Joint Ventures for Government Contracts 2025: Structure, Rules & Requirements

Quick Answer: What is a Government Contracting Joint Venture?

A joint venture (JV) is a partnership between two or more businesses formed to pursue government contracts together. For small business set-asides, JVs must meet specific SBA requirements including ownership, control, and performance rules. Under the Mentor-Protégé program, small businesses can JV with large firms while maintaining small business status.

51%

Small Biz Ownership

40%

Work Requirement

Contract Limit*

LLC

Common Structure

*3-contract limit applies to non-MP joint ventures

What is a Joint Venture?

In government contracting, a joint venture is a formal business arrangement where two or more companies combine resources to bid on and perform federal contracts. JVs allow businesses to pool capabilities, past performance, and resources to compete for larger or more specialized opportunities.

Why Companies Form JVs

Capability Gaps

• Combine technical expertise
• Share equipment and facilities
• Access specialized personnel

Contract Requirements

• Meet past performance needs
• Satisfy bonding requirements
• Achieve geographic coverage

Types of Joint Ventures

Small Business JV

Two or more small businesses partner together:

→All parties must be small for the NAICS
→Combined revenues evaluated for size
→Can bid on small business set-asides
→Limited to 3 contracts over 2 years

Mentor-Protégé JV

SBA-approved MP relationship enables:

→Large mentor + small protégé
→Uses protégé's small status
→No 3-contract limit
→Exception to affiliation rules

Populated JV

A JV with its own employees:

→Hires employees directly
→Has its own facilities
→More permanent structure

Unpopulated JV

A shell entity that subcontracts work:

→No direct employees
→Work performed by JV members
→Most common structure

Benefits of Joint Ventures

Why Form a JV?

For Small Businesses

✓Access larger contracts
✓Leverage partner past performance
✓Share risk and bonding
✓Build experience and capabilities
✓Expand geographic reach

For Partners

✓Access set-aside markets
✓Develop reliable partners
✓Meet small business goals
✓Share contract risk
✓Combined technical strengths

Affiliation Rules

Understanding affiliation is critical for JVs seeking small business status. The SBA examines whether JV partners should be considered "affiliated" (counted as one entity for size purposes).

Key Affiliation Concerns

!Ownership ties: Common ownership between JV members
!Management overlap: Same people controlling both entities
!Economic dependence: One party relies heavily on the other
!Identity of interest: Family relationships, shared facilities

Affiliation Exceptions

Mentor-Protégé Exception

SBA-approved MP relationships are exempt from affiliation based on the assistance provided or JV agreement

Small Business JV Exception

Two small businesses can JV without affiliation if they meet the "3-in-2" rule (no more than 3 contracts in 2 years)

JV Structure Requirements

For a JV to qualify as small for set-aside contracts, it must meet specific structural requirements under SBA regulations (13 CFR 125.8).

Mandatory Requirements

51% Ownership

The small business(es) must own at least 51% of the joint venture

Small Business Manager

A small business party must serve as the managing venturer and control the JV's day-to-day operations

40% Performance Requirement

The small business party must perform at least 40% of the work on each contract (can count work by small business subcontractors)

Separate Bank Account

JV must maintain separate books and records and a separate bank account

JV Agreement Requirements

•Written agreement identifying all parties
•Purpose limited to government contracting
•Itemized list of major equipment and facilities
•Designation of responsible party for contract negotiation
•Work allocation between parties
•Profit/loss sharing arrangement

How to Form a Joint Venture

Steps to Form a JV

Find the Right Partner

Identify a partner with complementary capabilities and aligned goals

Draft JV Agreement

Create compliant agreement covering all SBA requirements

Form Legal Entity

Register in SAM.gov

Complete SAM registration for the JV entity

Pursue Contracts

Submit proposals as the JV entity with combined capabilities

Frequently Asked Questions

Does a JV need its own certifications?

No, a JV does not separately certify as 8(a), HUBZone, etc. The JV qualifies based on the certifications of its small business members. For an 8(a) JV, the 8(a) party must control the JV.

What is the "3-in-2" rule?

For non-MP joint ventures between small businesses, the JV can only be awarded 3 contracts within a 2-year period. After that, the JV must dissolve or the partners may be found affiliated. MP JVs are exempt from this limit.

Can a JV use past performance from its members?

Yes, a JV can claim past performance from any of its members. The proposal should clearly identify which member performed the work and describe their role in the JV.

How is the 40% work requirement calculated?

The small business party must perform 40% of the total contract value. This can include work performed by small business subcontractors. For construction, it's 40% of construction work (not materials/supplies).

Can we form a JV just for one contract?

Yes, many JVs are formed for specific opportunities. The JV remains in existence through contract performance but may not pursue additional contracts (especially under the 3-in-2 rule).

Find JV-Ready Contract Opportunities

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Mentor-Protégé Program Guide

How to find a mentor and form MP JVs

Teaming Arrangements Guide

JV vs teaming: which is right for you?