jvs and teams teaming and jvs chicago 2015

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Rose Consulting Law Firm - specializing in Government & Small Business Law

Offices in Oakland, Salt Lake City, Chicago, Washington DC, Atlanta, Valdosta and

Jacksonville

Joint Venture and Teaming Arrangements

Foundation Technologies, Inc.1400 Progress Industrial Blvd.Lawrenceville, GA 30043




Jacksonville

What is a small business? Organized for profit Place of Business in the U.S., operates primarily

in the U.S., or makes a significant contribution to the U.S. economy (taxes, use of American products/labor)

Does not exceed the small business size standard for the procurement.

Each North American Industrial Classification System (NAICS) Code has a small business size standard.

13 CFR 121.105




Jacksonville

NAICS Codes and Size Standards

Sector 23 – Construction Subsector 236 – Construction of Buildings 236115 New Single-Family Housing Construction (except Operative Builders) $33.5 236116 New Multifamily Housing Construction (except Operative Builders) $33.5 236117 New Housing Operative Builders $33.5 236118 Residential Remodelers $33.5 236210 Industrial Building Construction $33.5 236220 Commercial and Institutional Building Construction $33.5 Subsector 562 – Waste Management and Remediation Services 562111 Solid Waste Collection $12.5 562112 Hazardous Waste Collection $12.5 562119 Other Waste Collection $12.5 562211 Hazardous Waste Treatment and Disposal $12.5 562212 Solid Waste Landfill $12.5 562213 Solid Waste Combustors and Incinerators $12.5 562219 Other Nonhazardous Waste Treatment and Disposal $12.5 562910 Remediation Services $14.0 Except, Environmental Remediation Services 500 238110-238990 Concrete $15.0




Jacksonville

Engineering NAICS/Size Standards

Sector 54 – Professional, Scientific and Technical Services Subsector 541 – Professional, Scientific and Technical Services 541110 Offices of Lawyers $10.0 541191 Title Abstract and Settlement Offices $10.0 541199 All Other Legal Services $10.0 541211 Offices of Certified Public Accountants $19.0 541213 Tax Preparation Services $19.0 541214 Payroll Services $19.0 541219 Other Accounting Services $19.0 541310 Architectural Services $7.0 541320 Landscape Architectural Services $7.0 541330 Engineering Services $14.0 Except, Military and Aerospace Equipment and Military Weapons $35.5 Except, Contracts and Subcontracts for Engineering Services Awarded Under the

National Energy Policy Act of 1992 $35.5 Except, Marine Engineering and Naval Architecture $35.5




Jacksonville

Size must include Affiliates What is an Affiliate? When one controls or has the power to control

another. Common ownership Common control Common management Identity of Interest (family members, common

investments, dependant through contractual relationships)

Newly organized concerns Joint Ventures

13 CFR 121.103




Jacksonville

What other issues can create Affiliation?

The ownership Structure Who are the other owner(s) besides the 51% owner? Are they owner(s) of other companies? Are they companies themselves? Are they in the same or similar line of business?

Look at the Operating Agreement or By-Laws Are there shared control arrangements? Do managers in the LLC or board members (Inc.) share

decision making? What about negative control issues – Can a manager or board

member block a quorum by not attending a meeting? Does the firm unduly rely on another for materials or

subcontracts (like an unofficial mentor)? SBA uses a totality of the circumstances review, so generally

no one factor may determine affiliation although it can.13 CFR 121.103




Jacksonville

Average Annual Receipts Use Federal Tax Returns

Average of last three completed fiscal years

13 CFR 121.104




Jacksonville

Number of Employees Count all individuals employed on a full-time, part-time, or other basis. This includes

employees obtained from a temporary employee agency, professional employee organization or leasing concern.

Numbers of employees for each of the pay periods for the preceding completed 12 calendar months (running average).13 CFR 121.106




Jacksonville

Joint Ventures A joint venture is an association of individuals and/or concerns with

interests in any degree or proportion by way of contract, express or implied, 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 on a continuing or permanent basis for conducting business generally.

This means that the joint venture entity cannot have more than 3 contracts over a two year period, starting from the date of the submission of the first offer (3-in-2 rule). 13 CFR 121.103(h)




Jacksonville

Joint Venture vs. Prime/Sub Relationship

SBA affiliation regulations purposely do not define “teams” or “teaming agreements”

Joint Ventures Formal joint venture (Separate legal entity, such as LLC) Informal (no new entity formed)

Prime Subcontractor Relationships




Jacksonville

Teaming Arrangement: FAR 9.601

“Contractor Team Arrangement,” as used in this subpart, means an arrangement in which—

Two or more companies form a partnership or joint venture to act as a potential prime contractor.

A potential prime contractor agrees with one or more other companies to have them act as its subcontractors under a specified Government contract or acquisition program.




Jacksonville

What are the Benefits? General benefit for all concerns, both large and small:

The joint or team is able to compete for larger, more technically complex contracts by combining the capabilities and past performance of various team members.

FAR 9.601




Jacksonville

Joint Venture Exceptions to Affiliation

A joint venture is a small business concern, when the combined revenue/employees of all joint venture partners do not exceed the small business size standard.

Exception, a joint venture is considered small, when each joint venture partner is small and if: The procurement is bundled; or For a procurement having a receipts based size standard,

the dollar value of the procurement exceeds ½ the size standard; or

For procurements having an employee based size standard, the dollar value of the procurement exceeds $10 million.***** Sea Change here!!!!

13 CFR 121.103(h)(3)




Jacksonville

Proposed Regulations February 5, 2015 – SBA issues new proposed Rules

for Joint Ventures and a New Mentor Protégé Program!

Government-Wide M/P Program to be established allowing for M/P programs for other small businesses modeled after the 8(a) program

This will lead to increased competition for Federal contract, open markets for small businesses outside the 8(a) program and create an incredible administrative burden on the SBA

This will mostly benefit EDWOSB, SDVOSB and HUBZone firms




Jacksonville

Proposed Regulations 8(a) M/P packages will continue to be reviewed by

SBA’s Assoc. Admin. for Bus Development New M/P packages outside 8(a) will be reviewed by

Dir. Of Gov’t contracting Proposed 3 year limit on M/P agreements with annual

review and approval Proposed lifting the current limitations on protégés to

state simply they must be small for their NAICS code Exception to affiliation for JVs between mentors and

protégés will be extended to the new M/P program No more populated JVs




Jacksonville

Proposed Regulations

HUBZones are allowed to JV with their large business mentor

There will be a great deal more oversight SBA has suggested that there will be no more

limitations on when a small business can joint venture with another small business to joint venture and receive the exemption from affiliation found at 13 CFR 121.103(h)(3).

Any questions




Jacksonville

Points for Prime/Sub Relationships

Agencies may consider an offeror’s subcontractor’s capabilities and experience under relevant evaluation factors, where the RFP does not prohibit the consideration of a subcontractor’s experience in the evaluation of proposals (Roca Management Education & Training, Inc., January 15, 2004, GAO, B-293067).

The prime contractor is solely responsible for meeting all contract requirements, including the Limitations on Subcontracting percentage.

Must watch out for Ostensible Subcontractor relationship with its subcontractor(s).




Jacksonville

What is an Ostensible Subcontractor?

An ostensible subcontractor is a subcontractor that performs primary and vital requirements, or a subcontractor upon which the prime contractor is unusually reliant.

A contractor and its ostensible subcontractor are treated as joint venturers, and therefore affiliates, for size determination purposes.

13 CFR 121.103(h)(4)




Jacksonville

When is one Ostensible? The SBA originally came up with what we refer to as the 7 factor test. Although

they use the “Totality of the Circumstances” test now, we will see in decisions by the GAO, Claims Courts and others grappling with the Ostensible Subcontractor issue, the 7 factor test being frequently referred to. So, to give you some point of reference, I am going to list the 7 factors here.

(1) who will manage the contract (2) which party possesses the background and expertise necessary for contract

performance (3) which party chased the contract (4) the degree of collaboration in preparation and submission of the competitive

proposal (5) whether there are discrete tasks to be performed by each of the teaming

partners, or whether there is instead commingling of personnel and resources

(6) the relative amount of work to be performed by each teaming partner (7) which party will perform the more complex and costly contract functions

D.P. Associates, Inc., No. 2719, Aug. 7, 1987* These factors are not weighed equally, and not one of them is a conclusive test of

unusual reliance.




Jacksonville

Morris-Griffin v. C&L Service Corporation = Ostensible Subcontractor

Recent Case on Affiliation and Ostensible Subcontractors – http://www.roseconsultingllc.org/Summary_of_Morris-Griffin_v.pdf

Morris‐Griffin v. C&L Service Corporation, 2010 WL 3221975 (E.D. Va)

Large HUD loan processing company teamed with janitorial 8(a) company to win 8(a) set-aside contract to process loans for HUD – found to have fraudulently circumvented the SBA rules by using a nominal 8(a) contractor.

http://www.roseconsultingllc.org/Summary_of_Morris-Griffin_v.pdf

http://www.roseconsultingllc.org/Summary_of_Morris-Griffin_v.pdf




Jacksonville

Points for Joint Ventures Do not violate the “3-in-2 rule” – three contracts

won in a two year period, by the same joint venture entity.

If you violate the rule, general affiliation will be found.

13 CFR 124.513(a) requires formal approval by SBA of all joint ventures pursuing 8(a) contracts.

Performance of work requirements apply to cooperative efforts of the joint venture entity.




Jacksonville

Formal 8(a) Joint Ventures For competitive 8(a) procurements that meet 13 CFR 124.513(b)(1)(ii):

8(a) firm can joint venture with one or more other businesses and the joint venture is considered small, so long as each is small under the size standard for the procurement, and;

The size of at least one 8(a) member of the joint venture must be less than ½ the size standard for the procurement.

But see new rules proposed that will change all this




Jacksonville

Formal 8(a) Joint Ventures (cont’d)

For joint venture between 8(a) protégé and SBA approved mentor:

The joint venture is considered small, so long as the 8(a) protégé is small for the procurement.

13 CFR 124.513(b)(3)

The joint venture may bid as a small business on any federal prime procurement.

13 CFR 121.103(h)(3)(iii)




Jacksonville

Formal 8(a) Joint Ventures (cont’d)

For any 8(a) joint venture between 8(a) business and another firm to perform an 8(a):

If the JV is populated, then the 8(a) firm must perform 40% of the work of the JV and none of the work may be subcontracted out to JV members.

If unpopulated (other than admin personnel), then the 8(a) prime must perform 40% of the work performed by the total amount of work subcontracted to members of the JV.

13 CFR 124.513(d)But rules are again proposed to change




Jacksonville

Lets Talk about Mentor Protege

There are 14-15 Mentor Protégé Programs in the Federal Government SBA by far has the one with the greatest benefits but it is the toughest club to join

3 best parts of theirs: Exemption from affiliation for JVs between the mentor and protégé for pursuit

of any federal procurement Mentor may own up to 40% equity investment in protégé Mentor may bond the protégé’s jobs for them if written into the MP agreement

By and large the next best is DOD DoD allows for reimbursement of some expenses of the mentor, or

subcontracting credit and also sets aside some procurements for those in the program.

The rest all contain provisions for extra small business credit in the Mentor’s small business plan for being a mentor, some have reimbursement of expenses to some extent for assisting a protégé, etc. Warning – Only SBA’s mentor protégé programhas an affiliation exemption and allows for a JV to exist between a large and small business.

See new proposed rules




Jacksonville

Where Can I Find the CFR?

Federal Regulations (CFR) on-line:http://ecfr.gpoaccess.gov

Size regulations -- 13 CFR Part 1218(a) & SDB regulations -- 13 CFR Part 124

Government Contracting Programs – 13 CFR Part 125.6HUBZone Program – 13 CFR Part 126

Service Disabled Veteran Program – 13 CFR 125Women-Owned Small Business Program-13 CFR 127

http://ecfr.gpoaccess.gov/

http://ecfr.gpoaccess.gov/




Jacksonville

What did Dave do in the active Air Force?!

Some lawyers, we just do not mess with!Gen B.B. Bell, US Forces Korea @ Dave

But sir, I really don’t think it’s a good idea to go to the DMZ today. My tour is almost over!




Jacksonville

David A. Rose [email protected]

Principal Attorney (229) 244-1527Moser Rose PC http://www.moserrose.com

If you have additional questions, please contact Dave

http://www.moserrose.com/

jvs and teams teaming and jvs chicago 2015

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