that the joint
venture was formed for the express purpose of performing the contract
at issue, and thus we find the contract indistinguishable from the
enterprise; moreover, the fact that Chattin will only hold 50 percent
of the voting power on the Management Committee, which ultimately
controls the actions taken on behalf of the joint venture, renders
this distinction irrelevant.
The protest is denied.
Comptroller General
of the United States
1. Chattin/Ashton first challenged the rejection of its bid on
procedural grounds, arguing that the contracting officer failed to
file a formal objection questioning the firm's eligibility declaration
and failed to refer the matter to the chief of the contracting office,
which it alleges is required by the Department of the Interior's BIA's
Acquisition Regulation, as set forth at 48 C.F.R. Parts BIA 1480-1499.
However, the agency points out that the authority upon which the
protester relies is a proposed regulation that has never been
finalized or implemented. See Proposed Acquisition Regulations: Buy
Indian Act Procedures for Contracting, 56 Fed. Reg. 46468, 46475.