Teamwork Makes the Dream Work for Small Businesses Seeking Government Contracts

Pursuing federal government contracts independently is not a winning strategy for small businesses interested in federal contracts.  Newcomers wanting government contracts should remember the mantra that “teamwork makes the dream work.” 

Small businesses can maximize their chances to win contracts through teaming arrangements, including the U.S. Small Business Administration’s (SBA) Mentor-Protégé Program (MPP) and through joint ventures (JVs). 

Nyemaster Goode has practical experience in helping shape these arrangements and this article provides an overview of teaming opportunities available to small businesses. 

Use the MPP to quickly gain relevant experience

The MPP is designed to help inexperienced small businesses gain the necessary skills and resources to win federal contracts.  The program pairs small businesses (protégés) with experienced, government contractors (mentors) to develop technical, managerial, and financial capabilities. Most mentors are large businesses, although the regulations also allow experienced small businesses to serve as mentors.  Note that other agencies have MPP-related programs with specific requirements, as well.

• Understand eligibility requirements.

• • A protégé must be a small business under SBA’s relevant size standard regulations (see the SBA’s Size Standard Tool) and organized for profit. Mentors must be for-profit business that possess practical experience in government contracting, demonstrate a commitment to developing the footprint of the protégé, and cannot be suspended or debarred from contracting.  The SBA will not match parties (like other agencies, such as the Department of Defense); protégés must find their own mentors. 

• • A small business can only be a protégé for a maximum of 12 years, consisting of two six-year terms with the same mentor or two different mentors. Protégés can only have two mentors while in the program, but both relationships can exist simultaneously.

• Draft specifically tailored mentor-protégé agreements to guarantee SBA approval. The agreement must be in writing and detail the members’ responsibilities and the assistance the mentor will provide.  The parties must prove that the relationship will provide real developmental benefits to the protégé.  Note that both the protégé and mentor must be registered in SAM.gov before the SBA will approve their agreement. 

• Avoid affiliation. The SBA must find that the parties are not affiliated before it approves the mentor-protégé agreement.  This means that the members cannot have any power to control each other, and a third-party cannot have the power to control both the mentor and protégé.  Even if the potential to control merely exists—regardless of whether it is exercised—then the members may be considered affiliates and unable to participate in the MPP with each other.  The SBA considers each circumstance individually against a litany of factors, such as ownership, management structure, and contractual relationships. 

• The MPP benefits protégés and mentors alike. Protégés learn internal business management and strategic planning, as well as the nuances and regulatory requirements native to federal procurement.  Importantly, protégés can gain access to previously unknown or unreachable markets.  In addition to the benefits of a joint venturing with a protégé (see below), mentors can identify future subcontractors and possibly earn credit toward subcontracting goals (in certain agencies). 

Consider forming a joint venture to increase chances at small business and set-aside contracts

JVs are arrangements between two or more businesses that allow them to compete together for government contracts.  They enable small businesses to team up with mentors or other small businesses to bid on contracts that they might not be able to win on their own.  Joint venture agreements must be in writing and follow SBA requirements, and all JVs must be independently registered in SAM.gov. JV regulations are at 13 C.F.R § 125.8-9.

• Mentor-protégés can form JVs, and protégés take the lead. Mentor-protégé venturers must have an approved mentor-protégé agreement in order to bid on small business contracts.  The JV agreement must specify the responsibilities of the parties with contract negotiation and performance, designate the protégé as managing venturer, and name an employee of the protégé as “Responsible Manager” with oversight responsibility over the JV’s performance in contracts.  Despite these requirements, venturers have significant leeway to negotiate and tailor JV agreements.

• Protégé venturer control. The protégé venturer must control the day-to-day management and administration of the JV, but the mentor can participate in governance—such as determining which contracts to pursue.  Further the protégé venturer must own 51% of the JV, and perform at least 40% of the substantive work (which means that it also receives 40% of revenues).

• Two small businesses can combine forces in a JV. Through a JV, two or more small businesses can bid on contracts set aside for small businesses.  All venturers must qualify as small pursuant to SBA regulations.  The written agreement between the venturers need not have any specific regulatory conditions and the SBA need not approve the agreement.

• Maximize your competitive edge by pooling resources. Joint ventures allow members to share business capabilities, resources, and finances all while retaining their own individual businesses sizes.  In this way, JVs substantially reduce risk by limiting the exposure of each business.  JVs allow businesses of all sizes to enter new markets and locations that would not be open without the leverage of the other.  Importantly, a mentor venturer can win small business or set-aside contracts through the JV that it would not be eligible for due to its size.

• Small, inexperienced venturers can receive benefits in past performance evaluations. When a small business venturer enters into a JV with a prime/large contractor, it can leverage the evaluations from its mentor and immediately enhance its competitive chances to win awards.  Further, two small businesses venturers’ individual past performance, when combined, may be able to meet the required past performance history in certain contracts that each could not meet alone. 

Mentor-protégé and joint venture agreements can deliver substantial benefits to large and small businesses alike.  Nyemaster assists companies in navigating options, including drafting agreements and ensuring compliance with regulations.  Contact Nyemaster to help your business compete more effectively in the federal marketplace through these arrangements.