Changes in the rules regarding joint ventures were issued by the SBA during the third quarter of 2016. There have been several corrections and clarifications, but the end results is that federal contractors are finding new advantages in forming joint ventures.
Joint Ventures are business combinations which two or more companies to form a third company, usually with one partner owning 51% or more. They are attractive in federal contracting from an administrative and liability standpoint.
From an accounting standpoint, an unpopulated joint venture allows each partner to do their assigned work and bill the joint venture. One partner of the JV typically takes responsibility for JV accounting and administration. Each partner performs their work and invoices the JV. The JV then bills the client and collects the receivable, pays the partners invoices and profits are shared per the terms of the JV agreement. JVs can provide the partners greater protection that the traditional prime/sub relationship, with less likelihood of a small prime contractor delaying or even defaulting on payments due to its subcontractors.
Mentor-Protégé (M-P) programs allow for Mentors to help Protégés so they can become more competitive in federal contracting. Described by the SBA website, Mentor-Protégé programs can provide for management and technical assistance, financial and contracting assistance, trade education, business development, and general or administrative assistance. The key to successful M-P programs is a clear understanding of the objectives and methods, plus the costs and benefits to both parties.
We’ll be covering these programs as part of the Florida GovCon Summit on March 29-30 in Tampa. Presenters include:
Matt Stavish with Republic Capital Access will describe how new rules can make it easier for joint venture partners to navigate the initial capital arrangements to form the new entity, reducing investment requirements and risks.
The Florida GovCon Summit brings focuses on second-stage small businesses in federal contracting, bringing them together with agencies, primes and subject matter experts to talk about Teaming for the Bigger Federal Deals.
Questions? Connect with me, Jenny W Clark, and message me through LinkedIn.