Teaming Arrangements
Service Disabled Veteran Owned Small Business
(SDVOSB) Conference
June 29, 2010
Octavia Turner
U.S. Small Business Administration
Procurement Center Representative
octavia.turner@nasa.gov
How Important Are
Small Businesses?
In 2008, there were 29.6 million businesses in the
United States, according to Office of Advocacy
estimates -
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Represent 99.7 percent of all employer firms
Employ just over half of all private sector employees
Pay 44 percent of total U.S. private payroll
Have generated 64 percent of net new jobs over the past 15 years
Hire 40 percent of high tech workers (such as scientists, engineers,
and computer workers)
 Produce 13 times more patents per employee than large patenting
firms; these patents are twice as likely as large firm patents to be
among the one percent most cited
What is SBA’s definition of a SB?
• Independently owned and operated
• Not dominant in its field of operations
• Depending on the industry, size
standard eligibility is based on:
 the average number of employees for the preceding
12-months
-or average annual receipts for a three-year period.
What is a Service Disabled Veteran
Owned Small Business?
• The SDV must have a service-connected
disability that has been determined by the
Dept of Veterans Affairs or DOD
• The SDVO SBC must be small under the
NAICS code assigned to the procurement
• The SDV must unconditionally own 51%
of the SDVO SBC
• The SDV must control the management and
daily operations of the SDVO SBC
• The SDV must hold the highest officer
position in the SDVO SBC
What are the types of SDVOSB
procurements?
Competitive
Sole Source
•Rule of Two
• Only 1 Source
• Up to $5.5 M
•Buys over $3000
•No upward $ limit
•Award can be
made at fair
market price
(mfg)
• Up to $3 M
(non-mfg)
• Award can be
made at fair
market price
Can simplified acquisition
procurements be set-aside?
If a requirement is at or below the
simplified acquisition threshold, a
Contracting Officer may set-aside the
requirement for competition among
SDVOSBs using simplified acquisition
procedures or may award a sole
source contract to a SDVOSBs.
What requirements are not
available for SDVOSB set-aside?
 Federal Prison Industries (FPI)
 Ability One Program (formerly JWOD)
 Current SBA 8(a) Business Development
Program requirements
 Orders under indefinite delivery
contracts
 Orders against federal supply schedules
What are some examples of
team arrangements?
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Joint Venture (JV)
Prime/Subcontractor Relationship
Limited Liability Corporation (LLC)
Mentor-Protégé Agreement
Partnership
What’s a 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.
Does the government recognize
teaming arrangement?
FAR 9.603
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.
What are the advantages of teaming?
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Increase annual profits
Complement each other’s unique capabilities
Minimize risks
Gain first hand experience
Increase competitiveness
Compete with large firms
Compete for larger more technically complex
contracts
Expand geographically
What are common reasons for
not teaming?
• Do not want to give up control
• Prefer a direct relationship with the federal
government
• Lack of trust that the team will be profitable
• Takes time and effort to build the right relationship
Joint Venture
- an association of persons or
concerns …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...
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…”
(13 CFR 121.103(h) and Federal Acquisition Regulation 19.101)
A Joint Venture is when two or
more firms organize as one to
perform and/or provide a
product or service.
SDVOSB Joint Venture - A joint venture of at
least one SDVO SBC and one or more other business
concerns may submit an offer as a small business for
a competitive SDVO SBC procurement so long as
each concern is small under the size standard
corresponding to the NAICS code assigned to the
contract…
How do you determine the size of
a Joint Venture?
Joint Venture = Affiliation
• The members of a JV or team are considered to be
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affiliated for size purposes
The size of each team member contributes to the total
size of the JV or team
The JV or team is small only if the combined annual
receipts or employees of all the firms in the JV meet the
size standard for the procurement
It does not matter whether control is exercised, so long
as the power to control exists.
Can you form a Joint Venture and
not be affiliated for size purposes?
Exclusions from affiliation - A JV of two or
more business concerns may submit an offer as
a small business for a federal procurement
without regard to affiliation provided:
What are exclusions to
affiliation?
Each concern is small under the size standard
corresponding to the NAICS code assigned to
the contract when:
(a) The procurement qualifies as a “bundled”
requirement, at any dollar value; or
What are exclusions to
affiliation? (cont’d)
(b) Other than a “bundled” requirement and:
(1) For a procurement having a revenuebased size standard, the dollar value or the
procurement, including options, exceeds half the size
standard corresponding to the NAICS code assigned
to the contract;
or
(2) For a procurement having an
employee-based size standard, the dollar value of the
procurement, including options, exceeds $10 million.
Is this JV considered a
small business entity?
Small Business Set-Aside
Size Standard for NAICS 237990 is $33.5M
$20M estimated value of contract award
Joint Venture Team:
1. SDVOSB – average annual receipts of $3M with 100
employee
2. Small Business – average annual receipts of $18M with
400 employees
3. 8(a) – average annual receipts of $11M with 250
employees
Can this JV bid on a
small business set-aside?
YES!
This JV team can bid on this service disabled
veteran owned small business set-aside and still
be considered small since the dollar value of the
procurement ($20M) exceeds half the size
standard (half of $33.5M) and each team
member is small for the applicable NAICS code.
Is this JV considered a
small business entity?
Small Business Set-Aside –
Size Standard for NAICS 541330 is $4.5M
$20M estimated value of contract award
Joint Venture Team:
1. SDVOSB – average annual receipts of $3M with 100
employee
2. Small Business – average annual receipts of $18M with
400 employees
3. 8(a) – average annual receipts of $11M with 250
employees
Can this JV bid on a
small business set-aside?
NO!
This JV team cannot bid on service
disabled veteran owned small business
set-aside and still be considered small.
Two team members are large for the
applicable NAICS code.
Is this JV considered a
small business entity?
Small Business Set-Aside –
Size Standard for NAICS 541712 is 500 employees
$8M estimated value of contract award
Joint Venture Team:
1.
SDVOSB – average annual receipts of $3M with 100
employee
2.
Small Business – average annual receipts of $18M with
400 employees
3.
8(a) – average annual receipts of $11M with 250
employees
Can this JV bid on a
small business set-aside?
NO!
This JV team cannot bid on this service
disabled veteran owned small business
set-aside and still be considered small.
The size standard for the applicable
NAICS code is based on the number of
employees. The procurement does not
exceed $10M.
What is the performance
of work requirement?
Services
50% of personnel costs on own
employees or other SDVOSB(s)
employees
Supplies
50% of manufacturing cost,
excluding materials, on own
employees or employees of
other SDVOSB(s)
General Construction
Special Trade Construction
15% of cost of contract with
25% of cost of contract,
own employees or employees of excluding materials, with own
other SDVOSB(s)
employees or employees of
other SDVOSB(s)
NOTE: Does not apply to unrestricted procurements!
How does the performance of work
requirement affect the SDVOSB JV?
SDVOSB Set-Aside for services:
• Small Business A: can only do 25% of job with his
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own people
Small Business B: can only do 25% of job with his
own people
Neither A nor B can bid the job alone.
However, if they form a Joint Venture, they can
combine their efforts, doing 50% with their own
people, and can bid the job.
What are the contents of a
JV agreement?
SDVOSB JV agreement must:
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Set forth purpose of JV
Designate SDVOSB as managing venturer and an employee of
managing venturer as project manager
State that at least 51% of the net profits earned by the JV go the
SDVOSB venturer(s)
Specify the responsibilities of the parties with regard to contract
performance, source of labor and negotiation of the SDVOSB
contract
Obligate all parties to the joint venture to ensure performance of
the SDVOSB contract and to complete performance despite the
withdrawal of any member
Require the final original records be retained by the managing
venturer upon completion of the SDVOSB contract performed
by the joint venture
(13 CFR 125.15(b)(2)
Please Note!
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
•The JV is registered in CCR and ORCA as a separate
entity
•The JV may have subcontractors.
Please Note!
• The performance of work requirements apply to
the cooperative effort of the joint venture
partners, not its individual members.
• Contract is executed in joint venture’s name
• A large business cannot be a JV participant on a
SDVOSB set-aside
-- One exception: 8(a) Mentor-Protégé
Please Note!
• The JV is responsible for performance
• JV members have privity of contract with the
government
• Members share profits and risk of loss
• JV members are individually and equally liable for
contract performance
What is a prime/subcontract team
arrangement?
FAR 9.601
“Contractor team arrangement,” as
used in this subpart, means an
arrangement in which—
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.
What are the responsibilities of the
prime contractor?
Prime Contractor:
• Agrees to furnish supplies or services and
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government agrees to pay
Responsible for adhering to terms and conditions of
contract
Manages and controls the contract
Government has privity of contract only with the
prime contractor
Relationships identified before offer is submitted
What are the responsibilities of the
subcontractor?
Subcontractor:
• Agrees to furnish supplies or services and prime
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contractor agrees to pay
Responsible for adhering to terms and conditions
of subcontract
Conveys terms and conditions to second-tier
subcontractors
Subcontractor has privity of contract only with
the prime contractor
Relationships can be defined before or after
award
What is an ostensible subcontractor?
13 CFR 121.103(h)(4)
A contractor and its ostensible subcontractor are
treated as joint venturers, and therefore affiliates,
for size determination purposes. An ostensible
subcontractor is a subcontractor that performs
primary and vital requirements of a contract, or of
an order under a multiple award schedule
contract, or a subcontractor upon which the prime
contractor is unusually reliant…
What does SBA consider in the ostensible
subcontractor determination?
All aspects of the prime/sub relationship are
considered:
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Joint banking account with joint signatures
Joint approval on invoices
Joint authority required for most actions
Unusual reliance upon teaming
Agreements between the prime and subcontractor (such as bonding
assistance or the teaming agreement)
Whether the subcontractor is the incumbent contractor and is ineligible to
submit a proposal because it exceeds the applicable size standard for the
solicitation
Subcontractor manages contract or subcontractor employees are key
personnel
Teaming Tips
Selecting Teaming Partners – consider:
• capabilities, financial, credit history, other resources
• past performance
• debarment/suspension
• management styles, corporate cultures, strategic visions
• past and current teaming history
Successful Teaming Qualities
• compatible contractors
• good teaming agreements in place
What research can be performed
prior to deciding to team?
• Attend industry days, outreach events, match making
events, conferences, etc.
• Network with prospective prime contractors
• Watch for full and open solicitations with evaluation
criteria that encourages teaming
• Check the FBO “interested parties” list for potential
partners
• Ask for procurement history to identify previous contracts
• Service Corps of Retired Executives (SCORE) article:
“Teaming to Help Win Government Contracts”
http://www.score.org/pdf/OPEN%20Govt%20Team%20to
%20Win%203-1.pdf
What are characteristics of a
good teaming arrangement?
•Tasks are clearly divided among team members
•Responsibilities are clearly defined
•Team members cannot be easily replaced
•Team members will not team with competitors on the same
procurement
•All parties benefit from the relationship
•Clearly define roles of prime contractor and subcontractor
when contract is awarded
Wrap Up
Joint Venture
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Entered into prior to award
Contract written in joint venture name
Temporary arrangement – 3 offers in two year period
Considered as new entity for federal contracting
purposes
• Team members are affiliated
Prime/Subcontractor
• Entered into before or after award
• Prime is responsible for completing the contract
• Prime/subcontract relationship established for a specific
contract
Where can I find
teaming opportunities?
1. Federal Business Opportunity –
http://www.fbo.gov
2. SUBNet – http://web.sba.gov/subnet
3. Dynamic Small Business Search –
http://www.ccr.gov
4. Prime Contractor List –
http://www.sba.gov/gc
5. Networking – conferences, workshops,
training sessions
References
1. Code of Federal Regulations
http://ecfr.gpoaccess.gov/
13 CFR 121 – SBA Size Regulation
13 CFR 124.513 -- SBA 8(a) Joint Venture Rules
13 CFR 124.520 -- SBA Mentor Protégé
13 CFR 125 Subpart C -- Contracting with SDVO SBCs
13 CFR 126.616 – HUBZone Joint Ventures
2.
Federal Acquisition Regulation NAICS
http://farsite.hill.af.mil
3.
DoD Handbook for Facilitating Small Business Teaming
Arrangements http://www.acq.osd.mil/osbp/resources/teaming.pdf
Who Needs DSBS?
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All small firms seeking
federal, state, and private
contracts
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All federal and state
government agencies
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All major prime
contractors
Veterans in Business
Still Serving America
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