Fans of the blog know that we’re wild about joint ventures: they allow small business contractors to use their size status while, at the same time, leveraging their joint venture partner’s experience and capabilities.
But joint ventures—particularly joint ventures under one of the SBA’s socioeconomic programs—can be tricky to create. For joint ventures between a small and a large company, the venturers first need an approved mentor-protégé agreement. And regardless, for the joint venture to qualify under a socioeconomic designation, that joint venture must have a compliant agreement.
But that’s still not enough to create a compliant joint venture. As a recent SBA Office of Hearings and Appeals decision explains, the small business venturer must unequivocally control the joint venture.
Joint ventures and small business subcontracting are two issues near and dear to the hearts of many small business federal contractors. Well, the Federal Acquisition Regulation will soon be updated with respect to both of these topics. The new rules will align with SBA’s rules and remove any inconsistencies. Let’s dive in!
What happens when an SBA area office finds a joint venture compliant with SBA rules in a size protest, but SBA’s Office of Hearings and Appeals says the same agreement fails to meet requirements in a status protest? Let’s find out.
The SBA recently proposed a rule that would amend the infamous three-in-two (AKA 3-in-2) rule for joint ventures. SBA’s current regulations provide that a joint venture can be awarded no more than three contracts over a two-year period. While SBA plans to keep the two-year lifespan for joint venture awards, it plans to get rid of the three contract maximum.
Forming a joint venture is an important tool to help small businesses increase their competitiveness under federal acquisitions. But for all the benefits, some headaches remain.
One common issue arises when a solicitation requires the prime contractor to hold a facility security clearance. Because a joint venture is an unpopulated legal entity formed for the purpose of bidding on a specific opportunity, the joint venture itself (as the prime contractor) often lacks the needed clearance—even though the joint venture’s members might both hold it. In these situations, a form-over-substance evaluation may leave the joint venture ineligible for award.
Fortunately, the SBA has recognized the silliness of such an exclusion and has invited feedback on a potential solution.
In the age of consolidated contracts and increased competition, small business federal contractors are searching for a way to improve their odds of winning the next opportunity. One of the most important tools for doing so is to form a joint venture.
Here are five things you should know about small business joint ventures:
When a small business sells products to the government under a contract designated with a manufacturing NAICS code, the small business either must be the “manufacturer” of the products, or separately qualify under the nonmanufacturer rule. The nonmanufacturer rule, in turn, requires the prime contractor to have no more than 500 employees, whereas manufacturers may fall under larger size standards–some as big as 1,500 employees.
But what about an unpopulated joint venture that doesn’t itself manufacture any products, relying on the individual venturers to manufacture the solicited goods? Does it also have to comply with the 500-employee size standard under the nonmanufacturer rule? Or can the joint venture be deemed the “manufacturer” of the products in question?