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Navigating the world of government contracting can be difficult and time-consuming, especially for new or small businesses. One powerful strategy that can give businesses a competitive edge is forming a Joint Venture (JV). A JV is a type of temporary teaming arrangement between two or more entities. The advantage of this partnership is that, when operating as the JV, they are permitted to pool their resources, skills, experience, and capital.  

Understanding how JVs work is crucial for companies hoping to build their contracting portfolio. A JV can open doors that are otherwise closed, whether you’re new to GovCon or looking to broaden your reach. In this blog, we’ll explore what you must know about JV advantages, risks, opportunities, and other considerations for long-term success.  

Key Advantages of Joint Ventures 

JVs can deliver many key advantages to participating companies, both when responding to a proposal and during contract performance. Consider this: 

A JV gets credit for the collective experience and certifications of its entities.

The ability to aggregate the experience of the JV’s entities explains why small businesses partner with larger businesses or businesses that offer different services. On many bids, JVs may use any member’s past performance and/or experience. In some cases, only one entity needs to have a facility clearance or industry certification for the JV to receive credit. Ultimately, pooling resources allows businesses to bid on contracts that they might not be able to pursue alone, even when the contracts are highly complex or include challenging qualification/experience requirements.

Some solicitations will have adjusted minimum requirements that are more proportionate for smaller businesses.  While it’s important to note that this is at the discretion of the procuring agency, Contracting Officers may relax requirements (such as dollar values of past performance references) for the protégé/SB member of the JV.

So, why do large businesses that already have a lot of qualifying experience agree to partner with small businesses? 

Because large businesses can gain access to set-aside work. A JV between a mentor and its protégé can bid on any set-aside contract for which the set-aside protégé qualifies. Large businesses can expand their access to small business set-aside contracting opportunities that they wouldn’t otherwise have, such as 8(a) or HUBZone set-asides, by partnering with these set-aside businesses through joint ventures, allowing them to pursue work they wouldn’t be eligible to bid on independently. It’s important to note that large businesses can also form JVs with other large businesses to compete for large, complex contracts without size standard restrictions; however, these large business JVs do not qualify for set-aside contracts.

JVs can deliver broader access to markets and clients. Even if you’re not forming a JV with a set-aside or a large business, a JV partnership can offer broader access to contracting opportunities by enhancing your access to the clients and markets of your partner entities. In fact, this should be a key consideration when you form a JV, because you should absolutely consider who you are going to market your services or solutions to and where/how you can deliver the greatest return on investment.  

You might be able to offer more (or better!) solutions. Businesses in a JV should be combining resources, skills, technologies, and knowledge beyond the proposal to actually deliver better solutions and capabilities. Ideally, a JV blends each company’s services to offer something that boosts their competitive stance.  

You get to share the delivery risk and realize increased administrative efficiency. A JV is a legally binding agreement, so once formed, all entities share the financial and operational risks in delivery. Though one entity will be the designated ‘managing partner,’ all entities are responsible for delivering quality services. Working together, businesses may achieve economies of scale because they can use existing business processes, quality management techniques, and even accounting systems.

Challenges with Joint Ventures

While JVs can offer many benefits, they also come with unique challenges including time-intensive collaboration, workload balance challenges, and potential liability concerns. These challenges should be carefully considered before companies formalize the partnership with an agreement because:

You’re sharing the risk and liability. Yep – that shared risk we cited as a “pro” above could easily be a “con” if you team with an entity that doesn’t live up to the terms of the JV agreement or the terms of your shared government contract. Just like a group project in school, each collaborator needs to provide the parts of the work they’re assigned, or everyone’s grade (and reputation) suffers.  

Competing priorities might crop up. There are a minimum of three entities’ priorities at play, assuming the JV was formed by only two companies (because remember, a JV isn’t limited to two partners!). The JV itself will require attention and resources from its member entities to function effectively, and each partner must continue to handle their regular business operations. It’s definitely not an “either/or” situation – entities must be prepared to balance the demands of the JV and their individual company simultaneously.  

There may be restrictions on the bids you are eligible for. Not every solicitation permits JVs to compete, and sometimes there are additional restrictions, like having the smaller entity contribute a minimum number of projects, or having a requirement that each member of the JV be “similarly situated” (which would prevent an LB from forming a partnership with an SB).  

All JVs have an expiration date. JVs can only exist for two years after their first awarded contract. There are a few caveats that go along with this, which we’ll discuss in more depth later on. 

Businesses must plan carefully to overcome these obstacles so they can maximize the advantage of being a JV.

Other Considerations in Forming a Joint Venture

While you’re weighing the pros and cons of establishing a JV, you’ll also need to determine if you want to form a Populated or an Unpopulated joint venture, which will be informed by the specific types of contract(s) you hope to pursue.

• Unpopulated Joint Venture: This type of JV operates using each partner's employees and resources rather than hiring/having its own employees. It is registered as its own entity in SAM.gov and will also have an Immediate Owner listed (i.e., typically the managing partner of the JV, although there may be exceptions). Unpopulated JVs are the most common type found in GovCon, and they are typically eligible for small business set-aside contracts; however, it’s always important to verify the RFP for confirmation and any limitations.  
• Populated Joint Ventures: This type of JV also operates as a separate legal entity, but it will have its own employees and resources. Populated JVs are often used for larger contracts, and the benefits include direct control of the JV resources (since they are not “on loan” from a parent entity). It is important to note that this type of JV is discouraged by the SBA and is typically not eligible for small business set-asides. 

Additionally, all JVs have a shelf life. The duration of a JV is usually tied to its purpose. For JVs created to pursue government contracts, the following timelines apply:

• Two-year limit: JVs typically last up to two years after the first awarded contract, with the potential for additional task orders (if on an IDIQ) as well as other standalone contracts within that period.
• No Award, No Continuation: A JV formed to pursue a specific contract may not last long if it doesn't win that bid. Ultimately, the duration of the JV depends on the terms of the JV agreement. If it fails to win the contract and has no other legitimate business purpose, it may no longer meet the requirements to maintain its status and could be dissolved. 

You must also be able to describe in your proposal how your JV will operate. Since most JVs are established for the purpose of pursuing (and winning) certain types of contracts, it’s important to understand which elements of the JV may be considered during proposal submission. When bidding as a JV, at a minimum, you must be prepared to:

• Clearly define and describe the roles and responsibilities of each JV partner.
• Include the official (signed!) JV Agreement in the proposal. 
• Provide proof of eligibility for set-aside programs (e.g., HUBZone, SDVOSB, 8(a)).
• Clarify how work will be divided among JV members, particularly in relation to contract management, quality assurance, and the technical approach.
• Describe the capabilities and experience each member will contribute, and/or explain how each partner’s performance is relevant to the JV’s capability. 
• Outline financial contributions, accounting processes, and provide a clear budget. 
• For mentor-protégé JVs, explain how the mentor supports the protégé. 

Finally, it’s important to understand how the SBA’s “performance of work” requirements apply to JVs, especially for mentor-protégé arrangements pursuing set-aside contracts. Note: This is a summary of the Code of Federal Regulations (CFR) 125.8c.  

• The small business protégé must perform at least 40% of the total work the JV performs. 
• The 40% must be substantive, hands-on work, not just administrative or “paper-pushing” roles. 
• The protégé’s 40% is calculated against the total amount of work done by both partners combined (not the total contract value).  
• Any work performed by the mentor or its affiliates, including subcontractors, is counted toward the mentor’s share. 
• The protégé’s 40% cannot include work done by a subcontractor, even if that subcontractor is also a small or similarly situated business. 

The reason behind these requirements is to ensure the protégé gains real, hands-on experience and benefits from the contract. 

What People Get Wrong about JVs

By this point, you’ve probably noticed that JVs can be complex, nuanced entities, so let’s clear up a few more common misconceptions.  

• Misconception #1: Joint Ventures and Partnerships are the same.  
• Reality: Partnerships are long-term, legally recognized business structures in which ownership and responsibilities are shared for the continuous operation and profit of the business. In contrast, a JV is a temporary arrangement established for a specific project or objective, with the parties typically dissolving the collaboration once the project is completed (or when the time limit of the permitted arrangement expires). 
• Misconception #2: JVs are only for large (or only for small) companies.  
• Reality: Both small and large businesses can benefit from combining resources, expertise, and technologies, thereby enhancing competitiveness and delivering better solutions. By sharing financial and operational risks, partners reduce individual burdens, while pooling resources helps to lower costs and achieve economies of scale. 
• Misconception #3: JVs automatically protect each company from liability and ensure equal control over all activities.  
• Reality: If the JV encounters legal problems or financial losses, each partner could be held liable. Additionally, control, work responsibilities, and resource usage may not always be divided equally among the partners. 

Where To Learn More

If you want to learn more or dig into specific requirements, the CFR and Federal Acquisition Regulations (FAR) are the governing regulations for JVs. The FAR focuses on federal procurement within the broader CFR regulations. We recommend starting with the following CFRs, since they are the primary regulations governing JVs: 

• 13 CFR §121.101: Explains SBA Size Standards as identified by North American Industry Classification System codes. 
• 13 CFR §121.103: Explains how SBA determines whether an affiliation exists between entities. 
• 13 CFR §124, 125, 126, 127, 128: Outlines specific regulations for 8(a), Historically Underutilized Business Zone (HUBZone), Service-Disabled Veteran-Owned Small Business (SDVOSB), Women-Owned Small Business (WOSB), Economically Disadvantaged Women-Owned Small Business (EDWOSB), and Veteran-Owned Small Business (VOSB) joint ventures 
• 48 CFR §19: Describes Small Business Programs.

It’s also important to note that the Small Business Administration has specific rules related to the registration, eligibility, and performance requirements of JVs. You can learn more here: Joint ventures | U.S. Small Business Administration

Conclusion

JVs can offer significant opportunities for businesses looking to excel in government contracting. Whether large or small, a well-structured JV allows companies to enhance their capabilities, reduce risks, and access larger contracts. Partners can achieve shared goals and grow by combining resources, expertise, and technologies. However, success depends on understanding the governing regulations, establishing clear agreements, and crafting strong and collaborative proposals. With the right strategy and careful management, JVs can be a powerful tool for success in the competitive government contracting landscape. 

If you’re considering forming a JV for a specific bid or want to pursue a bid with an existing JV, Trident can help confirm your eligibility and walk you through compliance requirements. [For help with the JV agreements themselves, we recommend you contact a lawyer.]  

Karen Haddock
Karen is a proposal manager at Trident Proposal Management and a former U.S. Army Officer with extensive experience in project management, logistics, and education. Based on the East Coast, she supports clients around the world as part of our globally dispersed team.