Reminder: Joint Venture Agreements Must Include Required Provisions

It’s no secret that federal contract opportunities are becoming more and more competitive. But as we’ve previously gushed, small businesses enjoy a tremendous tool for enhancing their competitiveness: participating in a joint venture with another company.

Properly formed, a joint venture allows its participants to augment their capabilities and experiences in the quest to win (and successfully perform) a particular opportunity. But there’s the trick—to enjoy the benefits of a joint venture, that joint venture must meet various regulatory requirements. One misstep and the joint venture might not be eligible for the award.

A recent SBA Office of Hearings and Appeals decision shows the importance of making sure these regulatory requirements are met.

We’ve previously written about the requirements for the SBA’s various socio-economic joint venture programs. Among the most intensive are the requirements that a joint venture agreement “itemize all major equipment, facilities, and other resources to be furnished by each party to the joint venture, with a detailed cost or value of each, where practical,” and “specify the responsibilities of the parties with regard to negotiation of the contract, source of labor, and contract performance.” E.g., 13 C.F.R. § 125.18(b)(2)(vii) (the section which has the SDVOSB joint venture agreement requirements; cleaned up). If a joint venture agreement doesn’t provide this information in enough detail, it can be found noncompliant and, thus, the joint venture could lose its eligibility for the award.

As you might notice, these requirements aren’t always the easiest to meet. That’s particularly true in the case of indefinite awards, where awardees will compete for substantive task orders under a base contract. But in those instances, the regulations give joint ventures a path to compliance: the venturers can provide a general description of their provisions or responsibilities, or, in the alternative, specify how they will provide them once a definitive scope of work is made available.

This path, however, doesn’t mean that a joint venture agreement doesn’t have to meet the substantive requirements. Rather, joint venture agreements usually include an addendum that details these contract-specific items once this scope of work is made known. This addendum, moreover, should be completed and signed (and approved by the SBA or CVE, if required) before bids are submitted.

But what happens if a joint venture fails to provide this contract-specific information? As the SBA OHA recently affirmed, the joint venture’s agreement isn’t compliant and, therefore, the joint venture isn’t eligible for the award.

In Department of Veterans Affairs, SBA No. CVE-148-P (Apr. 9, 2020), the SBA OHA was called on to consider an SDVOSB eligibility protest filed by the VA against a joint venture called CR Nationwide, LLC – Trumble Construction, Inc. JV1. The joint venture was named by the VA as the apparent awardee under a procurement, but the VA was concerned that the joint venture agreement did not meet the relevant regulatory requirements, so it asked the OHA to consider the issue.

The OHA found that the SDVOSB joint venture agreement did not provide enough contract-specific information. Instead, the joint venture agreement said that, “after determining the scope of work” for the anticipated contract, the venturers would “prepare and submit to the contracting authority a jointly executed statement” that itemizes all major equipment, facilities, and resources to be furnished by each party, and that specifies their respective responsibilities regarding contract negotiation, source of labor, and contract performance.

The problem, however, was that the parties never actually executed that joint statement, so the joint venture agreement failed to provide the needed information. As a result, the joint venture agreement was found noncompliant, and the joint venture lost its potential award.

If this issue sounds familiar, it’s because you’ve probably read about it on SmallGovCon before. In 2019, we wrote that this exact same joint venture was found ineligible for this exact same issue. But even with this caution, the joint venture still failed to meet the regulatory requirements.

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So what’s the takeaway from this appeal? Joint venture agreements must meet detailed regulatory requirements or risk noncompliance (and, thus, ineligibility for award). Even for contract-specific items for indefinite opportunities, however, joint venturers must be careful to supplement their agreements with the needed information before submitting their bids. If they don’t, they can be found to be ineligible.

If you have any questions about the SBA’s joint venture programs, please give me a call.