1. A Guide for Government Contractors
Joint Ventures 101
A Guide for Government Contractors

2. Introduction Understand what a Joint Venture Is
Understand what a Joint Venture Looks Like
Understand the purpose of a Joint Venture
Understand how the SBA Treats Joint Ventures
Understand how SBA Joint Ventures Relate to Other SBA Rules
Understand the Joint Venture Timeline
Avoid Pitfalls in the Process

3. Understanding Joint Ventures What Is It, Exactly?

4. Joint Venture Is a “New Business” (Maybe)
Two or more companies come together to perform a single contract at the prime contract level.
Partnership, LLC, Corporation, “Pseudo-Partnership”
A series of agreements between or among the ventures and possibly a registration of a new business entity with the State
The agreements could include an “operating agreement,” a “partnership agreement,” a “bylaws,” a “shareholders’ agreement,” a “joint venture agreement.”

5. What Does a Joint Venture Look Like
Single face to the Government
Chosen Business Form
A commitment to work together in a tighter relationship than the normal prime/sub for the project or projects.
Partnership, LLC, Corporation

6. Understand The Purpose of A Joint Venture Why Not Just Prime Sub?

7. General Advantages of a Joint Venture
Enable companies to spread risks of prime-contracting
Permit companies to leverage their combined capital
Allow all parties to have a voice and control over how the contract is performed and managed
Enable parties to share in profits of the entire project
Enable parties to develop direct relationships with the government agency contracting officials

8. Specific Small Business Related Advantages
Allows small businesses to team with other small businesses to go after bigger contracts
If the joint venture is made pursuant to an approved mentor-protégé agreement, allows small businesses to lean on a large business, and allows a large business to pursue work it would otherwise not qualify for.

9. The SBA and Joint Ventures What is this Affiliation Thing Again?

10. Size Status Based on Affiliation
SBA will aggregate the revenues of a company an all of its “affiliates” to determine the size of the company.
There are many different things that can cause affiliation – common ownership, familial relationships, undue reliance based on loans, contracts, or other relationships.
The ostensible subcontractor rule.
Joint ventures are affiliated with their co-venturers – except.

11. Exception to Joint Venture Based Affiliation
If both members of a joint venture are small in the relevant NAICS code.
If the members of a joint venture are also in a mentor protégé relationship.
Two additional rules to allow a company to take advantage of this exception:
The joint venture must be “unpopulated,” and
The joint venture must adhere to the “three-in-two” rule
Except that “three-in-two” may not be a complete bar to the affiliation exception.

12. Mentor Protégé – 8(a)
Submit a proposed mentor-protégé agreement for SBA approval.
The agreement must address how assistance will be provided that will help the protégé firm meet the goals established in its SBA-approved business plan.
Must describe specific assistance the mentor will give.
Mentor can offer a loan or an equity investment up to 40% in addition to assistance.

13. Mentor-Protégé All Small
Submit a proposed mentor-protégé agreement for SBA approval.
The business need (goal), as outlined by the Protégé, in one or more of the eligible categories for assistance.
The mentor’s plan to address that need (goal).
The timeline for a need (goal) to be met.
The measure by which SBA will determine the successful accomplishment of the goal.
Must describe specific assistance the mentor will give.
Mentor can offer a loan or an equity investment up to 40% in addition to assistance.

14. Timeline Start before the RFP is Published

15. Steps Identify a potential joint venture
Come to an agreement about the general shape and form of the joint venture
If this is to be a mentor-protégé relationship, prepare the mentor-protégé agreement
Prepare the joint venture agreement and whatever other legal documents are required
Prepare whatever administrative steps are required (bank account, office lease if necessary, etc.)
Prepare whatever operational steps are required (work share, etc.)
For a mentor-protégé relationship, submit all the documents for SBA approval
A joint venture need not be approved before a bid is submitted, but it must be approved before a contract is awarded

16. Pitfalls What do you mean it was supposed to be unpopulated?

17. Common Pitfalls Waiting too long to start the Joint Venture process.
Not closely vetting potential Joint Venture partners.
Not giving the details of the operating arrangement enough attention.
Not giving the details of the legal arrangement enough attention.
Not checking the agreements against the SBA requirements and suggestions and modifying them to match.

18. Conclusion
Joint Ventures are a great way to leverage complementary strengths and cover for weaknesses.
Take your time to really think through how you might use a joint venture to further your strategic plans.
For an SBA joint-venture (small only or mentor protégé), dot your I’s and cross your T’s on the operational, administrative, and legal requirements for a successful joint venture.

19. Questions?

20. Christopher Shiplett
Phone: (703)
Web: randolphlaw.com