Joint Ventures for Federal Construction: SDVOSB, 8(a) and Small Business JVs

Many of the federal construction bids we support are submitted by joint ventures. A JV can pair a certified small business with a partner that has deeper past performance, bonding or specialized capabilities, and compete for contracts neither could win alone.

Done right, a joint venture is a powerful tool. Done wrong, it can create a size problem, a compliance problem, or both. This guide covers the rules that matter most for construction.

When a joint venture makes sense

JVs are most useful when a solicitation asks for more than one company can show on its own, for example:

• Past performance that one partner has and the other doesn't
• Bonding capacity above what the certified partner can obtain alone
• Certifications, such as SDVOSB status for a VA set-aside
• Geographic presence or specialized trades

A JV isn't the only option. Sometimes a prime-subcontractor team is simpler and meets the requirement just as well, and a teaming agreement doesn't carry the same eligibility rules. The right structure depends on the solicitation.

The core SBA rules

Size

For a joint venture to compete on a small business set-aside, each partner generally must be small under the solicitation's NAICS code. The major exception is a joint venture between an SBA-approved mentor and protégé, which qualifies as small if the protégé is small. See SBA's Mentor-Protégé Program.

Work share

The small or certified partner must perform at least 40% of the joint venture's work. For SDVOSB joint ventures, that partner's work must be more than administrative.

Control

For certified set-asides, the certified partner leads. In an SDVOSB joint venture, the service-disabled veteran-owned partner must be the managing venturer and own at least 51% of an entity JV.

The two-year rule

A joint venture can receive new contract awards for two years after its first award without the partners being treated as affiliated. It can continue performing, and receiving orders under, contracts it already holds. Plan pursuits around that window.

VA and SDVOSB construction

The VA is a major buyer of construction, and it gives first priority to service-disabled veteran-owned small businesses:

• Order of priority: SDVOSBs first, then VOSBs, then other small business programs
• Rule of two: if two or more capable SDVOSBs are expected to bid at fair prices, the VA sets the contract aside, and the Supreme Court has held this is mandatory
• Certification: SDVOSBs must be certified through SBA's VetCert program, which took over from VA on January 1, 2023

For SDVOSB joint ventures pursuing VA construction, the JV's structure, the SDVOSB partner's role and the documentation of both need to be airtight.

Past performance for joint ventures

A new joint venture usually has no record of its own. When that's the case, each partner's past performance must be considered. For small business joint ventures, agencies must consider each partner's experience individually and can't require the small partner to meet every requirement alone.

How to present it varies by solicitation. Some are clear; others barely address joint ventures at all. When the instructions are unclear, submitting a question during the solicitation's question period is often the smartest move.

Common joint venture pitfalls

• Size problems because one partner isn't small under the solicitation's NAICS code and the JV isn't a mentor-protégé JV
• Work share that doesn't add up to the required 40% for the certified partner
• Operating agreements that don't reflect the roles described in the proposal
• Inconsistent names and identifiers across volumes, such as the JV's UEI, CAGE code and legal name
• Leftover content from a partner's previous proposals, like old footers or solicitation numbers
• Missing the two-year window for new awards

Where to go from here

A well-structured joint venture can open doors to contracts neither partner could win alone. If you're considering one for a construction bid, we can help you decide whether it's the right structure and make sure the proposal reflects it correctly.