This document provides an overview of joint venturing, teaming, and subcontracting strategies for small businesses, with a focus on opportunities for Service-Disabled Veteran-Owned Small Businesses (SDVOSBs). It discusses reasons to form joint ventures or teams, how to find potential partners, legal risks to consider, and differences between joint ventures and prime/subcontractor teams. The document also outlines requirements for SDVOSB joint ventures and prime/subcontractor relationships, as well as mentor-protégé programs that can help SDVOSBs.

1. SDVOSB
Joint
Venturing, Tea
ming &
Subcontracting
7th Annual Veterans
Business Conference Government
Steven J. Koprince
Partner
Contracts
Petefish, Immel, Heeb & Hird, LLP
Solutions
for Small Business

2. Overview
• Why joint venture or team?
• Where can I find teammates?
• JV and teaming legal risks
• Joint ventures v. prime/subcontractor teams
• SDVOSB joint ventures
• SDVOSB prime/subcontractor teams
• Mentor protégé programs
• Question-and-answer

3. Why JV or Team?
• Offer more to the government in terms of:
Resources
Past performance
Key personnel
Other capabilities
• Improve proposal
• Pursue larger or more complex contracts
• Share risks and liabilities

4. Finding Teammates
• Industry days
• Procurement conferences
• OSDBUs
• PTACs & SBDCs
• Personal contacts
• Online resources (e.g., LinkedIn)

5. Legal Risks
• Non-compliance with mandatory JV
provisions
• JV affiliation/size problems
• Violation of ostensible subcontractor rule
• Violation of subcontracting limits
• Loss of SDVOSB “control” by service-disabled
veteran

6. Joint Ventures v. Teams
• Joint Ventures • Teams
– Both parties perform at – Only one party performs
the prime contract level at the prime contract
– Parties split profits and level
losses – Subcontractor paid on a
– Parties may form a new pre-determined basis
legal entity – No new legal entity
– Subcontracting limits created
apply to JV as a whole – Subcontracting limits
apply to prime only

7. Joint Ventures v. Teams
• Liability
• JV: both parties responsible for entire contract
• Team: sub responsible only for its own share of
work
• Control
• JV: Both parties exercise some level of control
• Team: Prime should control the relationship
• Ostensible subcontractor affiliation

8. Joint Ventures v. Teams
• Advantages of a JV v. a Team:
• Government can rely on two companies to
perform entire contract
• Minority member may exercise more control
• Individual JV members not responsible for as
much work
• May receive favorable tax treatment
• Helps companies stay smaller longer

9. Joint Ventures v. Teams
• Disadvantages of a JV v. a Team:
• Lead contractor surrenders substantial control
• JVs may not be eligible to bid due to size
problems
• Both parties liable for entire contract
• Termination may be more difficult
• Government or competitors may raise past
performance questions

10. Joint Ventures v. Teams
• Size requirements
• JV: sizes of joint venturers may be added together
to determine small business status
• Team: only the size of the prime contractor is
considered in determining small business status

11. SDVOSB Joint Ventures
• What is a Joint Venture?
• Two or more companies
• Combine resources, skills, efforts, & knowledge
• Share profits and losses
• Temporary basis
• “Three in two” general affiliation rule

12. SDVOSB Joint Ventures
• SDVOSB JV Requirements (13 C.F.R. 125.15):
At least one joint venturer must be a SDVOSB
Joint venture must qualify as small
• Cannot JV with a large business
Parties must adopt written JV agreement containing
mandatory provisions
JV can be informal or formal

13. SDVOSB Joint Ventures
• Mandatory SDVOSB JV provisions (13 C.F.R.
125.15(b)):
SDVOSB designated as managing venturer
Employee of SDVOSB as project manager
• Need specific name!
At least 51% of net profits to SDVOSB
• Regardless of work share
Specify responsibilities of parties

14. SDVOSB Joint Ventures
• Mandatory SDVOSB JV provisions (13 C.F.R.
125.15(b)):
All parties obligated to continue performance
Final original records maintained by SDVOSB
managing venturer
• For VA & FAA procurements:
JV itself must be verified by CVE
JV must be a separate legal entity
• No prior approval required for others

15. JVs and Subcontracting
• The JV itself, as prime contractor, is subject to
the subcontracting limits
• For SDVOSB JVs, no rule regarding work split
among JV members
Keep in mind management requirement
Beware “control” issues.

16. How to Create a Team
• A prime/sub team should be formed well in
advance of proposal submission by way of a
teaming agreement
• Teaming agreement: binding agreement to
pursue a specific government contract as a
prime/sub team

17. Subcontracts
• Subcontract supersedes/replaces the teaming
agreement
• Much more detailed than teaming agreement
• Must include mandatory FAR provisions (flow-
downs)
• Consider an incorporation by reference clause
• Consider specific identification of (at minimum) key
flow-downs
• Provide the sub with a copy of the prime
contract, less any confidential information about your
company

18. Limits on Subcontracting
• Every set-aside contract contains
subcontracting limits (FAR 52.219-14)
• Limits vary depending on type of contract
• Contrary to common perception, limits are
not based on the total value of the contract
• For SDVOSB prime contracts, self-
performance requirements can be met by
subbing to other SDVOSBs.

19. Ostensible Subcontractor
Affiliation
• What is it?
• SBA considers a small prime contractor affiliated
with its subcontractor for purposes of a set-aside
contract where:
• The prime is “unusually reliant” upon the sub, and/or
• The sub will perform the primary and vital portions of
the contract
• Why does it matter?
• If sizes of prime and sub, combined, exceed size
standard, prime is ineligible for award

20. Ostensible Subcontractor
Affiliation
• SBA evaluates ostensible subcontractor
affiliation on a case-by-case basis, looking at
“totality” of relationship between the parties
• Best practice: reduce/eliminate number and
severity of ostensible subcontractor risk
factors as identified in regulation and SBA
OHA cases

21. Serving as a SDVOSB Sub
• For most prime contracts, may self-certify as a
SDVOSB subcontractor if meet all
qualifications
• However, for VA prime contracts containing
VAAR 852.219-9, must be listed as verified in
VetBiz to qualify as a SDVOSB subcontractor

22. Mentor-Protégé Programs
• DoD Mentor-Protégé Program
• SDVOSB may participate as protégé
• Mentor: must have at least one active DoD
subcontracting plan
• Recently, DoD has required very thorough and
detailed applications

23. Mentor-Protégé Programs
• DoD Mentor-Protégé Program
• Benefits:
• Mentor and protégé not affiliated on basis of
assistance provided by mentor to protégé under
agreement
• Mentor may receive credit against its
subcontracting plans for assistance (credit
agreement) or reimbursement of funds expended
(reimbursement agreement)
• BUT, no joint venturing capability

24. Mentor-Protégé Programs
• DHS • FAA
• State • USAID
• Treasury • Energy
• NASA • VA
• GSA • EPA
• HHS • DOT (proposed)

25. Mentor-Protégé Programs
• Affiliation risks
• March 2011: SBA adopts new size regulations
• New regulations provide that exception from
affiliation only allowed when mentor-protégé
program has been approved by SBA or created by
Congress
• Currently, only SBA 8(a) and DoD comply
• SBA OHA has held that affiliation may exist based
on VA M-P assistance

26. Mentor-Protégé Programs
• New SBA mentor-protégé programs on the
horizon, including SDVOSB
• Congressional directive: programs should be
similar to 8(a)
• May include JV capability

27. Questions?
Thank you!
Questions?