8(a) Joint Ventures on Federal Construction Projects: More Work, More Hurdles and Likely Less Use

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A good portion of federal government construction contracts are still set aside for or give preferences to certified socio-economic small businesses, such as 8(a), HUBZone, social-economic disadvantaged, veteran or service-disabled veteran. As a result, to obtain these contracts, small and large companies regularly attempt to maximize their competitive advantages through utilization of partnership arrangements, such as joint venture arrangements or Teaming Agreements. A major partnership tool for 8(a) entities is a regulatory sanctioned joint venture arrangement where an actual new entity is created with an ownership interest by both the large and (8 (a) entity. However, recent changes to the small business regulations may make other arrangements, such as Teaming Agreements, more desirable.

Historically, unless the joint venture was with an 8(a) entity or through another mentorprotégée relationship, a partnership between a large and small business concern risked being considered "affiliated." Affiliation exists when the small business concern is so dependent upon the other large business concern that its economic viability would be in jeopardy without such relationship. Such dependency or control can arise through ownership, joint management or the contractual relationship (such as a joint venture).

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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