Morris Manning & Martin, LLP

SBA Rule Sets Up Security Clearance Clash With DoD


A U.S. Small Business Administration rule intended to provide clarity for mentor-protege agreements hasn't resolved uncertainty for related joint ventures that require security clearances, leaving those ventures to potentially miss out on deals their members are individually eligible for.

In a final rule that went into effect on Nov. 16, the SBA said that a mentor-protege joint venture can use a facility security clearance from one of its partner companies, as long as related information is kept within the secured facility. Noting that some federal agencies had rejected joint ventures' bids for contracts when the venture didn't have its own security clearance, the SBA said that it "does not believe that such a restriction is appropriate."

But the SBA's proposal may not make any practical difference for joint ventures seeking federal deals that involve classified information because the SBA doesn't have the authority to either issue or deny security clearances. Contracting agencies may choose to defer to the U.S. Department of Defense's position on the rule, which hasn't been publicly stated, if it differs from the SBA's, according to Michelle Litteken, of counsel at Morris Manning & Martin LLP, who frequently advises clients on SBA programs.

"If a current JV that doesn't have a clearance submits a proposal, goes through all that time and effort to put together a proposal for a contract that requires a clearance, it's not out of the question that the procuring agency is going to deem them ineligible," she said.

Read more, as Michelle Litteken delves into the challenges and the benefits for small business contracts deriving from the new Rule. Law360 membership required.