Brian Nault, President, BlueWater Federal Solutions Inc.

1. Solutions.Integrity.Results
Joint Ventures in Federal Contracting
Government Technology & Services Coalition
Capacity Building
May 18, 2017 | Tysons Corner, VA

2. 2
• What is a Joint Venture
• Why Form a Joint Venture (JV)/Trends
• How to Form a JV
• Small Business
• Socio-economic
• Mentor Protege
• SBA and FAR Regulations
• JV Operating Agreements and Governance
• Pitfalls to Avoid
Agenda
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3. 3
JV is first and foremost, a formal business arrangement in which two or
more entities (whether corporate, individual or otherwise) agree to develop
a legal entity (company) that is established, owned, and operated by all
parties with a particular percentage of ownership.
The participants of a JV are often referred to as the JV Partners (JVP),
who share risk and combine property, resources, capability and expertise
to carry out the business of the JV enterprise, giving them a joint
proprietary interest in the business.
The term JV refers to the purpose of the entity and not to a type of entity.
Therefore, the entity may be a corporation, a limited liability company, a
partnership or other legal structure recognized by a State and the Federal
Government (IRS).
What is a Joint Venture (JV)
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• JVs are recognized under FAR Subpart 9.6—Contractor Team
Arrangements, as a form of contractor teaming arrangement (CTA).
• JVs are owned and operated by all parties with a particular percentage
of ownership.
• Partners are often referred to as the JV Partners (JVP), who share risk
and combine property, resources, capability and expertise
• Though unpopulated, the JV performs all legal and contractual duties
required of any company.
Why form a Joint Venture (JV)
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5. 5
• JVs are continuing to trend because they create advantageous
relationships to compete in today’s competitive environment.
 When the service/technical breadth makes it hard for a single Prime SB to
propose, and then perform 51% of the work.
 A collection of companies that comprise the SB JV (whole) provides a much
greater capability than the individual companies (sum of the parts).
 By collectively representing a much broader offering of service capabilities
than those of the individual entities.
• To perform services on the contract, the unpopulated JV contracts the
work to its JV partner companies for all aspects of business operations,
including program management and direct work to be performed under
the contract.
• The collection of work performed by the JV partners represent the
value of work performed by the JV, and therefore must be at least 51%
of the total contract value for SB set-aside contracts.
Why form a Joint Venture (JV)
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• A common formation for JVs is the Limited Liability Company (LLC),
which limits each member to its pro-rata share of the liabilities to the
percentage of ownership. Notably, for the JV to qualify as an SB JV for
a set-aside, each member company must be within the three-year
annual revenue size standards of the NAICS standard chosen for the
procurement in which the JV will be the Prime Offeror.
• The one exception is with formally recognized Mentor–Protégé
arrangements. In this case, the Protégé Company must be within the
NAICS code selected for the procurement.
 The Mentor Company is generally a large business capable of providing significant
support to the SB Protégé in the areas of business process and systems, project
management and service capabilities.
 In this case, the JV must perform at least 51% of the contract AND the SB Protégé
must perform 51% of the total performed by the JV.
How to Form a JV
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• The governance and management structure of the SB JV is important
to achieving success, and the implications are critical.
• SB JV’s are unpopulated entities; this means JV’s
 Do not have any direct employees.
 Are owned and operated by the members under a governance
model, generally a JV operating agreement (OA)
• SB JVs are management ventures where the partners govern the
enterprise and the Managing Member provides the day-to-day
operations - Corporate and Program management.
• The JV OA depicts all terms and conditions of operations, to include JV
governance.
• A sound JV OA sets all expectations of the member companies prior to
proposal development, proposal submission, and contract execution
after award.
Operating Agreements & Governance
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• The agreement must cover all aspects of the governance and business
operations of the JV, to include how contract performance will be
organized, led, and delivered (and by whom).
• Areas to be addressed in the agreement include internal governance,
including JV management, member work sharing, capitalization,
disputes, liabilities, taxes, finance and accounting, contracting,
subcontracting, purchasing, program management, and JV
management information systems.
• The OA must also detail how the members will work together to
develop solutions and propose new work under a contract, as well as
how task leadership and work sharing will be established and
performed on awarded task orders. This includes the use of
subcontractor members of the team.
Operating Agreements & Governance
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• Most SB JVs require each partner to supply both functional managers
and executives to serve on the Board of Directors, which has a real
decision-making function.
• Not all partners in shared management ventures need to own equal
shares.
• One company member is typically designated with the responsibility to
perform as the Managing Member.
• JVs are flexible and can be structured in such a way that the JVP has
more than a co-equal role in the JV (e.g., 40/60) in which the majority
owner would be designated as the Managing Member.
• The work required to operate the company is most often performed by
the Managing Member as a charge to the JV.
Operating Agreements & Governance
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• Privity of contract is with the Prime company, the JV, not the
individual members.
• The JV interfaces with the Government and is the single point of
accountability to the contract.
• To meet the SB set-aside requirements, the sum of labor
performed by the member companies must be at least 51% of
contract labor.
• In addition to the members’ labor, the JV may have defined
subcontractor teammates with which it has formed agreements
to support certain SOW aspects of the contract.
• The large business subcontractor labor can be as high as, but
can not to exceed, 49% of the contract labor.
Operating Agreements & Governance
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• The fundamental role of the Managing Member is to fully manage the
SB JV and ensure 100% compliance with all contractual, financial and
legal requirements and obligations.
• The Managing Member will assign management staff to operate the JV.
• The lead JV Executive and Contract Program Manager (PM) are most
often leaders from the Managing Member;
• These individuals are assigned and dedicated at a level needed to perform
leadership duties on behalf of the JV.
• The Executive will operate the SB JV and the PM will report to the lead Executive
and serve as the point of authority to the Government for the contract.
• Oversight of the Managing Member is commonly performed by the JV’s
Board of Directors or Governors, which is made up of the executives
from the Member companies.
Managing Member Responsibilities
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Pitfalls to Avoid
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13. 13
BlueWater is a well managed and capitalized company; highly capable of winning
IDIQ’s and Task Orders, and creating value for our partners and our customers.
 Founded in January 2005; Headquartered in Chantilly, VA
 200 employees; over 310 personnel managed on our Prime contracts
 Top Secret Facility Clearance (over 85% of employees are cleared)
Why our success as a Prime for over a decade?
 BlueWater is the Managing Partner on three successful small business Joint Ventures
 We have established a new one to bid on the DOJ, ITSS-5 procurement.
 Over 90% of our business is executed on our Prime contracts
 We build dynamic/high-performance teams that win and execute complex work
 Won, managed, and performed 97 unique task orders worth $455 million
 Large footprint built through Prime Contracts (DHS and DoD)
We use mature, highly disciplined processes and procedures
 CMMI Level 3 Appraised for both Services and Development
 International Standards Organization (ISO) 9001:2008 Registered Company
 DCAA Audited and Approved Accounting System and Rates
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About BlueWater