Make Sure That Your SBA Joint Venture Agreement Contract Gets Approved Before Contract Award
Many companies lose out on lucrative SBA JV contracts (jv agreement) because they fail to meet the expressed terms of the solicitation requirements.
Government Requests for Proposal (RFP) are sometimes set aside for 8(a) BD program participants. An important aspect that potential bidders must look out for is the specific language that “If the procurement is to be awarded through the 8(a) BD program, SBA must approve the joint venture pursuant to 13 CFR 124.513.”
Even if your small business is waiting for your mentor-protégé approval, your joint venture partnership agreement still has to meet the requirements of 13 CFR 124.513 and must be approved in accordance with the SBA joint venture rules. For example, joint venture agreement regulations state that:
For example, joint venture regulations state that:
- SBA must approve the joint venture structure and JV agreement prior to the award of an 8(a) contract.
- Where an 8 a joint venture partnership contract has been established and approved by SBA for one 8(a) contract, a second or third 8(a) contract may be awarded to that joint venture provided an addendum to the contract agreement, setting forth the performance requirements on that second or third contract, is provided to and approved by SBA prior to contract award.
- After approving the structure and JV agreement in connection with the first contract, SBA will review only the addendum relating to the performance of work on successive contracts.
- SBA must approve the addendums prior to the award of any successive 8(a) contract to the joint venture business.
How Does SBA Joint Venture Rules Impact the Outcome of Affiliation and Size Protests
The answer to this question can potentially save you thousands of dollars in SBA size protest cases. Under SBA Joint Venture rules, the parties to a joint venture contract are generally presumed affiliated for the performance of the awarded contract for which they have submitted an officer absent certain exceptions. See 13 CFR 121.103(h)(2).3 for exemptions to the affiliation rules. See also SBA 8a Mentor Protege Joint Venture Rules 13 CFR 124.513 & 13 CFR 121.103.
How Does the 3-in-2 Rule Impact JV Relationships
When litigation starts the SBA does look at the 3- in-2 rule. The SBA joint venture regulation setting out the 3-in-2 rule provides, in pertinent part:
A joint venture cannot carry out no more than three specific or limited-purpose business ventures for joint profit over a two year period, for which purpose they combine their efforts, property, money, skill, or knowledge. However when there appears to be a continuing or permanent basis for conducting business generally then there may be some consequences.
- a specific joint venture entity generally may not be awarded more than three contracts over a two year period
- The starting date is from the date of the award of the first contract.
- Once a joint venture entity receives one contract, SBA will determine compliance with the three awards in two years rule for future
awards as of the date of initial offer including price.
SBA Joint Venture Definition
SBA joint venture rules define a joint venture as: “an association of individuals and/or concerns with interest in any degree or proportion consorting to engage in and carry out no more than three specific or limited-purpose business ventures for joint profit over a two year period for which purpose they combine their efforts, property, money, skill, or knowledge, but not a continuing permanent basis for conducting business generally.” See 13 CFR 121.103(h).
When assessing a small business size protest where there is a joint venture involved. The SBA’s definition is not the final analysis. Attorneys would also have to look beyond at the specific facts and whether there are any underlying statutes that also drive the solicitation in question. See Size Appeal of Olgoonik Diversified Services, LLC, SBA No. SIZ-5825 (2017) where the Diplomatic Security Act was a major factor in question.
Forming a 8a Joint Venture – Solicitation Language Rules
- Get SBA approval first
- Do not guess at what the solicitation says – courts will enforce the specific RFP language
- If in doubt submit a question to the contracting officer
- Seek help from the 8(a) BD specialist before bid submission.
Given the language of the solicitation, it is important to submit your joint venture contract as early as possible in the bidding process. Unless facts dictate that the formal notice of award was not made before SBA approval, you cannot use the SBA’s delay to suggest that you should be awarded the contract. Get a copy of your SBA JV agreement checklist here.
Clearly, there is an argument to be made that if the SBA is aware that you are bidding on a project, and its role is to help small businesses succeed, then it should accelerate the approval of the joint venture proposal.
- Until that issue is resolved, appeal courts apply this rigid rule.
For help or questions about SBA joint venture rules, call our small business lawyers at 1-866-601-5518. FREE INITIAL CONSULTATION.