If approved by the SBA, an 8a Participant may enter into a joint venture agreement with one or more other small business concerns, whether or not the other firms are 8a Participants, for the purpose of performing a specific 8a contract. A joint venture agreement is allowable only where an 8a concern lacks the necessary capability to perform the contract on its own, and the agreement is fair and equitable and will be of substantial benefit to the 8a concern. However, if the SBA concludes that an 8a concern brings very little to the joint venture relationship in terms of resources and expertise other than its 8a status, SBA will not approve the joint venture agreement. It’s best to discuss your plans to consider a joint venture for a particular 8a contract with your Business Opportunity Specialist (BOS) early in the bidding process so your agreement is appropriately formulated.
Every joint venture agreement to perform an 8a contract, including those between approved mentors and protégés, must include requirements:
- Setting forth the purpose of the joint venture;
- Designating an 8a Participant as the managing venturer of the joint venture, and an employee of the managing venturer as the project manager responsible for performance of the 8a contract;
- Stating that not less than 51 percent of the net profits earned by the joint venture will be distributed to the 8a Participant(s);
- Providing for the establishment and administration of a special bank account in the name of the joint venture. This account must require the signature of all parties to the joint venture or designees for withdrawal purposes. All payments due the joint venture for performance on an 8a contract will be deposited in the special account; all expenses incurred under the contract will be paid from the account as well;
- Itemizing all major equipment, facilities, and other resources to be furnished by each party to the joint venture, with a detailed schedule of cost or value of each;
- Specifying the responsibilities of the parties with regard to contract performance, source of labor and negotiation of the 8a contract;
- Obligating all parties to the joint venture to ensure performance of the 8a contract and to complete performance despite the withdrawal of any member;
- Designating that accounting and other administrative records relating to the joint venture be kept in the office of the managing venturer, unless approval to keep them elsewhere is granted by the District Director or his/her designee upon written request;
- Requiring that the final original records be retained by the managing venturer upon completion of the 8a contract performed by the joint venture;
- Stating that quarterly financial statements showing cumulative contract receipts and expenditures (including salaries of the joint venture’s principals) must be submitted to SBA not later than 45 days after each operating quarter of the joint venture; and,
- Stating that a project-end profit and loss statement, including a statement of final profit distribution, must be submitted to the SBA no later than 90 days after completion of the contract.
For any 8a contract, including those between mentors and protégés, the joint venture must perform the applicable percentage of work required by SBA regulations, and the 8a partner(s) to the joint venture must perform a significant portion of the contract.
The 8a firm must submit its request for approval of a joint venture agreement prior to submitting its bid or proposal, the SBA must approve the joint venture agreement prior to the award of an 8a contract on behalf of the joint venture. The SBA must approve all amendments to the joint venture agreement. In addition, the SBA may inspect the records of the joint venture without notice at any time deemed necessary. The joint venture size issues are complex, so it is best that you discuss your individual situation with your BOS. For more information on becoming 8a certified, visit http://www.cloveer.com.