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2 Teaming Arrangements Ms. Marichu Relativo, Procurement Center Representative (PCR) U.S. Small Business Administration Office of Government Contracting The use of recording devices is strictly forbidden during courses, workshops, conferences, keynote speeches, events, or any other programs sponsored or presented by SBA/PTAC. 2

3 What is a small business? 3 Organized for profit Place of Business in the U.S., operates primarily in the U.S., or makes a significant contribution to the U.S. economy (taxes, use of American products/labor) Does not exceed the small business revenue OR employee size standard for the procurement Each North American Industrial Classification System (NAICS) code has a small business size standard (wholesale and retail NAICS are not used in government procurements). 13 CFR

4 NAICS Codes and Size Standards 4 NAICS Description Revenue (M) # employees Industrial Building Construction $ Commercial and Institutional Building Construction $ Highway, Street, and Bridge Construction $ Women s and Girls Cut and Sew Blouse and Shirt Mfg Quick Printing Truck Trailer Manufacturing Wood Office Furniture Manufacturing General Freight Trucking, Local $ Couriers and Express Delivery Services General Warehousing and Storage $ Lessors of Residential Buildings and Dwellings $ Custom Computer Programming Services $ Other Computer Related Services $25.0 Information Technology Value Added Resellers Admin Management and General MGMT Consulting Svcs $ Environmental Consulting Services $7.0

5 Size must include affiliates 5 What is an affiliate? When one controls or has the power to control another Common ownership Common control Common management Identity of Interest (family members, common investments, dependant through contractual relationships) A Newly organized concern Joint Ventures (JVs) 13 CFR

6 Average Annual Receipts 6 Use Federal Tax Returns Cost of Goods Sold plus Total Income Average of last three completed fiscal years 13 CFR

7 Number of Employees 7 Count all individuals employed on a full-time, part-time, or other basis. This includes employees obtained from a temporary employee agency, professional employee organization or leasing concern. Numbers of employees for each of the pay periods for the preceding completed 12 calendar months(running average). Payroll records/irs Form CFR

8 Two Types of Affiliation 8 General Affiliation On-going basis Common ownership, common control, economic dependence, etc. Applies to the company in all business transactions For a specific procurement Joint venture (JV) Applies only to the contract at hand

9 Joint Ventures 9 A joint venture is an association of individuals and/or concerns with interests in any degree or proportion consorting to engage in and carry out no more than three specific or limited-purpose business ventures for joint profit over a two year period, for which purpose they combine their efforts, property, money, skill, or knowledge, but not on a continuing or permanent basis for conducting business generally The joint venture entity cannot be awarded submit more than three contracts over a two year period, starting from the date of the submission of the first offer or will be determined to have a general affiliation (3-in-2 rule). 13 CFR (h)

10 Joint Ventures (JVs) 10 The same two (or more) entities may create additional joint ventures, and each new joint venture entity may be awarded up to three contracts: ABC-XYZ JV ABC-XYZ 1 ABC-XYZ 2 However, such a longstanding inter-relationship or contractual dependence between the same joint venture partners will lead to a finding of general affiliation between them.

11 Joint Ventures (JV) 11 A joint venture must: be in writing do business under its own name Only 8(a) JV must be approved by SBA It may (but need not): be in the form of a separate legal entity, and if it is a separate legal entity it may (but need not) be populated (i.e., have its own separate employees).

12 12 Joint Ventures vs. Teaming Agreements A Teaming Agreement can be either a joint venture or a prime/sub relationship

13 Joint Venture vs. Prime/Sub Relationship 13 SBA affiliation regulations purposely do not define teams or teaming agreements Joint Ventures Formal joint venture (Separate legal entity, such as LLC) Informal (no new entity formed) Prime/Subcontractor Relationships

14 Teaming Arrangement: FAR Contractor team arrangement, as used in this subpart, means an arrangement in which Two or more companies form a partnership or joint venture (JV) to act as a potential prime contractor; A potential prime contractor agrees with one or more other companies to have them act as its subcontractors under a specified Government contract or acquisition program. **Recent Teaming Agreement Case: EG&G Technical Services Inc. v. The Cube Corp., 63 Va. Cir. 634 (Fairfax County Dec 23, 2002)

15 What are the Benefits? 15 General benefit for all concerns both large and small: The joint or team is able to compete for larger more technically complex contracts by combining the capabilities and past performance of various team members. FAR 9.601

16 When to Team 16 FAR recognize the benefits of teaming agreements Contractors complement each other s unique capabilities; and Offer the Government the best combination of performance, cost, and delivery for the system or product being acquired Particularly appropriate in complex research and development acquisitions. New rule: identify team by name in the proposal and must obtain approval to change team from the contracting officer Prevent Bait & Switch Penalty imposed on prime

17 17 Joint Venture Size Exemptions General Rule A joint venture is a small business concern when the combined revenue/employees of all joint venture partners do not exceed the small business size standard.

18 18 JV Size Exemption for Large Procurements If: The procurement is bundled; or It is a large procurement For a procurement having a receipts based size standard, the dollar value of the procurement exceeds ½ the size standard; or For a procurements having an employee based size standard, the dollar value of the procurement exceeds $10 million. Then, the joint venture is small if each joint venture partner is small.

19 19 Ostensible Subcontracting More of a joint venture than a prime-subcontractor relationship

20 What is an Ostensible Subcontractor? 20 The acid test: A subcontractor is an ostensible subcontractor if: The subcontractor performs the primary and vital requirements, or The prime contractor is unusually or unduly reliant upon the subcontractor. A contractor and its ostensible subcontractor are treated as joint venturers, and therefore affiliates, for size determination purposes. 13 CFR (h)(4)

21 21 What is an Ostensible Subcontractor? Recent Case on Affiliation and Ostensible Subcontractors ris-griffin_v.pdf Morris Griffin v. C&L Service Corporation, 2010 WL (E.D. Va) Large HUD loan processing company teamed with janitorial 8(a) company to win 8(a) set-aside contact to process loans for HUD found to have fraudulently circumvented the SBA rules by using a nominal 8(a) contractor.

22 What will be used to determine if Teaming Agreement is a JV? 22 Language Used in the Teaming Agreement Proposal wording Other circumstances: Reliance on Bonding Who is in control/managing contract Division of work (clear delineation) Role in pursuit of contract Whether subcontractor was the incumbent

23 Points for Prime - Subcontractor Relationships 23 Agencies may consider an offeror s subcontractor s capabilities and experience under relevant evaluation factors where the RFP does not prohibit the consideration of a subcontractor s experience in the evaluation of proposals (Roca Management Education & Training, Inc., January 15, 2004, GAO, B ). The prime contractor is solely responsible for meeting all contract requirements, including the Limitations on Subcontracting percentage Must watch out for Ostensible Subcontractor relationship with its subcontractor(s)

24 Limitations on Subcontracting (LOS) Self Perform 24 Apply to cooperative efforts of the JV entity. Applies to full or partial small business set-aside contract and socioeconomic subcategories Supplies: 50% cost of manufacturing excl mat l Services: 50% with its own employees General Construction: 15% with its own employees Specialty Construction 25% with its own employees

25 Solicitation LOS Example 25 "Self-performed work" generally includes costs for: mobilization and utilization of owned or rented plant and equipment to be operated by the contractor's own employees and labor associated with the aforementioned equipment; contractor's own labor to fabricate or to install materials into the finished construction; performance by the contractor's own employees of design work, land surveys and other engineering or technical specialist services required by the contract; supplies to directly support the aforementioned work to be accomplished by the contractor's own employees; and the contractor's own job overhead costs. Contractor markups for profit, general and administrative overhead, bonds, or other indirect costs on "self-performed" or subcontracted work are not "self-performed work" and are to be excluded from "total cost of the contract" for calculation purposes. Rental of plant or equipment for operation by subcontractors is not "self-performed work" but shall be included in the "total cost of the contract" for calculation purposes. Cost of materials to be incorporated into the work and supplies to support other than construction by the contractor's own employees are excluded from the above definition. Do not include these costs in the calculation. (example from a DOD solicitation )

26 26 Provisions for 8(a) contractors 8(a) Joint Ventures (JV) 8(a) Mentor Protégé size exemption 8(a) competitive contracts size exemption

27 8(a) Points for Joint Ventures 27 For 8a contracts, the formal joint venture must be approved by SBA. For other contracts (i.e., SBSA, HUBZone set-aside), SBA does not need to approve the joint venture prior to award, but if the size status of the joint venture is protested, the provisions of (c) and (d) will apply. (c) joint venture content requirements (d) performance of work requirements

28 8(a) competitive procurements 28 For competitive 8(a) procurements, the joint venture is considered small so long as: Each JV partner is small under the size standard for the procurement, and; The size of at least one 8(a) member of the joint venture must be less than ½ the size standard for the procurement; and It is a large procurement as shown on slide 17

29 Limitations on Subcontracting 29 Anytime an 8(a) firm participates in a joint venture, the 8(a) partner to the joint venture must submit a report to its servicing SBA district office explaining how the applicable performance of work requirements were met for the contract, after the contract is complete.

30 8a Performance of Work Requirements 30 In an unpopulated JV, the 8a partners must perform at least 40% of the work performed by the JV 40% cannot just be administrative functions 13 CFR (d)

31 8(a) Mentor Protégé Agreement 31 For joint venture between 8(a) protégé and SBA approved mentor: The joint venture is considered small so long as the 8(a) protégé is small for the procurement. 13 CFR (b)(3) The joint venture may bid as a small business on any federal prime or subcontract. 13 CFR (h)(3)(iii)

32 32 Provisions for HUBZones General Rule to be a HUBZone Firm: Principle Office located in HUBZone Area 35% of employees live in a HUBZone Area

33 HUBZone Joint Ventures 33 A HUBZone may only joint venture ONLY with another HUBZone concern (even applies to mentors). The JV itself need not be certified as a HUBZone concern. If it is a large procurement, it can qualify as small as long as each HUBZone partner is small for the NAICS code assigned to the procurement. HUBZone 10% Preference applicable for large procurement

34 HUBZone Limitations on Subcontracting 34 The aggregate of the HUBZone partners or HUBZone subcontractors must perform the applicable percentage of work required by 13 CFR see 13 CFR for application for general and specialty construction contractors 13 CFR 126.7

35 HUBZone Mentor Protégé 35 A HUBZone may enter into a Mentor-Protégé Agreement The mentor and protégé will not be found affiliated on the basis of the Mentor-Protégé Agreement when it is a Federally approved Mentor Protégé relationship. The HUBZone that is a prime contractor on a HUBZone contract may team with and subcontract work to its mentor. The mentor may not perform the primary and vital requirements of the contract.

36 Non-Manufacturing 36 Non-manufacturing waivers are not granted for HUBZone procurements

37 37 Provisions for Service Disabled Veteran (SDV) Procurements Only the Department of Veteran Affairs (VA) is authorized to set aside to Veteran-Owned Small Business (VOSB) firms

38 Provisions for Service Disabled Veterans (SDV) 38 A SDV may enter into a JV Agreement with one or more other small businesses for purposes of a SDV contract For JV partners are affiliated unless it is a large procurement (full/open). The JV Agreement must comply with (b)(2) the required contents of a SDV joint venture agreement The JV must perform the percentage of work requirements in 13 CFR 125.6

39 Limitations on Subcontracting 39 A SDV can fulfill the Limitations on Subcontracting requirements by using other SDV subcontractors

40 40 Provisions for Economically Disadvantaged/Woman Owned SBs Difference between Economically Disadvantage Woman Owned and Woman Owned Small Business (EDWOSB/WOSB): Visit:

41 EDWOSB or WOSB Joint Ventures 41 For JV partners are affiliated unless it is a large procurement (full/open). The EDWOSB or WOSB participant must be designated in SAM and ORCA as an EDWOSB or WOSB. There must be a written joint venture provided to the Contracting Officer that contains the elements of 13 CFR The JV must perform the applicable percentage of work in 13 CFR (LOS)

42 Acquisition Process 42 Starting point SBA provides assistance SBA concurrence Requirement Market Research Acquisition Strategy Solicitation & SBA coordination Subcontracting Plan to SBA CMR (for Large Business Award) Release to Industry And Award Issue Solicitation SBA Subcontracting Plan Review Prior To Award

43 Federal Regulations 43 Code of Federal Regulations (CFRs): Federal Acquisition Regulation (FAR):

44 FAR/CFR Quick References 44 HUBZone status protests FAR and 13 CFR NAICS code appeal FAR and 13 CFR Non-manufacturer rule waivers FAR (f)(1)-(7) and 13 CFR SDVOSB status protest FAR and 13 CFR WOSB Program status protest FAR and 13 CFR

45 Summary of CFR Regulations 45 SBA size regulations 13 CFR (h) HUBZone regulations 13 CFR SBA Certificate of Competency 13 CFR Service-disabled veteran 13 CFR (b) 8(a) and SDB regulations 13 CFR Small disadvantaged business 13 CFR (f) WOSB Program 13 CFR 127 SBA Prime Contracting 13 CFR125.2 SBA Subcontracting 13 CFR

46 National Ombudsman Office 46 Mission: To assist small business owners when they experience excessive or unfair Federal agency enforcement actions Repetitive audits or inspections; unreasonable fines or penalties; threats by a Federal agency; or acts of retaliations by Federal agency File complaints: 46

47 SBA Alaska District 47 Alaska District Directory Programs /Phone Sam Dickey District Director 8(a), 7j, HUBZone Dave Matekovich Lead Business Opportunity Specialist Diana McElhinney Business Opportunity Specialist Don Nagel Business Opportunity Specialist Joyce Courtney Business Opportunity Specialist 8(a), Veterans 8(a) 8(a) Veterans 8(a) Nelida Irvine Loan Specialist Scott Swingle (SBA Fairbanks Office) Yolanda Lassiter Front Office Admin Loans, Woman-Own (WOSB/EDWOSB) All Programs General, 8(a)/Score appointments

48 Thank You! Questions? 48 Marichu Relativo Procurement Center Representative (PCR) (907) General Question: Government contracting field staff directory: