Partnering Opportunities for - PowerPoint Presentation

Slide1

Partnering Opportunities for SDVOSBs/VOSBs

Presented by Sarah Schauerte

Legal Meets Practical, LLC

legalmeetspractical.comSlide2

Teaming Generally

Under FAR 9.601, “contractor team arrangement” means:

Two or more companies form a partnership or joint venture to act as a potential prime contractor (vertical teaming arrangement); or

A potential prime contractor agrees with one or more companies to have them act as its subcontractors under a Solicitation/Contract (horizontal teaming arrangement) Slide3

What’s the Point?

FAR 9.602(a) notes that teams

may be

desirable from the Government’s standpoint because they:

Enable companies to complement each other’s unique capabilities; and



Enable companies to offer the Government the best combination of performance, cost, and delivery Slide4

Big Picture Differences

Prime/Sub Team

Prime has sole interest/responsibility

Team controlled by subcontracts and TAs

Prime only has

privity

of contract

Profits and losses dictated by subcontracts

Joint Venture

Separate legal entity with “members” with proportionate “interests”

Serves “special purpose”

Joint and several liability

Profits and losses shared proportionately Slide5

So you want to team up…

Options:

Prime Contractor

Subcontractor

Member of Joint Venture Slide6

Prime Contractor Overview

Generally team as prime contractor when

set-aside

opportunity

SBA – Must be an SDVOSB as listed in

SAM.gov

VA – Must be a verified VOSB/SDVOSB as listed in the

VetBiz

registry Slide7

Prime Contractor Advantages

“Interested party” for bid protests

Control over contract management

Control over distribution of labor

Branding

Use SDVOSB/VOSB status (set-asides)Slide8

Prime Contractor Disadvantages

On the hook

Responsible for federal rule violations

Responsible for subcontractor actions

Remember to flow down FAR clauses

Can’t negotiate terms of prime contract with government Slide9

Forming a Prime Contract Relationship

Step #1: Vet your partners

Step #2: Execute non-disclosure agreement

Step #3: Execute teaming agreement

Step #4: Prepare proposal

Step #5: Execute Subcontract Slide10

Step #1: Vet Your Partners

The dating rules

Ask for references

Internet research

Prior dealings Slide11

Step #2: Execute Non-Disclosure Agreements

During proposal/negotiation phase, may exchange confidential or proprietary information

Will protect information for specified period of time

Internet

NDAs

usually ok Slide12

Step #3: Execute Teaming Agreement

Topics covered:

Relationship of parties

Procurement activities

Termination of TA/award of subcontract

Confidentiality

Notices

OCI

Disputes (including governing law and venue)Slide13

Step #4: Prepare Proposal

Prime contractor’s responsibility

Scrutinize solicitation requirements (see Sections L and M in particular)

Timely submission!Slide14

Step #5: Execute Subcontract

After a win

Ensure clear division of responsibilities

Important provisions:

Payment

Disputes

Confidentiality

Termination Slide15

Set-Aside Requirements

Must meet certain requirements if submit offer on set-aside contract (13 CFR §125.15).

Represent is SDVOSB

Represent is small under NAICS code

Represent will meet performance of work

reqts

.

Performance of Work

Reqts

. (13 CFR §125.6)

Services: 50% (with own employees)

Supplies: 50% (cost)

General construction: 15% (cost, own employees)Slide16

Subcontractor Overview

Big primes LIKE to team with

SDVOSBs/VOSBs

:

Proposal evaluation credit

Credit under subcontracting plan (FAR §52.219-9) Slide17

Subcontractor Advantages

Lower risk (prime bears brunt)

Less responsibility (prime manages)

Evaluation purposes

Bigger company might need to be prime because government agency does not consider past performance of subs.

HK Consulting, Inc

., B-408443 (September 18, 2013). Slide18

Subcontractor Disadvantages

Less control over how work completed

(Generally) less control over subcontract terms

Oftentimes no guaranteed

workshare

/prime contractor not penalized for not honoring teaming agreement:

Cyberlock

Consulting, Inc.

v

. Information Experts, Inc.,

2013 WL 1395742 (E.D. Va., April 3, 2013), EDVA held that a TA’s terms regarding the parties’ “agreement to agree” to future “good faith” negotiations of a subcontract, did not constitute an enforceable contract.  Slide19

How the TA Can Protect Subcontractors

To prevent a prime contractor from successfully arguing that a TA is a mere “agreement to agree,” follow these tips (handout):

Tip #1: Specify that parties “shall” enter into a subcontract

Tip #2: Include details on pricing

Tip #3: Specify subcontractor’s

workshareSlide20

TA Tips Continued…

Tip #4: Include subcontractor’s name in proposal

Tip #5: Try for exclusivity

Tip #6: Limit termination rights

Tip #7 Include remedies for failing to enter into subcontract.

However, you have to get your prime to agree to these terms! (Can be difficult).Slide21

Joint Venture Overview

Joint Venture Definition

Why JV? (Advantages and Disadvantages)

Starting a Joint Venture

Step One. Find the right partner

Step Two. Read up on set-aside regulations

Step Three. Paperwork (legal form

and

registrations)

Step Four. Determine management structure/labor

Step Five. Draft the joint venture agreement Slide22

What is a Joint Venture?

A “joint venture” is:

An association of individuals and/or concerns to combine property, capital, efforts, skills and knowledge to carry out no more than three specific of limited-purpose business ventures for joint profit over a two-year period.” 13 C.F.R. §121.103(h)

*Note – “three in two” rule Slide23

Why Form a JV?

The contracting agency can look to the resources of two (or more) companies to perform the work.

Alleviation of responsibility

Legal requirements under contract

Partner rather than manager or subordinate Eligibility/ability to perform larger contract

Ability to stay small for longer Slide24

Why Not?

More difficult to form

Give up control as prime contractor

In informal legal structures (

ie

, partnership), jointly and severally liable to third parties

Complications

Government issues with points of contact

Government questions with contract performance and satisfying subcontract limitations

More difficult to terminate Slide25

Step #1: Find the Right Partner

Vet your partner! (references, past dealings, in-person meeting)

Complementary offerings

Technical capabilities

Positive name recognition

Know what you both want Slide26

Step #2: Ensure the JV Meets Set-Aside Requirements

Keep in mind the size rules

JV partners as affiliated (with exceptions)

Aggregate rule

JV must meet applicable performance of work requirements (see 13 CFR 125.15)

Populated versus UnpopulatedSlide27

Step #2: Set-Aside Requirements

SDVOSB must be managing partner

SDVOSB employee must be project manager (and also named in JV agreement)

SDVOSB must receive 51% of net profits

JV Agreement must specifically describe both parties’ roles in contract performance and how SDVOSB will manage the project

Unique VA requirements:

The JV must be a separate legal entity

CVE must verify the JV prior to awardSlide28

Step #3: Choose a Legal Form

Limited liability company (preferred)

Partnership (informal, joint & several liability)

Corporation (double taxation, rare) Slide29

Step #4: Determine Mgmt. Structure & Labor

How will the parties manage the joint venture?

Which party will be responsible for negotiating contracts and subcontracts?

How will you communicate with the customer?

What are the sources of labor to be employed?

How do the parties envision the division of labor on contracts?

Populated or unpopulated? Slide30

Step #5: Drafting the JV Agreement

Common Terms (13 CFR §125.15(b)(2))

Purpose of JV

Designation of SDVOSB as managing partner

51% of net profits distributed to SDVOSB

Responsibilities of parties

Both parties must ensure performance of the prime contract, even if the other party withdraws from the JV

Designation that accounting/administrative records are kept by managing

venturer

and requirement that managing

venturer

retain records of contracts completed by JV

Performance of work requirements

Disputes Slide31

Questions?

Thank you for joining me today!

If you would like to speak with me further about teaming arrangements, please reach out:

Sarah Schauerte

scs@legalmeetspractical.com

(703) 552-3220

Website and blog at:

legalmeetspractical.com