Joint Ventures – a Great Way to Team on Federal Government Contracts
Most people are familiar with the concept of Joint Ventures (JVs); however there are many companies that could successfully use a joint venture, but aren’t aware of the particulars and benefits. This article provides a high level overview of JVs. You can contact us if you have any questions or need additional information.
JVs consist of two or more parties who team to create a new entity for the purpose of executing a particular business undertaking, such as pursuing a federal government contract. This enables them to pool their resources (staff, management, finances) and jointly present their past performance as a team.
Small and newer contractors should consider JVs because it will allow the pursuit of larger contracts (revenue and/or people) or gives the “prime” – the JV – stronger past performance because both parties’ experience counts as the prime’s, as opposed to a situation when only a subcontractor has the experience (skills/people/capabilities) or past performance. This can give the Team a stronger position for evaluation.
JVs can be extremely beneficial for 8(a) certified firms that have the skills necessary to perform on a contract, but not enough past performance or experience supporting a specific agency. New rules relating to 8(a) JVs took effect on February 11, 2011 revising the regulations pertaining to the 8(a) Business Development Program. One of the biggest changes is that the JV may be awarded up to 3 contracts over a 2-year period without a finding of general affiliation. Previously the rules stated that the JV could only bid on 3 contracts — a definite improvement. If you are considering creating an 8(a) JV, you should contact the SBA before starting the paperwork and before the proposal is submitted. The SBA has specific guidelines and forms that must be used in order for a JV Agreement (JVA) to be approved. If their format is not used, your JVA will probably be rejected, and as a result, the agency cannot award the contract to the JV. For more information on the regulations pertaining to awarding an 8(a) contract to a JV, reference 13 C.F.R. § 124.513(a)(1).
Creating a JV is not necessarily complicated, but there are SBA regulations that govern small business JVs and even more specific regulations for creating 8(a) certified JVs. When creating a JV, you need to seek the advice/counsel of someone familiar with JVAs for government contracts and knows the corresponding regulations. JVAs have nuances that are different from general business law, so make sure that your legal counsel or contracts administration professional is not only familiar with JVAs, but is up-to-date on recent legislation affecting JVs.