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New Rule Changes for 8(a) Joint Venture Partnerships

Posted by Abraham Xiong on March 19, 2011 at 12:36 PM

New Rule Changes for 8(a) Joint Venture Partnerships


8a companies can enjoy some new rule changes for Joint Venture partnerships. On February 11th, 2011 the SBA made significant rule changes to the 8a Mentor-Protégé Joint Venture Program.


Joint Ventures are partnerships formed by two companies, an 8a company and a non-8a company, coming together to pursue contract opportunities. Both companies bring different strengths to the table to help the new partnership be more attractive as a contractor to the government. The 8a company is a small company and the non-8a company is a large company. In this case, both companies will have two options: 1) seek for a teaming agreement relationship or 2) seek for a joint venture mentor protégé relationship. In the latter, the companies would go and form a new legal corporation for the mutual interests of both companies. Since the 8a company is managed by the SBA, option 2 must be submitted to the SBA and their acknowledgement must be given.


The ultimate goals in these strategies are to increase more contract wins. The biggest challenge to the old rule was the limitation of only three contract attempts (or proposal submissions) in a two year period. This did not take into consideration whether there was a contract win or not. After 3 attempts, the joint venture could not seek any more opportunities until after the two year period. This was very limiting for the joint venture. This change is the most significant alteration with the new rule.


Here is a summary of the latest changes as of February 11th, 2011:


1. Joint Ventures are now limited to three contracts in a two-year period; previously it was limited to three offers over a two-year period, not actual contract awards.


2. The same members in a joint venture can form additional joint ventures and be awarded three additional contracts for the new joint venture. However too many joint ventures between the same parties could lead to a finding of a general affiliation (this could cause the loss of 8a status for the protégé).


3. Joint Ventures no longer have to seek approval for a second and third 8(a) contract from the SBA. The Joint Venture is only required to add an addendum to the original agreement outlining the scope of work for the new contract.


4. For distribution of profits the new rule requires that 8(a) firm receive profits from the Joint Venture commensurate with the work preformed by the 8(a) firm. Previously the 8(a) firm was required to receive 51% of the profits at a minimum.


5. The 8(a) company must now perform at least 40 percent of the work done by the joint venture, in the past it could be as low as 25% of the work preformed.


6. For "Unpopulated Joint Ventures" (unpopulated joint ventures are those that are not separate legal entities with their own employees) the 8(a) firm must provide the project manager on contracts and perform at least 40 percent of the work with its own employees.


7. Three protégés is now the maximum allowable to a mentor firm at one time.


8. A second mentor is now permitted for a protégé in limited circumstances and must be in an unrelated NAICS code to the other mentor.


9. The mentor-protégé agreement is required to specify the developmental assistance that the mentor will provide the 8(a) firm. If the SBA has a finding that the 8(a) firm is not being developed then it may issue a stop-work order for each federal contact the mentor and protégé are performing as a small business. This order could be withdrawn if the SBA becomes satisfied that corrective action will be made.

Categories: Recent News, 8a, Small Business

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