I am a grandparent raising grandchildren too. I think it's okay. If they are always supervised it is not a big deal in my opinion. If you think their behavior is questionable then by all means do something about it.
Of course if you say he has to go it will be the end of the world for her...he will be even more desirable.
I know of 3 couples that met in 6th or 7th grade, when they moved from elementary school to Jr. High. They are still married and have grandchildren and one couple has great grandchildren.
So, sometimes they will end up together sometimes it is just a "first love" kind of situation. She is old enough become pregnant so I would make sure she understood that and what causes pregnancy, etc...some kids may seem like they understand it but they may not.
I participated in a study done by a friend of mine during grad school. A nearby town, very very tiny town, had the highest percentage of teen pregnancies in that state. We went in and did a research project to try to figure out why the teens in this particular town were all coming up pregnant.
The research showed that a vast majority of them did not have strong relationships with their parents, many were in single parent homes. Also a LOT of them, even though they had sex ed, did NOT understand the workings of the reproductive system. They had old wives tales they had heard, they had locker room advice, etc...they did not understand that sex equaled a baby. They also, nearly every single girl, stated they were glad they got pregnant, they now had someone that would love them unconditionally.
I worry that my grand kids feel rejected by the person they are supposed to be loved by the most, their parents. It is a natural conclusion for them to feel something is unlovable about themselves, that they are the reason their parents don't want them or that they left.
I know that they are at risk for engaging in sex at a younger age so they can feel loved. It is something that when the time is right and "the talk" happens I am going to stress about.
With all that said.....if you are taking precautions that they are always supervised and that your grand daughter understands about sex then I think they are more than okay for group activities with you or other parents along, not other kids in a group like going to the movies, a group thing that includes the parents or other adults that are trustworthy.