M A R K E T S O L U T I O N S S E R I E S :F O C U S O N J O I N T V E N T U R E ST R U C T U R E S &I M P L E M E N TAT I...
WHAT IS A JOINT VENTURE (JV)?§  Contractor Team Arrangement under FAR Part 9.6ü “Contractor Team Arrangement” defined as...
ADVANTAGES OF A JV§  One face to the Govt., yet the Govt. receives the resources of 2 (or more)companies to perform the w...
DIS-ADVANTAGES OF A JV§  Members share control; former “prime” gives up substantial control§  Joint and several liabilit...
TYPICAL CHARACTERISTICS OF A JV§  Co-Management§  Sharing of Profits and Losses§  Limited Duration§  A separate legal ...
§  JV agreement must be in writing§  JV may be informal (by agreement)§  JV may be formal (LLC or corporation)§  JV ma...
SBA JV SPECIAL CONSIDERATIONS	  	  	  	  §  Affiliationü  General rule is that members are affiliatedü  Size of JV dete...
SBA JV CONSIDERATIONS CONTINUED	  	  	  	  §  Limitations on Subcontracting restrictions apply§  Special “size” accounti...
LFS TEAM FLOOD SMART JV, LLC	  	  	  	  LFS TEAM FLOODSMART JV, LLCGovernment (GOVT)Co. C(10%)Unpopulated JVCo. B(30%)LFS(...
LFS TEAM FLOOD SMART JV, LLC	  	  	  	  LFS TEAM FLOODSMART JV, LLCGovernment (GOVT)Co. B Co. CLFS JVLFS Inc. Co. D Co. Ew...
LFS FLOODSMART JV LEGAL STRUCTURE	  	  	  	  §  Limited Purpose: “The Company is formed for the purpose of submitting a P...
JV MANAGEMENT PROVISIONS	  	  	  	  §  Most JV LLCs are Member Managed and Majority Member appoints Manager toconduct bus...
LFS JV VOTING PROVISIONS	  	  	  	  §  Membership Interestü  Members vote in relative proportion to their ownership stak...
LFS JV VOTING PROVISIONS	  	  	  	  §  Simple Majorityü  All decisions not otherwise decided by Super Majority or Unanim...
LFS JV VOTING PROVISIONS	  	  	  	  §  Super Majorityü  Appointment or replacement of the Program Managerü  Releasing, ...
LFS JV VOTING PROVISIONS	  	  	  	  §  Unanimous Consentü  Modification of the contract;ü  Taking any act in contravent...
LFS JV FINANCIAL PROVISIONS	  	  	  	  §  JV is, for the most part, a pass-through vehicle§  Capital Contribution reflec...
ATTRIBUTES OF A SUCCESSFUL JV	  	  	  	  §  “Educated Consumer”§  “Shared Vision”ü  Focus on Customerü  Understanding ...
ATTRIBUTES OF AN UNSUCCESSFUL JV	  	  	  	  §  Uneducated “Consumer”§  No Single Objective§  No Single Point of Contact...
Lisa MartinCEO, LeapFrog Solutions703.273.7900 *127lmartin@leapfrogit.comDevon E. Hewitt, Esq.Member, Protorae Law703.942....
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Market Solutions Series: Focus on Joint Venture Structures & Implementations

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The current Federal environment requires creativity, drive and passion to succeed. Part of this creativity manifests itself in the strategies your company employs to continue its growth or maintain its current position. A number of CEOs have asked GTSC about joint ventures - why you would choose to form one, how they are formed, the different types and the legal considerations.

Join us to hear from several small businesses that formed joint ventures and engage with them to learn how they did it, why, and whether or not they would do it again. Also, hear from some of the leading industry experts on the legal and operational considerations to consider in setting up your joint venture.

About the GTSC Market Solutions Series
The Market Solutions Series provides an inside look at creative successful interactions in the Federal homeland and national security market. These intimate roundtables take members inside the "story" and allow them to understand the market components and forces that resulted in success. The Market Solution Series was developed in response to members who were interested in creative ways to partner and team to win business with the Federal government.

Our Speakers:
Devon E. Hewitt, Member, Protorae Law PLLC, guest of LeapFrog Solutions
Lisa Martin, CEO, LeapFrog Solutions
Brian Nault, President, BlueWater Federal Solutions
Malcolm Sandilands, Partner, Dickstein Shapiro LLP

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Market Solutions Series: Focus on Joint Venture Structures & Implementations

  1. 1. M A R K E T S O L U T I O N S S E R I E S :F O C U S O N J O I N T V E N T U R E ST R U C T U R E S &I M P L E M E N TAT I O NJ U N E 6 , 2 01 3
  2. 2. WHAT IS A JOINT VENTURE (JV)?§  Contractor Team Arrangement under FAR Part 9.6ü “Contractor Team Arrangement” defined as (1) partnership/joint venture or (2) prime/subü Distinguishable from GSA use of Contractor Team Arrangement (“CTA”)ü FAR states that “the Government will recognize the integrity and validity of contractor teamarrangements”§  SBA Joint Venture Definition:“[A]n association of individuals and/or concerns with interests in any degree or proportion by way ofcontract, express or implied, consorting to engage in and carry out no more than [(3) three] specificor limited purpose business ventures for joint profit over a [(2) two] year period, for which purposethey combine their efforts, property, money, skill, or knowledge, but not on a continuing or permanentbasis for conducting business generally.”§  3 in 2 rule; “limited purpose entity”ü Up to 3 contract awardsü Limited purposeü During a 2 Year periodwww.GTSCoalition.com
  3. 3. ADVANTAGES OF A JV§  One face to the Govt., yet the Govt. receives the resources of 2 (or more)companies to perform the work§  Minority member can exert more control over contract performance than if itwere a subcontractor§  Small business gets “prime” past performance record§  Small business gets to use past performance record of partners§  Small business can remain “small” longerwww.GTSCoalition.com
  4. 4. DIS-ADVANTAGES OF A JV§  Members share control; former “prime” gives up substantial control§  Joint and several liability (if partnership)§  Govt. may be concerned there is no single point of contact, unless there is asolid governance model with the managing/lead member§  More difficult to terminate than other teaming arrangements§  Greater complexity and more costly to the contractor (not the government) thana Prime/Sub approachü Legal Feeswww.GTSCoalition.com
  5. 5. TYPICAL CHARACTERISTICS OF A JV§  Co-Management§  Sharing of Profits and Losses§  Limited Duration§  A separate legal entityü  Partnership, LLC or Corporationü  Need TIN; must register in SAM (formerly CCR, ORCA)§  Populated JV (used more for commercial JVs than government)§  Unpopulated JV (used more government)www.GTSCoalition.com
  6. 6. §  JV agreement must be in writing§  JV may be informal (by agreement)§  JV may be formal (LLC or corporation)§  JV may be populated or unpopulated§  JV members and relationship must be disclosed in proposalCHARACTERISTICS OF AN SBA JVwww.GTSCoalition.com
  7. 7. SBA JV SPECIAL CONSIDERATIONS        §  Affiliationü  General rule is that members are affiliatedü  Size of JV determined by aggregating the revenues or employees of allmembers§  Exceptions to Affiliationü  SBA-approved Mentor/Protégé JVs (8(a)/DoD)ü  Both members are small under NAICS code assigned procurement andØ  Procurement is a bundled requirement orØ  Procurement valued more than $10 million if size standard isemployee-based or procurement value is more than ½ of a revenue-based size standardq  Ex., if $14M is size standard, then the contract value for the life of thecontract would have to be over $7Mwww.GTSCoalition.com
  8. 8. SBA JV CONSIDERATIONS CONTINUED        §  Limitations on Subcontracting restrictions apply§  Special “size” accountingü  For size purposes, a small business concern must include in its receipts or innumber of employees its proportionate share of joint receipts or joint employees,as applicable§  JVs permitted under SBA’s 8(a), HUBZone, Women-Owned and SDVOSB Programsü  Special rules for each program, especially 8(a) Programwww.GTSCoalition.com
  9. 9. LFS TEAM FLOOD SMART JV, LLC        LFS TEAM FLOODSMART JV, LLCGovernment (GOVT)Co. C(10%)Unpopulated JVCo. B(30%)LFS(60%)www.GTSCoalition.com
  10. 10. LFS TEAM FLOOD SMART JV, LLC        LFS TEAM FLOODSMART JV, LLCGovernment (GOVT)Co. B Co. CLFS JVLFS Inc. Co. D Co. Ewww.GTSCoalition.com
  11. 11. LFS FLOODSMART JV LEGAL STRUCTURE        §  Limited Purpose: “The Company is formed for the purpose of submitting a Proposal inresponse to the RFP and performing any resulting Contract, and not for any other purpose,it being expressly understood the Members are not making any permanent Membership orjoint venture or any other agreement for any purpose other than the one stated herein.”§  Formal legal entity – Limited Liability Companyü  Separate Federal ID #, Separate SAM§  Unpopulated – no employeesü  No separate overhead (workman’s comp., benefits – employees get use ofmanaging members benefits)ü  No G&Aü  Governance by managing lead member§  Labor will be performed by Member employees pursuant to Purchase Order/Subcontract between JV and Member§  Management and Management Fee paid pursuant to Services Agreement withLead/Managing Memberü  File articles of organization with the statewww.GTSCoalition.com
  12. 12. JV MANAGEMENT PROVISIONS        §  Most JV LLCs are Member Managed and Majority Member appoints Manager toconduct business of JVü  Manager’s authority may be limited by voting provisions of Operating Agreement§  LFS FloodSmart JV is Member Managed but contract issues managed by individualsappointed by Membersü  Appointment of “Lead Member” (LFS)ü  Appointment of “Program Manager” (LFS Employee)§  LFS FloodSmart JV requires Members to exercise management control through votingwww.GTSCoalition.com
  13. 13. LFS JV VOTING PROVISIONS        §  Membership Interestü  Members vote in relative proportion to their ownership stake in the JV§  Quarterly Meetingsü  Need meeting with a quorum, which is presence at the meeting of 70% of theMembership Interests§  Voting Requirementsü  Simple MajorityØ  Action authorized by vote by greater than 50% of the JV MembershipInterests upon a quorumü  Super MajorityØ  Vote by greater than 70% of the JV Membership Interestsü  UnanimousØ  All Members must agree and all Membership Interests vote in the samemannerwww.GTSCoalition.com
  14. 14. LFS JV VOTING PROVISIONS        §  Simple Majorityü  All decisions not otherwise decided by Super Majority or Unanimous Votedecided by Simple MajorityØ  Primarily contract issues, including operations, administration andmanagementwww.GTSCoalition.com
  15. 15. LFS JV VOTING PROVISIONS        §  Super Majorityü  Appointment or replacement of the Program Managerü  Releasing, compromising, assigning, or transferring any claims, rights, orbenefits of the JV in an amount up to $5,000 per month; orü  Expulsion of a Member upon motion of the Lead/Managing Member, usingits discretion in good faith to assert such Member is no longer capable ofproviding the technical expertise or providing the necessary managementof the contractwww.GTSCoalition.com
  16. 16. LFS JV VOTING PROVISIONS        §  Unanimous Consentü  Modification of the contract;ü  Taking any act in contravention of the Operating Agreement;ü  Appointment of the Lead/Managing Member;ü  Requiring any Member to contribute any additional capital to the JV;ü  Causing or permitting the JV to extend credit to or to make any loans;ü  Causing or permitting the JV to incur any indebtedness to any partyü  Releasing, compromising, assigning, or transferring any claims, rights, orbenefits of the JV in excess of $5,000 per month; orü  Distributing any cash or property of the JV, other than as expresslyprovided in the Operating Agreement, or pursuant to the contract or anysubcontractwww.GTSCoalition.com
  17. 17. LFS JV FINANCIAL PROVISIONS        §  JV is, for the most part, a pass-through vehicle§  Capital Contribution reflecting pro rata Membership Interest required§  Lead/Managing Member keeps Books and Records of JVü  Members able to audit/inspect Books and Records§  Lead/Managing Member authorized to make withdrawals from JV Bank Account§  Company prepares Financial Statements for Membersü  Annual Financial Statements reviewed by CPA§  Lead/Managing Member responsible for invoicing Customer§  Lead/Managing Member Tax Memberü  JVs that are LLCs typically are taxed as a partnershipwww.GTSCoalition.com
  18. 18. ATTRIBUTES OF A SUCCESSFUL JV        §  “Educated Consumer”§  “Shared Vision”ü  Focus on Customerü  Understanding of JV purposeü  Understanding of JV agreement§  Written Agreementü  Clear roles for Members with respect to management of JV operations,management of contract operations, management of books/records andfinancesü  Clear language regarding votingü  Clear language regarding termination, dispute resolutionwww.GTSCoalition.com
  19. 19. ATTRIBUTES OF AN UNSUCCESSFUL JV        §  Uneducated “Consumer”§  No Single Objective§  No Single Point of Contact§  No Lead /Managing Member§  No Written Agreement/General Agreement§  Different expectations of Members§  Different corporate cultures/operational styles§  Imbalance in expertise/resources/investment by Memberswww.GTSCoalition.com
  20. 20. Lisa MartinCEO, LeapFrog Solutions703.273.7900 *127lmartin@leapfrogit.comDevon E. Hewitt, Esq.Member, Protorae Law703.942.6746dhewitt@protoraelaw.comMORE QUESTIONS?www.GTSCoalition.com

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