Joint Venture Affiliation Exception Isn’t Unlimited, OHA Says

To encourage joint venturing, the SBA’s size regulations provide a limited exception from affiliation for certain joint venturers: a joint venture qualifies for award of a set-aside contract so long as each venturer, individually, is below the size standard associated with the contract (or one venturer is below the size standard and the other is an SBA-approved mentor, and they have a compliant joint venture agreement). In other words, the SBA ordinarily won’t “affiliate” the joint venturers—that is, add their sizes together—if the joint venture meets the affiliation exception.

Because of this special treatment, it can be easy for the venturers to assume that they are completely exempt from any kind of affiliation. But as the SBA Office of Hearings and Appeals recently confirmed, however, the exception isn’t nearly so broad.

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SBA Affiliation and Joint Ventures: SBA OHA Explains the Rules

Is a small business affiliated with its joint venture partner?  Forgive the stereotypical lawyerly response, but the answer is “yes and no.”  A small business is affiliated with its joint venture partner on a procurement-specific basis, but typically is not affiliated with its joint venture partner on an ongoing basis.  The SBA’s Office of Hearings and Appeals succinctly explained the basic rules relating to joint ventures and affiliation in Size Appeal of Innovative Resources, SBA No. SIZ-5238 (2011).

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