Are you a small business or DOD defense contractor worried about procurement fraud or SBA affiliation issues on Joint venture relationships? Are you confused about the limitations on the joint venture agreement? We help you to avoid some of the most Costly Legal Mistakes seen with government contract joint venture arrangements
Our team of joint venture lawyers is here to help you navigate the complex regulations surrounding SBA JV compliance under 13 CFR 125.8 and how you initiate and maintain the JV business relationship. We specialize in helping government contractors and small businesses avoid criminal liability for procurement fraud and stay on the right side of the law.
With our expertise, you can rest easy knowing you’re taking the necessary steps to protect your business and avoid costly legal battles. Our team has a proven track record of success in helping clients comply with SBA joint venture agreement regulations and avoid the pitfalls of procurement fraud.
Don’t wait until it’s too late. Contact us today to schedule a consultation with one of our experienced joint venture agreement lawyers and get the peace of mind you deserve.
Nationwide Representation In Government Small Business JV Matters
Watson & Associates, LLC small business joint venture agreement lawyers help small businesses throughout the United States to develop and comply with contracting relationships. Many of the arrangements fall within the purview of the SBA guidelines. More importantly, improper JV contracting relationships can lead to small business affiliation.
If an improper joint venture structure is formed or contractors do not follow the limitations on subcontracting rules, the results can be disastrous, and the contract can be taken away. Drafting, developing and complying with federal JV contracting regulations are issues to keep companies away from criminal liability. Our attorneys can help.
Nationwide SBA Joint Venture Lawyer Services
As federal small business attorneys, we help to:
- Draft JV contracting agreements tailored for your specific business;
- Breach of joint venture agreement and Legal Counsel
- Draft a JV template that focuses on avoiding SBA affiliation;
- Assess the risks of JV contract relationships;
- Analyze the new rules for substantive adjustments to the business entity structure;
- Interpret SBA regulations and provide sound legal direction to participating companies;
- Joint venture agreement for construction projects
- SBA OHA Appeals involving teaming and JV relationships
- Terminations for default
- Government contract fraud with JV arrangements
- Venture assets
- SBA OIG and DOJ investigations involving SBA joint ventures
- Due diligence and JV partner agreement and accounting matters
- Litigate disputes and allegations of affiliation, violation of the Ostensible Subcontractor Rule; and
- Government Contracts Procedure and Appeal of adverse SBA decisions. See SBA Size Protests & Small Business Size Standard Appeals
What are the General Rules for Joint Ventures?
Under SBA regulations, a joint venture between an 8(a) participant and one or more other small businesses may compete for an 8(a) set-aside contract, so long that the joint venture agreement complies with 13 CFR 124.513(c) and (d). See also 13 CFR 121.103(h)(l)(i). Among other requirements, the joint venture must designate an 8(a) participant as its ““managing venturer”, responsible for “controlling the day-to-day management and administration of the contractual performance of the joint venture”. 13 CFR 124.513(c)(2).
Tip: When state law stipulates that, unless a particular Manager or Managing Member is identified in an LLC’s operating agreement or articles of organization, all members are deemed to be managers of the LLC. The LLC operating agreement must appoint the small business as the managing member. Failure to take this important step can be ruled a violation of SBA regulations. State law must be followed for LLC’s. Se 13 CFR 124.513(c)(2).
Tip: When the SBA approves your joint venture agreement, it does not mean the SBA has issued a size determination. Despite SBA’s approval of your joint venture arrangement, your competition can still protest the JV relationship based on affiliation. See 13 § 121.1001(a)(2) of this chapter. See § 124.517(b).
SBA Rules for Joint Ventures
If you are wondering your responsibility for performing work, the following rules apply to joint ventures:
Limitations on Subcontracting
- As the joint venture prime of either a full or partial set-aside contract, the small business concern must agree to the following limitations on subcontractor for the respective contract types:
- Pay no more than 50% of the amount paid by the government to non-similarly situated firms for service contracts.
- Pay no more than 50% of the amount paid by the government to non-similarly situated firms for supplies or products contracts.
- Pay no more than 85% of the amount paid by the government to non-similarly situated firms for construction contracts.
- Pay no more than 75% of the amount paid by the government to non-similarly situated firms for special trade contracts.
Performance of Work
Under a mentor / protege relationship, the protégé must perform at least 40% of the work done by the joint venture. Assuming the joint venture and the protégé perform the minimum work share requirements, the protégé will perform 20% of the total contract value. However, for purposes of determining the protégé’s size, 40% of the revenues under the contract shall be appropriated to the protégé.
Benefits of Forming Joint Ventures
Forming a joint venture agreement between two or more businesses can be an attractive way to join forces, pool resources and share profits in order to bid on government contracts. However, it is important for each party to understand the regulations and requirements of forming such a venture. That’s why many companies turn to qualified attorneys and legal professionals who specialize in helping them navigate the complexities of federal rules and regulations when it comes to government JVs.
Tip: A joint venture can have more than two parties.
Tip: When a joint venture between one or more 8(a) Participants goes after a sole source 8(a) award, the SBA must approve the joint venture prior to the award of the sole source award. SBA does not approve joint ventures for competitive 8(a) awards.
At the heart of a successful joint venture is an agreement that outlines each party’s roles in a limited liability company, responsibilities and financial commitments in the venture. A good JV agreement should cover all the basics, including ownership rights and percentage of profit, as well as details on management structure, operations and liabilities. It should also provide for dispute resolution if issues arise.
Mistakes to Avoid with JV Structuring Under 13 CFR 125.8.
When entering into joint venture agreements for government contracts, small businesses must be mindful not to violate anti-trust laws or make other missteps that could jeopardize their eligibility for government contracts. Companies and small business joint venture structure formations must comply with the requisite workshares and should not make side contracts to avoid statutory compliance.
This can result in procurement fraud and violation of 13 CFR 125.8. Avoiding issues like these requires working with knowledgeable and experienced attorneys who can guide the process and ensure all applicable regulations are followed. Lastly, the specific language in the JV regulations must be followed, or the companies can be deemed affiliated.
Avoid JV Affiliation and Taking Away Your Contract
Joint Venture Lawyers for small businesses involved in an SBA small business programs: when you receive the award after hours of preparation and bidding, your competition can file a size bid protest that challenges the joint venture’s status. We help you defend against unfounded allegation also make sure that your company complies with 13 CFR § 125.8.
When bidding on government contracts, the JV entity can use both the company’s past performance, share contract costs, and each company’s resources. In addition, if qualifying in a Mentor-Protege relationship, a mentor and their protégé can joint venture as a small business for any small business government contract, so long as the small protégé individually qualifies as small. The venture may also pursue any type of set-aside contract for which the protégé qualifies, including contracts set aside for 8(a), service-disabled veteran-owned, woman-owned, and HUBZone businesses.
How Many Contracts Can Your Joint Venture Get?
Effective November 16, 2020 – the old requirement for a joint venture to be awarded no more than two contracts in a two-year period is no longer the law. Instead, the old three-in-two rule for joint ventures has been amended to hold now that the joint venture arrangement can be in place for two years, without any cap to the amount of awarded contracts.
However, the two-year period starts from the date of the first contract award, without the partners to the joint venture being deemed affiliated for the joint venture.”
Tip: So, a two-year lifespan of a joint venture applies, but there is no longer any limit on how many awards that joint venture can accept during that two-year life span.
Tip: Amendments to joint venture agreement. Where SBA has approved a joint venture for a sole source 8(a) contract, all amendments to the joint venture agreement must be approved by SBA.
Tip: This is a part of SBA joint venture rules where many vernturers find themselves in legal trouble. The JV contract must specify the responsibilities of the parties with regard to negotiation of the contract, source of labor, and contract performance, including ways that the parties to the joint venture will ensure that the joint venture and the 8(a) partner(s) to the joint venture will meet the performance of work requirements set forth in paragraph (d) of 13 CFR 124.514. If a contract is indefinite in nature, such as an indefinite quantity contract or a multiple award contract where the level of effort or scope of work is not known, the joint venture must provide a general description of the anticipated responsibilities of the parties with regard to negotiation of the contract, source of labor, and contract performance, not including the ways that the parties to the joint venture will ensure that the joint venture and the 8(a) partner(s) to the joint venture will meet the performance of work requirements set forth in paragraph (d) of this section, or in the alternative, specify how the parties to the joint venture will define such responsibilities once a definite scope of work is made publicly available;
Avoid this mistake made by other firms
Size Appeal of Optimal GEO, Inc., SBA No. SIZ-6141 (2022) (SBA OHA Area Office found that firm was other than small because the joint venture violated the “unlimited in two” rule by continuing to seek awards more than two years after the first award to joint venture.
As government contracts and small business joint venture agreement lawyers, we help clients to create joint venture agreements for construction on federal projects. The agreement typically consists of two corporate entities, the JV Entity and the Prime Contractor, each with statutory ownership in the JV entity. As joint ventures counsel, we help ensure that small businesses comply with the limitations on subcontracting and procurement regulations to avoid affiliation and criminal liability.
SBA OHA’s ruling clarified that under the SBA’s 2020 amendments to its regulations, non-small business venturers under an MPA are allowed to participate in the decision of whether to initiate a lawsuit or settle litigation. Despite the rule that the small business venturer must control contract administration and performance, it is now allowed to require the consent of the large business venturer in corporate governance and general business decisions, “as is customary for participants in a joint venture to do.” This will assist joint venturers in drafting their joint venture agreements.
The Agreement will provide details such as who is responsible for what part of the project, how profits or losses are shared, who has the authority to make decisions.
SBA JV Agreement Regulations 13 C.F.R § 125.8
In addition to a legal agreement, it is also important for all parties to understand the government regulations that apply to JV businesses. The U.S. Small Business Administration (SBA) has specific rules and eligibility requirements for SBA joint ventures taking part in federal contract work, known as 13 CFR 125.8 and 13 CFR 124.513. These regulations are often complex and can be difficult to interpret , but they are essential for companies to abide by in order to be eligible.
Having a knowledgeable contractual joint venture attorney is a great way to ensure that all parties involved understand the rules and regulations and the details of their agreement. A qualified attorney can help draft a contract that meets all legal requirements and provides clear guidance on how the venture will operate. They can also assist with dispute resolution and help negotiate any changes or modifications to the agreement. With their expertise and guidance, companies can feel confident that their joint venture will be successful.
Call Our SBA Joint Venture Agreement Lawyers
If your company is seeking to avoid liability when involved in joint venture agreements and strategic alliances, needs help with due diligence and compliance with SBA JV contracting rules, or needs legal advice on building strategic alliances to acquire and perform government contracts, call our small business joint venture agreement lawyers at Watson & Associates, LLC. all 1-866-601-5518 for a free initial consultation.