DOD small business agreements and contracts, especially teaming agreement contracts, are commonplace in today’s federal marketplace. Government DOD contracts get larger and more complex. Small companies cannot keep up with the increased resources that it takes to bid for and perform more major federal contracts.
As a result, small businesses seek out other qualified companies to form business alliances at the bidding stage. The problem is that small business can still be found affiliated with their subcontractors if they do not follow SBA affiliation rules.
Although the SBA has launched new rules, companies that submit teaming partners in response to government bids must still be aware of the possibility of affiliation.
SBA does not approve small business teaming agreements: Companies that are part of SBA programs (8a and HUBZone) often wonder whether they should notify the SBA about their teaming agreements. Although the SBA does not per se approve contractor teaming agreements, under the 8a participation agreement rules, the SBA may still seek recourse for not informing it about the teaming arrangement.
Although government teaming agreements have become very popular, so are the legal mistakes made. Although DOD small businesses and DOD agencies get the benefit of joint venture and teaming relationships, the law is federal procurement is law is tricky about how the parties must interact during the performance and who really controls the project.
Is there such a thing as SBA small business teaming arrangements?
The answer depends on how you interpret FAR 9.6 which states: The Government will recognize the integrity and validity of contractor teaming arrangements; provided, the arrangements are identified and company relationships are fully disclosed in an offer or, for arrangements entered into after submission of an offer, before the arrangement becomes effective. The Government will not normally require or encourage the dissolution of contractor team arrangements. Furthermore, the regulations do not give the SBA oversight and approval for teaming arrangements.
Tip: Never allege that another company violated teaming agreement and affiliation rules or Ostensible Subcontractor Rule to the SBA solely because that company does not have the relevant corporate experience and relies heavily on the large subcontractor. See SIZE APPEAL OF Reliable Contracting Group.
One reason you don’t want to challenge the experience level of the prime DOD small business is that the SBA does not have the authority to rule on the experience of the small business. That is solely the responsibility of the Contracting Officer. However, see SBA certificate of competency determinations.
Tip: If you have an SBA approved Mentor Protégé Agreement with a large business but submits the large business as a teaming agreement partner under the current contract, always inform the SBA first in writing before submitting the teaming agreement with your proposal.
Use of Small Business Government Teaming Agreements in DOD Contracts 13 CFR 121
When entering into DOD contracts, always make sure that you, as the prime, will be performing the primary and vital requirements of the contract; make sure that your teaming agreement shows you will be the overall manager of the federal contract. More specifically, overseeing all technical and quality control aspects.
Similarly situated small business subcontractors: The new regulations allow for prime contractors to engage in teaming agreements with similarly situated small businesses without fear of violating SBA affiliation rules. However, the limitations on subcontracting rules are still in effect.
Frequently, the SBA will investigate alleged violations of affiliation under the present effect rule, 13 CFR 121. 103(d)(1). Under the present effect rule, SBA may treat an agreement to merge to have a present effect on the power to control a concern. Large businesses may sometimes make the mistake of drafting a subsequent agreement to merge companies after the award. This is a fatal mistake under the present effect rule. This is why having an experienced teaming agreement lawyer can be beneficially in the initial phases of forming DOD small business team arrangements.
When investigating DOD small business teaming agreements in a small business size protest, the SBA will also evaluate the alleged violation under the totality of the circumstances, 13 CFR 121.103(a) (5). Under the totality of the circumstances, SBA may find affiliation even though no single reason is enough to prove affiliation.
Make sure that you engage an experienced small business teaming arrangements and DOD contracts attorney to help you to avoid the most costly mistakes in forming teaming relationships.
For immediate help in drafting, reviewing or litigating alleged violations involving a DOD small business agreements, call our government teaming agreements attorneys at 1-866-601-5518.