“Educating the Government Contracting Community”

Airport MBE JV Agreement That Crashed on Take-Off

Airport MBE JV Agreement…

International Airport (or other large public contracting agency) announces or issues a Request for Proposals (RFP) that requires bidders to address minority business enterprise (MBE) participation goals. And the predictable scramble among large non-MBE companies to find suitable MBE team members and Joint Venture partners ensues. What a rush! There's strategy, courtship, gamesmanship, competitive intelligence gathering, and for many a hurried push to ink a deal that can be made an exhibit to a proposal. Even for experienced government contractors, this scenario is a recipe for failure.

Late in 2006, the Indiana International Airport (IAA) issued just such an RFP seeking proposals for parking companies to provide valet parking services. Upon seeing that RFP, Global Parking System of Indiana, Inc. (Global), an Indiana- state-certified, MBE provider of shuttle services pursued and entered into a Letter Agreement and a Joint Venture Agreement (JV) with a non-MBE provider of valet parking, garage/lot management, and shuttle services, Parking Solutions, Inc. (PSI), for the purposes of securing the award of the IAA valet parking services contract and other government contracts issued by the Indiana International Airport, Indiana casinos, hospitals, hotels, and other entities for "parking and parking related services." After submitting several joint proposals for different contracting opportunities and receiving award of some from January 2007 to October 2012, the parties stopped pursuing contracts jointly and sued each other for breach of contract in 2013. Global Parking System of Indiana, Inc. v. Parking Solutions, Inc., No. 1:13-cv-00284-RLY-DM, (S.D. IN) (March 16, 2013).

As of the writing of this article, the litigation continues in federal district court in Indianapolis. Why? Because the Letter Agreement and the JV Agreement contained phrases that are ambiguous and not subject to clear interpretation by the Court. The Judge recently ruled that the parties' use of the phrase "parking and parking related services" in both the Letter Agreement and the JV Agreement made it impossible to determine which of two possible interpretations the parties intended. Given the nature of their businesses and the specific opportunity that triggered their interest in creating the JV Agreement, one would think that the phrase "parking and parking related services" would be one that that parties would ensure that they both mutually understood and explicitly articulated in their agreements.

The Letter Agreement and the JV Agreement both use the phrase "parking and parking related services." The Letter Agreement provided that the phrase would have the meaning set forth for it in the "applicable Joint Venture Agreement and related Parking Contracts." But the JV Agreement defined that phrase to mean "valet parking services and all other services, excluding automobile detailing, related to valet parking." According to the Judge it was equally reasonable to believe that the parties intended for "parking related services" to be limited to those services only associated with valet parking or to other types of parking services, such as shuttle service, as could be found in future "related Parking Contracts."

The Judge ruled that the "Right of First Refusal" provision also contained an ambiguous phrase -- "potential State/Casino Contract." According to the Judge, the term "potential" rendered that phrase ambiguous because it could just as easily mean the first time that a party received information regarding a State/Casino contracting opportunity or when the proposal converted into an actual opportunity for a subcontract to the JV partner.

What small business government contractor can afford to spend years and tens of thousands of dollars on attorneys to have a federal judge tell them that the Joint Venture Agreement they signed 9 years ago is not written clearly enough for a judge to understand it?

Contemplating a Teaming Agreement, Joint Venture Agreement, Subcontractor Agreement, Mentor-Protege Agreement, or other strategic relationship? Become a GCARL Member and we'll work with you to ensure that your agreements are clear; that they say what they mean and mean what they say. GCARL Membership Info.

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