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U.S. Small Business Administration

U.S. Small Business Administration. SBA Joint Venture Agreements. Legal Requirements . The regulatory requirements for 8(a) Joint Venture Agreements are found in 13 CFR § 124.513 Standard Operating Procedures (SOP) 80-50-3, p. 151-164. Legal Requirements. Definition of Joint Venture:

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U.S. Small Business Administration

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  1. U.S. Small Business Administration SBA Joint Venture Agreements

  2. Legal Requirements The regulatory requirements for 8(a) Joint Venture Agreements are found in • 13 CFR § 124.513 • Standard Operating Procedures (SOP) 80-50-3, p. 151-164

  3. Legal Requirements Definition of Joint Venture: Joint Venture Agreement (JVA) is an agreement between an eligible 8(a) participant and one or more other business concerns to establish a new legal entity solely for the purpose of performing aspecific 8(a) contract.

  4. Legal Requirements What JVA will SBA review? • JVA for 8(a) contracts, • With at least one 8(a) participant; or • Teaming agreements if fashioned as a joint venture agreement. • NOT Small Business Joint Ventures.

  5. Legal Requirements JVA are permitted when: • 8(a) participant lacks capacity; • JV arrangement is fair and equitable; • JV will be of substantial benefit to 8(a) participant; and • 8(a) participant brings substantial resources and/or expertise to the JV

  6. Legal Requirements Role of the 8(a) Participant: • Must be the managing (or lead) venturer • An employee of the managing venturer must be the project manager • Project manager is responsible for the performance of the contract.

  7. Size Determination What is considered small and eligible for JVA? • Competitive 8(a) procurements • Each concern is small under the size standard corresponding to the NAICS code assigned to the contract. • The size of at least one 8(a) participant is less than ½ of the size standard corresponding to the NAICS code for the contract.

  8. Size Determination Competitive 8(a) procurements • For a procurement having a revenue-based size standard, the procurement exceeds half the size standards • For a procurement having an employee-based size standard, the procurement exceeds $10 million.

  9. Size Determination • For Sole source & competitive 8(a) procurements that do not exceed the dollar levels. • Combine the annual receipts or employees to determine if it meets the size standard for the NAICS code assigned to the 8(a) contract.

  10. Size Determination • Mentor-Protégé JVA • Exception to the size requirement; • Size of the JV is deemed small provided the protégé qualifies as small for the size standard for the NAICS code assigned to the 8(a) contract.

  11. Processing the JVA Where do you send it? and when? • Send it to the servicing office of the 8(a) managing venturer; • At least 20 days prior to contract award.

  12. Processing the JVA The package must include: • Joint Venture Agreement • 3 years of signed tax returns and year end financial statements from all parties • A letter from managing participant as to capacity; benefits, and resources of the 8(a) participant • Supplemental information. See SOP 80-50-3, p. 155-58.

  13. Joint Venture Agreement provisions The Agreement is a legal document between the parties and should include the following : • Purpose • Designate 8(a) participant as the managing venturer and an employee as project manager • Establishment of bank account in the name of the Joint Venture • Itemize all major equipment, facilities and other resources • Specify responsibilities of the parties with regard to contract performacne, negotiation and source of labor

  14. Joint Venture Agreement provisions continued… • Obligating all parties to ensure performance of the 8(a) contract • Designate accounting and other administrative records to be kept at the office of the managing venturer, unless DD otherwise grants a waiver. • Final original records to be retained by managing venturer • Stating that quarterly financial statements must be submitted to SBA within 45 days after each operating quarter

  15. Joint Venture Agreement provisions continued.. • State that project end profit and loss statement be submitted to SBA within 90 days after completion of the contract. • A statement that JV will perform work in such percentages as required by 124.510 ( 50% for services & supplies; 15% for General Construction; 25% for special trades)

  16. Joint Venture Agreement provisions Continued… • Amendments must be approved by SBA • SBA may inspect records of JV without notice at any time deemed necessary.

  17. Review Process for JVA District Office Approval- • Business Development Specialist reviews the package and makes recommendation • District Counsel reviews and makes recommendation • District Director has final approval authority

  18. Post Approval Requirements After JVA has been approved- • Post approval reviews are done concurrently with the 8(a) participant’s annual reviews. • This agreement can be used to submit no more than 3 offers over a 2 year period starting from the date of the first offer (13 CFR § 121.103(h))

  19. Top Mistakes that I see.. • Joint Venture Agreements do not contain voting provisions that show 8(a) participant having majority control. • JVAs capital contributions do not reflect control by 8(a) participant (i.e., 50/50 vs. 51/49)

  20. Top Mistakes that I see.. • Not including the specific provisions listed in the regulations • SBA’s right to inspect records is modified • Missing provision that SBA must approve amendments • Not providing 8(a) participant its 51% share of net profits

  21. Top Mistakes that I see.. • Submitting JVA “in anticipation” of solicitation. • Submitting a bid to procuring agency and certifying size prior to JVA is in place. • Delegating/assigning rights of the 8(a) firm in the JV. This is subject to SBA approval under change of ownership. • Not submitting tax returns.

  22. Practice Tips • Follow the regulatory language closely. • The JV entity can be a separate legal entity (i.e.,LLC or it can be ABC-DEF JV). • If either party terminates the JVA, the remaining party must perform the contract.

  23. Teaming Agreements A teaming arrangement may be a arrangement in which a potential prime contractor agrees with one or more companies to have them act as its subcontractors under a specified Government contract or acquisition program or it can be a JVA.

  24. Teaming Agreements A teaming arrangement does not necessarily need to be reviewed by SBA, however it must be carefully evaluated to determine the relationship of the parties, as it may affect a participant’s eligibility if it results in actual or negative control, affiliation or loss of small business status.

  25. Questions

  26. Thank you Ashley H. Hou Baltimore District Counsel Ashley.Hou@sba.gov 410-962-2474

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