PartneringforContractingSuccess_2009.ppt

Partnering for Contracting Success

Public Dollars for Public Good Studies show that small businesses represent 99.7 percent of all firms, and they have generated 60 percent to 80 percent of net new jobs annually over the last decade.

New ideas: More than half the nation's technological innovation is created by small businesses

Should I Partner?

First, evaluate your company’s experience with the federal government.

If none, seek small buys and subcontract opportunities.

If experienced, then consider other forms of partnering to include teaming.

Why Partner?

Benefits to Small Businesses

Maximizes combined capabilities Minimizes risk Uses relaxed SBA affiliation rules Fills gaps in past performance Fills solicitation requirements (e.g., relating to geographic location or specific skill set) Increases competition

Benefits to Contracting Activities Reduces administrative burden Results in a single point of contact Supports small business program Increases competition Can mitigate or remove bundling

Teaming Agreements Partnerships Joint Ventures Prime-Subcontracting

Businesses have always teamed in various forms For small businesses, the most common form of teaming is in a prime-subcontractor relationship

Do not want to give up control Prefer a direct relationship with the federal government Lack of trust that the team will yield direct benefits Common Reasons for Not Teaming

In a Good Team… Responsibilities are clearly defined Tasks are clearly divided among team members Contract management is accomplished by the lead party

What is a Team?

The Federal Acquisition Regulations (FAR 9.601) defines Contractor team arrangement as:

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

FAR states, “Contractor team arrangements may be desirable from both a government and industry standpoint in order to enable the companies involved to complement each other’s unique capabilities; and offer the best combination of performance, cost, and delivery for the system or product being acquired”

FAR Continued, “The government will recognize the integrity and validity of contractor team 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”

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.

What is a Joint Venture?

The joint venture entity:

Cannot submit more than three offers over a two-year period, starting from the date of the submission of the first offer.

May or may not be in the form of a separate legal entity.

Is viewed as a business entity in determining power to control its management.

What is a Joint Venture?

formal or informal JV. An informal JV would be any agreement put together by the parties. A formal JV can be in the form of a LLC, corporation or partnership and the entity files for specific legal status with the state. The size regs refer to different kinds of legal entities, LLC, proprietorship, corporation, partnership, etc.

Joint Venture Structure If Contractor A and B form a joint venture—

Together they act as the prime contractor under a Federal contract.

The JV has its own DUNS number and CAGE code; it is registered on CCR and ORCA as a separate entity.

The JV may have subcontractors.

Elements of a JV The contract is awarded to the JV The JV is responsible for performance JV members have privity of contract with the government Members share profits and risk of loss

What to do Pre-Award Attend industry days, outreach events, Match Making events.

Network with prospective prime contractors Determine interest and value of combined capabilities Develop relationships with specific contracting activities

Monitor online notices:

Federal Business Opportunities (FedBizOpps) at www.fbo.gov Sources Sought Requests for Information Special notices for Industry Days SBA’s Subcontract Network (SUB-Net) at http://web.sba.gov/subnet/ Bid-matches from SBDCs and PTACs

Watch for full and open solicitations with evaluation criteria that encourages teaming or rewards aggressive small business subcontracting Some solicitations give greater evaluation credit to offerors that have identified, by name, small business subcontractors in their proposals

Look for solicitations that include language requiring the prime contractor to direct a certain percentage of subcontracting efforts to small businesses

Affiliation Parties to a Joint Venture are considered to be affiliates if submitting offers on a particular procurement.

SBA may determine that the relationship between a prime contractor and its subcontractor is a joint venture and that affiliation between the two exists.

Affiliation exists when one business controls or has the power to control another or when a third party controls or has the power to control both businesses.

Control may arise through ownership, management, or other relationships or interactions between the parties.

Affiliation Defined

SBA considers how the business operates:

Does the prime contractor have unusual reliance on the subcontractor to accomplish the contract?

If a subcontractor performs vital or primary requirements on a contract, which party is really in control?

Affiliation

Some General Principles of Affiliation

(13 CFR 121.103)

Affiliation

Size Exceptions Small businesses can benefit from forming a joint venture to pursue large procurements

Small businesses can form joint ventures without fear of losing status as small businesses

Know how to form a Joint Venture without becoming affiliated with your partner!

Affiliation with another partner could result in a finding that you are no longer a small business.

Exclusion from Affiliation A joint venture arrangement of two or more business concerns may submit an offer as a small business for a Federal procurement without regard to affiliation provided…

Exclusions

1) Each concern is small under the size standard corresponding to the NAICS code assigned to the contract, provided:

A) The procurement qualifies as a “bundled” requirement, at any dollar value; or…

Or, for a procurement having an employee-based size standard, the dollar value of the procurement, including options, exceeds $10 million.

Ex., Size Std=500 employees; Buy > $10 m

Bundled requirement or bundling refers to the consolidation of two or more procurement requirements for goods or services previously provided or performed under separate smaller contracts into a solicitation of offers for a single contract that is likely to be unsuitable for award to a small business.

What is a Bundled Requirement?

How Activities Avoid Bundling Make solicitations small business friendly Conduct industry forums or presolicitation conferences to gauge small business interest Obtain input from industry Identify potential sources Facilitate teams through networking sessions Issue “draft” solicitations

Mentor-Protégé Programs A small business can enter into a mentor-protégé arrangement with a more experienced business to pursue procurement opportunities.

Some mentor-protégé relationships include joint venture agreements; some do not.

Two types of mentor-protégé programs apply at DOD contracting activities: SBA 8(a) Mentor-Protégé Program, and DoD Mentor-Protégé Program

Benefits of Mentor-Protégé Arrangements

Developmental assistance from a more experienced mentor Potential subcontracting opportunities Increased visibility New markets Opportunity to gain past performance experience Mentor-Protégé Programs

SBA Mentor-Protégé Two firms approved by SBA to be a mentor and protégé under 13 CFR 124.520 may joint venture as a small business for any Federal Government procurement, provided… …the protégé qualifies as small for the size standard corresponding to the NAICS code assigned to the procurement, …and, for purposes of 8(a) sole source requirements, has not reached the dollar limit set forth in 13 CFR 124.519.

(1) For a firm having a revenue-based primary SIC code at time of program entry, the limit above which it can no longer receive sole source 8(a) contracts is five times the size standard corresponding to that SIC code as of the date of SBA's acceptance of the requirement for the 8(a) BD program or $100,000,000, whichever is less.

(2) For a firm having an employee-based primary SIC code at time of program entry, the limit above which it can no longer receive sole source 8(a) contracts is $100,000,000.

8(a) BD Participants A joint venture or teaming arrangement of at least one 8(a) Participant and one or more other business concerns may submit an offer for a competitive 8(a) procurement without regard to affiliation under so long as the requirements of 13 CFR 124.513(b)(1) are met.

(b) Size of concerns to an 8(a) joint venture. (1) A joint venture of at least one 8(a) Participant and one or more other business concerns may submit an offer as a small business for a competitive 8(a) procurement so long as each concern is small under the size standard corresponding to the SIC code assigned to the contract, provided: (i) The size of at least one 8(a) Participant to the joint venture is less than one half the size standard corresponding to the SIC code assigned to the contract; and (ii)(A) For a procurement having a revenue-based size standard, the procurement exceeds half the size standard corresponding to the SIC code assigned to the contract; or (B) For a procurement having an employee- based size standard, the procurement exceeds $10 million;

Requirements of 13 CFR 124.513(b)(1) The requirements of 13 CFR 124.513(b)(1) include the following:

A joint venture of at least one 8(a) Participant and one or more other business concerns may submit an offer as a small business for a competitive 8(a) procurement so long as each concern is small under the size standard corresponding to the NAICS code assigned to the contract, provided…

1) The size of at least one 8(a) Participant to the joint venture is less than one half the size standard corresponding to the NAICS assigned to the contract; or

2) For a procurement having an employee-based size standard, the procurement exceeds $10 million;

Requirements of 13 CFR 124.513(b)(1)

8(a) Teaming An 8(a) protégé firm may team or partner with its SBA-approved mentor to pursue any type of federal contract procurement, not solely 8(a) procurements FAR 52.219-14, Limitations on Subcontracting, applies if the requirement is issued as a small business set-aside.

SBA may determine that the relationship between a prime contractor and its subcontractor is a joint venture, and that affiliation between the two exists.

A contractor and subcontractor are treated as joint venturers if the ostensible subcontractor will perform primary and vital requirements of a contract or if the prime contractor is unusually reliant upon the ostensible subcontractor.

All requirements of the contract are considered in reviewing such relationship, including contract management, technical responsibilities, and the percentage of subcontracted work.

Ostensible Subcontracting: 13 CFR 121.103 (h)(4) What is Ostensible Subcontracting?

Things Considered

Things Considered

These are just some of the considerations used by SBA to evaluate whether the relationship is a true prime/subcontractor relationship or a joint venture under the ostensible subcontractor regulations.

Ultimately, a finding of unusual reliance, which rises to the level of a joint venture affiliation, must be a reasonable conclusion based on the totality of the circumstances.

To learn more

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