Navigating Federal Contracts Through Joint Ventures and Mentor-Protégé Success
Joint Venture Defined: A joint venture is “a commercial enterprise undertaken jointly by two or more parties which otherwise retain their distinct identities.”
Mentor-Protégé Defined: A relationship that helps eligible small businesses (protégés) gain capacity and win government contracts through partnerships with more experienced companies (mentors). A Mentor-Protégé Agreement is generally formed with a large business and is specific to the mentor’s primary NAICS code. The mentor-protégé is not a joint venture, as it is not a legally binding contractual arrangement but rather an informal memorandum of understanding between the parties. Oftentimes, a mentor-protégé relationship evolves into a formal joint venture.
Purpose: Joint ventures allow GBA Builders to compete for federal contracts reserved for small businesses, i.e., contracts that GBA Builders cannot bid on due to its larger size. Federal small business projects can be categorized in two ways – by the type of set aside and by the type of contract.
Types of Set-Asides:
- Women-Owned Small Business (WOSB)
- Service-Disabled Veteran-Owned Small Business (SDVOSB)
- Historically Underutilized Business Zones (HUBZone)
- 8(a) Business Development Program
- Small Disadvantaged Business (SDB)
- Small Business
Types of Small Business Federal Contracts:
- Competitive Set-Aside: “When at least two small businesses could perform the work or provide the products being purchased, the government sets aside the contract exclusively for small businesses. With few exceptions, this happens automatically for all federal contracts under $150,000. Some set-asides are open to any small business, but some are open only to small businesses who participate in SBA contracting assistance programs”.
- Sole-Source Set-Aside: “Sole-source contracts are a kind of contract that can be issued without a competitive bidding process. This usually happens in situations where only a single business can fulfill the requirements of a contract”.
There are benefits to GBA Builder’s joint ventures. Benefits include:
- A larger pool of projects.
- Shared risk and cost.
- Collective representation of past performance.
- Leveraging the other partner’s experience and market share.
- Small business partner receives hands-on mentorship to set them up for success.
- Enables GBA Builders to “pay it forward” and help a small business be successful.
Content of Joint Venture Agreement
A Joint Venture Agreement identifies the rights and obligations of each party with provisions including items such as objectives and scope, how the business will be financed, the structure of the management, how profits will be shared, etc. The following provisions are required to submit an offer reserved for small businesses:
- Define the purpose of the joint venture.
The purpose of joint ventures for GBA Builder’s Federal Team is to bid on and perform work. Joint ventures can perform additional contract opportunities in accordance with SBA if agreed upon.
- Designate a small business as the managing venturer and responsible manager.
- State the small business must own at least 51% of the joint venture.
The percentage of ownership is specified to show the small business’ ownership interest is 51% and the partner venturer’s ownership interest is 49%. The small business is the managing venture.
- State the small business participants must receive profits from the joint venture commensurate with the work performed by them, or a percentage agreed to by the parties to the joint venture whereby the small business participants receive profits from the joint venture that exceed the percentage commensurate with the work performed by them.
Meaning, the participants of the joint venture must receive profits proportionally to the work performed or a percentage agreed upon by both parties where the small business receives profits greater than the proportion of work performed.
- Provide a special bank account in the name of the joint venture. This bank account is used to deposit all payments for performance on a contract and to pay all expenses incurred from a contract.
- Itemize all major equipment, facilities and other resources to be furnished by each party to the joint venture, with a detailed schedule of cost of value of each, where practical.
Major equipment could include computers, printers, vehicles, etc.
- Specify the responsibilities of the parties regarding negotiation of the contract, source of labor and contract performance.
Roles and responsibilities for the project management, quality control management, safety management, site supervision, partners regarding negotiations, contract performance and source of labor are outlined in the Joint Venture Agreement.
- Obligate all parties to the joint venture to ensure performance of a contract set aside or reserved for small business and to complete performance despite the withdraw of any members.
If a partner withdraws from a joint venture, the partner may replace the withdrawn partner with the client’s approval.
- Designate that accounting and other administrative records be kept in the office of the small business managing venturer.
- Require the final original records be retained by the small business managing venturer upon completion of any contract.
- State the annual performance-of-work statements must be submitted to SBA and the relevant contracting officer no later than 45 days after each operating year of the joint venture.
- State the project-end performance-of-work must be submitted to SBA and the relevant contracting officer no later than 90 days after completion of the contract.
More details on the specific items required in the joint venture agreement are outlined in 13 CFR 125.8: https://www.ecfr.gov/current/title-13/section-125.8.
GBA Builders Involvement:
GBA Builder’s Federal Team has a Joint Venture Agreement with a Service-Disabled Veteran Owned Small Business (SDVOSB), DAX Contracting, and an 8(a) Certified, Women-Owned Small Business (WOSB), PMP Construction, and has been awarded many competitive set-aside contracts and sole-source set-aside contracts.
Our PMP/GBAB JV and DAX/GBAB JV partnerships are SBA-approved Mentor-Protégé partnerships that last up to six years. The partnership enhances the capabilities of the protégé, assists the protégé in meeting the goals established in its business plan and improves the protégé’s ability to successfully compete for contracts. The joint ventures are unpopulated separate legal entities organized as limited liability companies. The protégé (PMP Construction and DAX Contracting) is the managing partner with an ownership interest of 51%. GBA Builder’s ownership interest is 49%. The managing partner/protégé must comply with federal regulations and perform at least 40% of the work performed by the joint venture – typically in the form of project management, quality control management and safety management. GBA Builders provides site supervision in an amount not to exceed 60% of the work performed by the joint venture.
Additional Links and Sources:
GBA Builders is very proud of the work we have done through our joint ventures and the SBA Mentor-Protégé program since 2018 and are grateful for the experience and success that allows us to partner with and mentor smaller businesses.
Contributed by McClain Acri, Assistant Project Manager
As Assistant Project Manager for GBA Builders, McClain has a comprehensive construction and project management background, focusing on the federal market. Working daily with GBA Builder’s two joint ventures and alongside various projects, she understands the importance of developing and maintaining strong relationships through effective communication to achieve maximum efficiency and productivity.