Things You Should Know: WOSB Joint Ventures

 Small business federal contractors are looking for a means to better their chances of gaining the next

opportunity in the era of consolidated contracts and increasing competition. Creating a WOSB joint

venture is one of the most crucial strategies for doing this.

The following are some factors to be aware of with small business joint ventures:

What is a joint venture, exactly?

A joint venture is an organization of two or more firms that bid on and carry out tasks together (for

profit), using their combined resources, including money, property, resources, skills, and knowledge.

According to SBA requirements, the WOSB joint venture must be a distinct legal company that is

unpopulated, meaning that it won't employ the personnel who will carry out the contract's substantive

job (though it may have employees who perform administrative functions). The joint venture must be

registered with SAM.gov as a joint venture because it is a distinct legal entity (before the bid submission

deadline).

2. Is your company capable of joining a joint venture?

Most probably the basic rule is that for a joint venture to be considered a joint venture, both members

must be small enterprises. Additionally, the controlling member of the joint venture must have that

socioeconomic categorization for it to be eligible for solicitations that are designated for that

designation. For instance, the controlling member of the joint venture must be a WOSB itself, and the

non-managing member must be a small business if the joint venture wants to bid on work designated

for WOSBs (though it could also hold its designations).

This general rule has a significant exception: if a joint venture between a mentor and a protégé is

certified by the SBA, the WOSB joint venture will be qualified for any opportunity that the protégé

qualifies for. To put it another way, as long as the protégé is eligible, the mentor—even if a major

corporation—can form a joint venture with the protégé to compete for work designated for small

enterprises. That would be a strong incentive for big businesses to join the mentor/protégé program.

3. What conditions must be met before starting a joint venture?

The joint venture must be set up as a distinct legal entity and registered in SAM, as was previously

stated. In addition, a signed mentor/protégé agreement is required.

Depending on the specific socioeconomic classification that the joint venture seeks to be eligible for, the

standards for the WOSB joint venture agreement itself can be stringent. This article is not meant to be a

comprehensive explanation of those criteria, nor should it be used as a replacement for looking over the

relevant laws or hiring a lawyer to draft a joint venture agreement that complies with them. However,

generally speaking, the rules demand:

 Please describe the goal of the joint venture.

 The small business (or 8(a), SDVOSB, WOSB, or HUBZone firm, as the case may be) shall hold at

least 51 percent of the joint venture, shall be a managing member of the joint venture, and shall

choose one of its personnel as the project manager of the joint venture.

 That the profits of the joint venture be divided in proportion to the work done by each partner,

not following the parties' percentages of ownership.

 That the WOSB joint venture opens a separate bank account in its name, into which it will

deposit all monies due, and from which it will make all payments. Both members' signatures

must be required on the account for any withdrawals.

 Where possible, the primary assets, facilities, and resources that each member will provide to

the joint venture should be listed in the joint venture agreement along with their respective

values.

 For the joint venture agreement to detail the members' obligations with regards to contract

negotiations, labor sources, and contract fulfillment (including a discussion on how the joint

venture will meet the performance of work requirements).

 That even if a member withdraws, the other members are still required to finish the joint

venture's performance.

 That the joint venture set up legal reporting and record-keeping procedures.

These standards might seem straightforward, but they're not. Numerous rulings have concluded that a

joint venture agreement failed to satisfy one (or more) of these conditions, making the WOSB joint

venture ineligible. We, therefore, urge joint venture participants to be aware of and make an effort to

adhere to the standards.

Conclusion

Joint ventures are often effective tools. The key factors and regulations for joint ventures are outlined

on this page, but there are further nuances. To ensure that you meet the numerous requirements,

please carefully research the WOSB joint venture regulations and the specific solicitation.