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103(h) as follows: "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.
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.
" This is the definition of joint venture (JV) from the SBA and is applicable to pursuit of contracts that are set aside for small businesses by the Federal Government.
It is different than how the commercial sector defines joint venture and as such, it is imperative your legal advisor is cognizant of the many nuances found between commercial contracts law and Federal contracts law.
There are actual Masters of Laws degrees in Federal Procurement law, the differences are so pronounced.
This particular one, discussed herein, is but one very important difference that can cost you $$ Millions.
The Government sets aside 23% of all contract dollars for small businesses.
This amounts to tens of billions of dollars each year for small business.
Among the various ways of capturing these contracts are: teaming, joint venturing or pursuing them alone.
Most Government contracts are large because the Government does not have the resources or manpower to manage small purchases with all the audit submittal review requirements.
Therefore, you rarely see a contract that is small.
The requirements tend to be multidisciplinary.
This is not necessarily a bad thing since it will cost the contractor money to have an adequate procurement and accounting system to manage the additional requirements ancillary to a Government contract.
The reason for teaming, or, in this article a JV, should be materializing.
With a multidisciplinary approach, few companies, even the large ones, have the internal resources to satisfy the Governments source selection requirements completely.
In other words, no one firm can "do it all.
"They must reach out to other firms for the required disciplines to meet all the contract requirements.
In addition, one of those requirements for a given purchase might be to have a certain status discussed above.
If it is, and you are small but do not possess the requisite status (i.
e.
8(a) or SDVOSB), a JV may be your option to bid the contract.
A JV allows the joint venture partners to assume the persona of the 51% owner of the JV.
For instance a JV that is 49% owned by a small business and 51% owned and controlled by an economically disadvantaged woman owned small business (EDWOSB) becomes an EDWOSB JV.
As a JV, all of the joint venture partners' capabilities and past performance are considered as far as qualification of the joint venture to perform a project.
In addition, each JV partner contributes their expertise to the joint venture to pursue the project.
(This includes bonding and loans or financial assistance).
Finally, understand that all JVs are affiliated unless there is an exemption found in 13 CFR § 121.
103(h)(3).
Being affiliated can be bad.
Affiliated means that if challenged based on size - in other words, if you win the contract, and an unsatisfied, unsuccessful offeror (one of the losers) files a protest (challenge) claiming you are large because you joint ventured (other than small) SBA will gather up the financials on your two companies, examine your joint venture agreement and make a determination of affiliation (should they combine your two companies as one and see how big you are together).
Now if, even combined, you are small for your North American Industrial Code System (NAICS) size, it will not matter if you are affiliated.
The NAICS code is determined by the kind of word that predominates the contract - for instance construction may be 237220 or environmental remediation might be 562910.
In a nutshell, a joint venture is exempted from affiliation if the procurement is greater than one half the size standard for the procurement (e.
g.
if general construction then greater than one half of 33.
5 million of 16.
75 million) or if an employee based standard is greater than $10 million, or alternatively the procurement is a bundled procurement (e.
g.
they are buying many of one item - 5 fire stations or a multiple award contract for instance).
The only time a large business can JV with a small business is when the large business is in an approved SBA 8(a) Mentor Protege arrangement with a certified 8(a) small business.
Further, HUBZones can only JV with other HUBZones.
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