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.