1. Partnering for Success SHERRY ROSE Procurement Technical Assistance Center by Presents ALLIANCE FOR BUSINESS CONFERENCE MARCH 10, 2010 ALLIANCE FOR BUSINESS CONFERENCE MARCH 10, 2010

2. JOINT VENTURES, TEAMING ARRANGEMENTS, ETC. Partnering for Success

3. Why Partner? 1) Increase Competitive Edge 1) Increase Competitive Edge 2) Enhance Capabilities 2) Enhance Capabilities 3) Diversify 3) Diversify 4) Compete with Large Firms 4) Compete with Large Firms

4. General Affiliation: How does SBA determine affiliation? How does SBA determine affiliation? Concerns and entities are affiliates of each other when one controls or has the power to control the other, or a third party (or parties) controls or has the power to control both Concerns and entities are affiliates of each other when one controls or has the power to control the other, or a third party (or parties) controls or has the power to control both It does not matter whether control is exercised, so long as the power to control exists It does not matter whether control is exercised, so long as the power to control exists Factors: ownership, management, previous relationships or ties; contractual relationships. Factors: ownership, management, previous relationships or ties; contractual relationships.

5. Control may be positive or negative (e.g., negative control where shareholder has ability to prevent quorum or otherwise block actions of board or directors) Control may be positive or negative (e.g., negative control where shareholder has ability to prevent quorum or otherwise block actions of board or directors) Totality of circumstances, even though one single factor is insufficient for finding of control. Totality of circumstances, even though one single factor is insufficient for finding of control. In determining size, SBA counts the receipts or employees of the concern and all of its domestic and foreign affiliates, regardless of whether organized for profit. In determining size, SBA counts the receipts or employees of the concern and all of its domestic and foreign affiliates, regardless of whether organized for profit.

6. Affiliation Some General Principles of Affiliation (13 CFR 121.103)  Power to Control  Common Managers  Common Stockholders  Identical Business Interests  Contractual Relationships  Joint Venture Arrangements

7. What is a Joint Venture? A joint venture is… an association of individuals and/or concerns with interests in any degree or proportion by way of contract, express or implied, consorting to engage in and carry out no more than three specific or limited-purpose business ventures for joint profit over a two-year period, for which purpose they combine their efforts, property, money, skill, or knowledge, but not on a continuing or permanent basis for conducting business generally.

8. What is a Joint Venture? This means that… The joint venture entity cannot submit more than three offers over a two-year period, starting from the date of the submission of the first offer. A joint venture may or may not be in the form of a separate legal entity. The joint venture is viewed as a business entity in determining power to control its management. SBA may also determine that the relationship between a prime contractor and its subcontractor is a joint venture, and that affiliation between the two exists.

9. Affiliation Parties to a Joint Venture are considered to be affiliates if submitting offers on a particular procurement.

10. Affiliation SBA may also determine that the relationship between a prime contractor and its subcontractor is a joint venture, and that affiliation between the two exists.

11. A contractor and subcontractor are treated as joint venturers if the ostensible subcontractor will perform primary and vital requirements of a contract or if the prime contractor is unusually reliant upon the ostensible subcontractor. All requirements of the contract are considered in reviewing such relationship, including contract management, technical responsibilities, and the percentage of subcontracted work. Ostensible Subcontracting: 13 CFR 121.103 (h)(4) What is Ostensible Subcontracting?

12. 1.Which party chased the contract? 2.What degree of collaboration was there between the prime contractor and subcontractor on the proposal? 3.Which party possesses the requisite background and expertise to carry out the contract? 4.Who will manage the contract? Seven-Factors Test

13. 5.Are there discrete tasks to be performed by each party, or is there commingling of personnel and materials? 6.What is the amount of work to be performed by each party? 7.Which party performs the more complex and costly contract functions? Seven-Factors Test

14. The “seven factors” test is only one tool used by SBA to evaluate whether the relationship is a true prime/subcontractor relationship or a joint venture under the ostensible subcontractor regulations. It is not the exclusive test of the presence of unusual reliance. Ultimately, a finding of unusual reliance, which rises to the level of a joint venture affiliation, must be a reasonable conclusion based on the totality of the circumstances. Seven-Factors Test

15.  Decisions made by the Office of Hearings and Appeals (OHA) in Washington can provide insight on “ostensible subcontracting.” If you’re concerned, go to: www.sba.gov/oha and then “search decisions.”  Search using key words such as “ostensible subcontracting” or “totality of the circumstances” or “joint venture.” To learn more

16. Affiliation  Know how to advise a firm to form a Joint Venture without becoming affiliated with its partner! Affiliation with another partner could result in a finding that a firm is no longer a small business.

17. Affiliation There is an Exception to Every Rule!

18. Exclusion from Affiliation A joint venture arrangement of two or more business concerns may submit an offer as a small business for a Federal procurement without regard to affiliation provided…

19. Exclusions 1) Each concern is small under the size standard corresponding to the NAICS code assigned to the contract, provided: A) The procurement qualifies as a “bundled” requirement, at any dollar value; or…

20. Exclusions B) The procurement is other than a “bundled” requirement and: For a procurement having a revenue-based size standard, the dollar value or the procurement, including options, exceeds half the size standard corresponding to the NAICS code assigned to the contract…or…

21. Exclusions For a procurement having an employee- based size standard, the dollar value of the procurement, including options, exceeds $10 million.

22. Bundled requirement or bundling refers to the consolidation of two or more procurement requirements for goods or services previously provided or performed under separate smaller contracts into a solicitation of offers for a single contract that is likely to be unsuitable for award to a small business. What is a Bundled Requirement?

23. Mentor - Protégé Two firms approved by SBA to be a mentor and protégé under 13 CFR 124.520 may joint venture as a small business for any Federal Government procurement, provided… …the protégé qualifies as small for the size standard corresponding to the NAICS code assigned to the procurement, …and, for purposes of 8(a) sole source requirements, has not reached the dollar limit set forth in 13 CFR 124.519.

24. 8(a) BD Participants A joint venture or teaming arrangement of at least one 8(a) Participant and one or more other business concerns may submit an offer for a competitive 8(a) procurement without regard to affiliation so long as the requirements of 13 CFR 124.513(b)(1) are met.

25. Requirements of 13 CFR 124.513(b)(1) The requirements of 13 CFR 124.513(b)(1) include the following: A joint venture of at least one 8(a) Participant and one or more other business concerns may submit an offer as a small business for a competitive 8(a) procurement so long as each concern is small under the size standard corresponding to the NAICS code assigned to the contract, provided…

26. 1) The size of at least one 8(a) Participant to the joint venture is less than one half the size standard corresponding to the NAICS assigned to the contract; and (a) For a procurement having a revenue-based size standard, the procurement exceeds one half the size standard corresponding to the NAICS code assigned to the contract; or (b) For a procurement having an employee- based size standard, the procurement exceeds $10 million; (b) For a procurement having an employee- based size standard, the procurement exceeds $10 million; Requirements of 13 CFR 124.513(b)(1)

27. Service Disabled Veteran-Owned 13 CFR 125.15 (b) An SDVOSB may enter into a joint venture agreement with one or more other small businesses for the purpose of performing an SDVOSB contract – An SDVOSB may enter into a joint venture agreement with one or more other small businesses for the purpose of performing an SDVOSB contract – Joint venture of at least one SDVOSB and one or more other business concerns may submit an offer for a competitive SDVOSB procurement so long as each concern is small under the applicable NAICS code and size standard, provided: Joint venture of at least one SDVOSB and one or more other business concerns may submit an offer for a competitive SDVOSB procurement so long as each concern is small under the applicable NAICS code and size standard, provided: - For a revenue-based size standard, the procurement exceeds half the size standard corresponding to the applicable NAICS code; -For an employee-based size standard, the procurement exceeds $10 million. - The joint venture must contain provisions set forth in the regulations.

28. -For sole source and competitive SDVOSB procurements that do not exceed dollar levels, an SDVOSB entering into a joint venture agreement with another concern is considered to be affiliated with respect to performance of the SDVOSB contract (annual receipts or employees must meet applicable size standard). SDVOSB must -For sole source and competitive SDVOSB procurements that do not exceed dollar levels, an SDVOSB entering into a joint venture agreement with another concern is considered to be affiliated with respect to performance of the SDVOSB contract (annual receipts or employees must meet applicable size standard). SDVOSB must Be managing partner of jv and project manager Be managing partner of jv and project manager Receive at least 51% of net profits of jv Receive at least 51% of net profits of jv The jv must perform applicable percentage of work The jv must perform applicable percentage of work

29. Prime Contractor Performance Requirements (Limitations On Subcontracting) ( 13 CFR 125.6) In order to be awarded a full or partial small business set-aside contract, 8(a) contract, or an unrestricted procurement where firm claims 10% SDB price evaluation preference, a small business concern must: In order to be awarded a full or partial small business set-aside contract, 8(a) contract, or an unrestricted procurement where firm claims 10% SDB price evaluation preference, a small business concern must: In the case of a contract for services (except construction), perform at least 50 percent of the cost incurred for personnel with its own employees In the case of a contract for services (except construction), perform at least 50 percent of the cost incurred for personnel with its own employees In the case of a contract for supplies or products (other than procurement from a non-manufacturer of such supplies or products), perform at least 50 percent of the cost of manufacturing the supplies or products (not including the cost of materials) In the case of a contract for supplies or products (other than procurement from a non-manufacturer of such supplies or products), perform at least 50 percent of the cost of manufacturing the supplies or products (not including the cost of materials) In the case of a contract for general construction, perform at least 15 percent of the cost of the contract with its own employees (not including cost of materials) In the case of a contract for general construction, perform at least 15 percent of the cost of the contract with its own employees (not including cost of materials) In the case of a contract for construction by special trade contractors, perform at least 25 percent of the cost of the contract with its own employees (not including cost of materials) In the case of a contract for construction by special trade contractors, perform at least 25 percent of the cost of the contract with its own employees (not including cost of materials) An SDVOSB – same percentages apply, except percentages may be met by the SDVOSB prime contractor or the employees of other SDVOSB’s. A HUBZone small business – same percentages; however, service and manufacturing percentages may be met by one or more qualified HUBZone small businesses.

30. Supply of Manufactured Products (13 CFR 121.406) On a small business set-aside or 8(a) contract, a small business must – On a small business set-aside or 8(a) contract, a small business must – Be the manufacturer of the end item being procured (end item must be manufactured in the U.S), or – Be the manufacturer of the end item being procured (end item must be manufactured in the U.S), or – Qualify as a non-manufacturer, kit assembler, or supplier under Simplified Acquisition Procedures. Qualify as a non-manufacturer, kit assembler, or supplier under Simplified Acquisition Procedures.

31. Non-Manufacturer Does not exceed 500 employees Does not exceed 500 employees Is primarily engaged in retail or wholesale trade and normally sells type of item being supplied Is primarily engaged in retail or wholesale trade and normally sells type of item being supplied Will supply the end item of a small business manufacturer or processor made in the United States (unless a waiver has been granted by SBA) Will supply the end item of a small business manufacturer or processor made in the United States (unless a waiver has been granted by SBA) NOTE: THERE ARE NO WAIVERS TO THE NON-MANUFACTURING RULE FOR HUBZONE CONTRACTS (13 CFR 126.601(e)(1)) NOTE: THERE ARE NO WAIVERS TO THE NON-MANUFACTURING RULE FOR HUBZONE CONTRACTS (13 CFR 126.601(e)(1))

32. Kit Assembler Where the manufactured item is a kit of supplies or other goods provided for a special purpose, the small business offeror must – Where the manufactured item is a kit of supplies or other goods provided for a special purpose, the small business offeror must – Have fewer than 500 employees, AND Have fewer than 500 employees, AND 50 percent of the total value of the components of the kit must be manufactured by U.S. small businesses under the size standard for the applicable NAICS code 50 percent of the total value of the components of the kit must be manufactured by U.S. small businesses under the size standard for the applicable NAICS code The offeror need not itself be the manufacturer of any of the items assembled The offeror need not itself be the manufacturer of any of the items assembled If the Government has specified an item for the kit which is not produced by U.S. small business concerns, such item shall be excluded for calculation of total value. If the Government has specified an item for the kit which is not produced by U.S. small business concerns, such item shall be excluded for calculation of total value.

33. Simplified Acquisition Procedures Where the procurement for a manufactured item is processed under Simplified Acquisition Procedures (13.101 of FAR – 48 CFR 1301) and where the anticipated contract cost will not exceed $25,000, offeror need not supply end product of a small business concern as long as the product is manufactured or produced in the U.S. and the offeror has fewer than 500 employees. Where the procurement for a manufactured item is processed under Simplified Acquisition Procedures (13.101 of FAR – 48 CFR 1301) and where the anticipated contract cost will not exceed $25,000, offeror need not supply end product of a small business concern as long as the product is manufactured or produced in the U.S. and the offeror has fewer than 500 employees. Offeror need not be manufacturer Offeror need not be manufacturer Does not apply to subcontractors. Does not apply to subcontractors.

34. What is a Manufacturer? There can be only one manufacturer of the end item being acquired There can be only one manufacturer of the end item being acquired With its own facilities, performs the primary activities in transforming inorganic or organic substances, including the assembly of parts and components, into the end item being acquired. With its own facilities, performs the primary activities in transforming inorganic or organic substances, including the assembly of parts and components, into the end item being acquired. End item must possess characteristics which, as a result of mechanical, chemical or human action, it did not possess before original substances, parts or components were assembled or transformed. End item must possess characteristics which, as a result of mechanical, chemical or human action, it did not possess before original substances, parts or components were assembled or transformed. Firms that add substances, parts or components to an existing end item to modify its performance will NOT be considered end item manufacturer where those identical modifications can be performed by and are available from manufacturer. Firms that add substances, parts or components to an existing end item to modify its performance will NOT be considered end item manufacturer where those identical modifications can be performed by and are available from manufacturer.

35. What are the Evaluation Factors? Evaluation factors: Evaluation factors: Proportion of total value added by efforts of the concern, excluding costs of overhead, testing, quality control, and profit; Proportion of total value added by efforts of the concern, excluding costs of overhead, testing, quality control, and profit; Importance of the elements added to the function of the end item, regardless of relative value; Importance of the elements added to the function of the end item, regardless of relative value; Concern’s technical capabilities; plant, facilities and equipment; production or assembly line processes; packaging and boxing operations; labeling of products; and product warranties. Concern’s technical capabilities; plant, facilities and equipment; production or assembly line processes; packaging and boxing operations; labeling of products; and product warranties.

36. Computer Assemblers Firms that provide computer and other information technology equipment primarily consisting of components parts (such as motherboards, video cards, network cards, memory power supplies, storage devices, and similar items) who install components totaling less than 50% of the value of the end item are generally NOT considered the manufacturer of the end item. Firms that provide computer and other information technology equipment primarily consisting of components parts (such as motherboards, video cards, network cards, memory power supplies, storage devices, and similar items) who install components totaling less than 50% of the value of the end item are generally NOT considered the manufacturer of the end item.

37. 1535 Bacharach Blvd. Atlantic City, NJ 08401 Phone 609-343-4845 Fax: 609-343-4710 SHERRY ROSE Procurement Technical Assistance Center E-mail: srose@adm.njit.edu