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Daily Archives: May 27, 2012

Explore teaming arrangements.

Teaming arrangements are a great way for an experienced business to help an non-experience business learn how to perform successfully on a federal contract. Federal Acquisition Regulation (FAR) FAR 9.601defines contractor team arrangements as follows: “Two or more companies form a partnership or joint venture to act as a potential prime contractor;” or “A potential prime contractor agrees with one or more other companies to have them act as its subcontractors under a specified contract or acquisition program.”  The Department of Defense (DOD catagorizes teaming agreements as a prime contractor and subcontractor relationship; subcontracting; partnerships; joint ventures; cooperative research and development agreements; public-private partnership and mentor protégé agreements. Potential teaming partners must understand and create teaming documents that address contract privity, limitations on subcontracting and the SBA rules on affiliation

The most prevailing teaming business model in federal contracting is the prime contractor and subcontractor relationship. In this relationship, a group of companies form a team to work together to pursue a prime contract with the promise to work together  to negotiate a subcontract with the team members if the team is successful in winning a contract award. When the team members are successful in their procurement pursuit and the proposed prime contractor is awarded a contract, the team members must then negotiate in good faith to enter into a subcontract. The subcontract serves to formalize the legal relationship between the team members and the prime contractor. http://media.nucleus.naprojects.com/pdf/American_Express_OPEN_Victory_in_Procurement_survey_3.pdf

A partnership is a business enterprise consisting of two or more individuals or concerns who come together to co-own a single business for profit. Partnerships fall into two basic types: general and limited. In a general partnership, each partner invests in a business with an agreed-upon percentage of ownership and acceptance of all the debts, regardless of which partner incurred the debt. In a general partnership, the action of any partner can bind the entire partnership on contracts

A limited partnership is a special type of partnership consisting of general partners and limited partners. The general partners manage the business enterprise and are liable for the legal debts and obligations of the partnership. The limited partners invest funds into the partnership in exchange for receiving a predetermined share of the profit. The limited partners are prohibited from participating in the management of the partnership; otherwise, they will lose their limited partner status. They have no authority to control day-to-day operations. Limited partners are liable only to the extent of their investments.

The Code of Federal Regulations (CFR) 13 CFR 121.103(h) defines a joint venture as an association of two or more individuals or concerns formed to undertake a particular business transaction or project, rather than one in tended to continue indefinitely. The members of the joint venture share in the profits and risk of loss. The joint venture entity, and its members are in privity of contract with the government. Like the SBA regulations, the FAR FAR 19.101(7)(i),   defines a joint venture as having a limited life, rather than being permanent. Unlike the SBA regulations, which permit a joint venture to submit up to three proposals for different procurements over a 2-year period, the FAR defines a joint venture as collaborating on a single specific business venture. Small disadvantaged business (SDB) see 13 CFR 124.1002(f) and (2)), Service Disabled Veteran-Owned Small Business Concerns (SDVOSBs) 13 CFR 125.15(b) and SBA 8a mentor protégé participants may enter into joint venture agreements with limitations.

The SBA Mentor-Protégé Program enables concerns certified as SDBs under Section 8(a) to form a joint venture with a mentor firm to pursue large, consolidated or bundled procurements. The 8(a) firm may form a joint venture with a large or small business under an SBA-approved 8(a) joint venture agreement. The joint venture is deemed small as long as the 8(a) protégé qualifies as small for the procurement (regardless of the size of the mentor. An 8(a) protégé firm may form a joint venture with its SBA-approved mentor to pursue any type of federal contract procurement, not solely 8(a) procurements. As a result, the Limitations on Subcontracting, performance-of-work requirements of FAR 52.219-14, FAR 52-219-3, and FAR 52.219-27 would not apply. In other words, an SBA-approved 8(a) joint venture pursuing a large, bundled procurement need not worry about the percentage of work to be performed by the individual members of the joint venture.

A Cooperative Research and Development Agreement (CRADA) is a written agreement between a government agency and a private company to work together on a project. Under a CRADA, the government agency and private entity form teams to solve technological and industrial problems.

A Public-Private Partnership (PPP) is a contractual risk-sharing agreement between a public agency and a private-sector entity. Through this agreement, the public and private-sector entities share skills and assets to deliver a service or facility for the use of the general public. PPPs are typically used to provide needed public facilities and infrastructure.

In its post-Adarand guidance following the Supreme Court’s 1995 decision, the Department Of Justice (DOJ) recognized partnering as an effective strategy, and recommended that agencies actively pursue race-neutral mentor-protégé programs that do not guarantee contract awards on a noncompetitive basis Mentor-protégé programs may or may not be race-neutral depending on whether they are open to all firms based on objective economic or social data. Mentor-protégé efforts should attempt to make small and disadvantaged firms more competitive, without altering standards for competition or establishing award preferences. The GAO (http://www.gao.gov/new.items/d11548r.pdf) reported that as of March 2011, that  NASA  had 12 agreements, GSA 65, SBA  482, FAA 10, Department  of Veterans Affairs 24, US AID 6, Department of Energy 120, Department of Treasury 58, Department of State 86, Environmental Protection Agency 4, Homeland Security 9, Department of Defense 101, and Department Homeland Security 220 active agreements.

 

Federal Mentor Protégé programs require the mentor to provide developmental assistance which may include 1. General business management, including organizational management, financial management, and personnel management, marketing, business development, and overall business planning; (ii) Engineering and technical matters such as production inventory control and quality assurance; and(iii) Any other assistance designed to develop the capabilities of the protégé firm under the developmental program. 2) Award of subcontracts under DoD contracts or other contracts on a noncompetitive basis.(3) Payment of progress payments for the performance of subcontracts by a protégé firm in amounts as provided for in the subcontract; . (4) Advance payments under such subcontracts. (5) Loans. (6) Investment(s) in the protégé firm not to exceed 10 percent. (7) Assistance that the mentor firm obtains for the protégé firm from one or more of the following: (i) Small Business Development Centers, Procurement Technical Assistance Centers).(iii) Historically black colleges and universities.(iv) Minority institutions of higher education.

The SBA’s Small Business Teaming Pilot (http://www.sba.gov/content/small-business-teaming-pilot-program) was created to help companies form teaming agreements. On September 23rd, 2011, the SBA announced the awardees of the SBTPP grants. Eleven grantees were selected from hundreds of applications submitted. Grantees were awarded between $200,000 and $500,000 in funding, for a total of approximately $5 million in Fiscal Year 2011.

 

Grantees are expected to help small businesses find other firms interested in teaming, assist SBs with the formation and execution of teaming arrangements, aid teams of SBs in identifying appropriate larger contracting opportunities, and assist teams of SBs with the preparation and submission of bids and offers. Grantees will leverage their existing resources and collaborate with SBA District Offices, resource partners, and other federal, state, local and tribal government small business development programs.

Please contact the awardee in your area to get help forming a teaming agreement. Teaming arrangements are a great way for a small business to eventually become a prime contractor. As discussed earlier, teaming arrangements take the form of prime contractor and subcontractor relationship; subcontracting; partnerships; joint ventures; cooperative research and development agreements; Public-Private Partnership (PPP) and mentor protégé agreements. These arrangements can help the small business learn the ins and outs of contract compliance, quality control, finance, past performance, audits and other issues around government contracting.