Category Archives: Joint Venture

Answers to Questions About Teaming – Part 1

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These questions were asked during a recent “Developing and Managing Contractor Teams” Workshop.

 

How long does it take the process to become a mentor/protégé?

8(a) firms should consult with their SBA District Office Business Opportunity Specialist BEFORE they apply for the 8(a) BD Mentor-Protégé program.

According to the Small Business Administration Office of Government Contracting and Business Development, it usually takes about 3 or 4 months for a new 8(a) Mentor Protégé Agreement to undergo full analysis and receive a decision from the SBA headquarters.

Protégé 8(a) firms should notify their prospective Mentors that 1.) SBA approval and acceptance of the Mentor Protégé Agreement is not guaranteed and involves a great deal of due diligence and 2.) The entire end-to-end Mentor Protégé Agreement review process will entail approximately one quarter to one half of a year to complete.

 

Can the three Protégé’s have the same NAICS Code?

Please reference 13 CFR124.520 (b)(2) for complete details as well as contacting your SBA District Office for an official answer.

Excerpts from the reference.

(2) Generally a mentor will have no more than one protégé at a time. However, the Assistant Administrator//Business Development (AA/BD)  may authorize a concern or non-profit entity to mentor more than one protégé at a time where it can demonstrate that the additional mentor/protégé relationship will not adversely affect the development of either protégé firm (e.g., the second firm may not be a competitor of the first firm). Under no circumstances will a mentor be permitted to have more than three protégés at one time.

 

When an 8(a) enters into a Mentor Protégé Joint Venture Agreement with a large business, is the new JV a small business?

Under the formal Mentor Protégé and Joint Venture Programs the answer is yes.

 

— Donna Gaillard/Phyllis Embree

How Can A Joint Venture Help My Business Grow?

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A joint venture is defined as a business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task. This task can be a new project or any other business activity. In a joint venture (JV), each of the participants is responsible for profits, losses and costs associated with it. However, the venture is its own entity, separate and apart from the participants’ other business interests – Investopedia

The JV can be either informal, where a handshake seals the agreement to share a booth at an expo, or very formal with lawyers and complex agreements documenting two or more companies combining resources to develop new technologies.  Benefits:

  • Save money and reduce risk through capital and resource sharing
  • Smaller companies are able to work with larger companies to develop, manufacture and market new products/services
  • Research/Development underwritten by more than one company

The Joint Venture for the 8(a) company joining with a non- 8(a) company in the pursuit of federal business opportunities is executed in a Mentor- Protégé relationship.  The two companies, let’s assume a small 8(a) and a large non 8(a), work the JV through the SBA.  The companies form a new legal entity (JV-1 for example) for the mutual interest of both companies.

The purpose of the JV is to increase the number of contract wins however there are specific rules.  Highlights as follows:

  • The JV is limited to 3 contracts in a 2 year period.
  • The 8(a) firm in the JV must receive profits commensurate with the work performed by the 8(a) firm
  • The 8(a) must perform at least 40% of the work
  • Mentor firm is only allowed 3 protégés at one time
  • The mentor protégé agreement is required to specify the development assistance the  mentor will provide the 8(a) firm.

JVs offer opportunities that a small company may not experience when going it alone.  If this sounds like something you may be interested in contact your nearest SBA office and inquire about establishing a JV.

–Frank Lane