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The prime offered a small workshare on a set-aside it will prime. Is that normal or a red flag?

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  • This is not a normal arrangement for a joint venture on an SDVOSB set-aside; it raises a significant red flag regarding the limitations on subcontracting rules.
  • For services set-asides, the prime contractor, or in this case, the joint venture, must not pay more than 50 percent of the amount pai
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We responded to a sources sought notice for a federal SDVOSB set-aside for court reporting services, NAICS 561492. A larger small business, not veteran-owned, reached out to us to form a joint venture to pursue the opportunity. They want to be the managing venturer and handle most of the work. They told us our SDVOSB status would make the JV eligible to bid. We would only perform a small amount of the actual service delivery. Is this a normal arrangement for a joint venture on a set-aside? Can a non-SDVOSB business really do the majority of the work while using our certification?

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asked Luis A. Verified vendorSDVOSB founder, court reporting and legal support · San Antonio, TX · 246 rep

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This is not a normal arrangement for a joint venture on an SDVOSB set-aside; it raises a significant red flag regarding the limitations on subcontracting rules. For services set-asides, the prime contractor, or in this case, the joint venture, must not pay more than 50 percent of the amount paid by the Government to subcontractors that are not similarly situated entities, per FAR 52.219-14(e)(1). If the non-SDVOSB business performs the majority of the work, it would likely violate this rule because they are not a similarly situated entity. The SBA also requires that the SDVOSB joint venture partner perform a significant portion of the work and that the managing venturer be the SDVOSB. It is important to understand these rules to avoid potential issues with contract award or performance.

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answered Keisha W. Verified vendor8(a) firm founder, staffing and training · Atlanta, GA · 197 rep
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Luis, the arrangement your potential joint venture partner is proposing is not normal and is a significant red flag. Keisha is right about the limitations on subcontracting for services set-asides. Beyond that, for an SDVOSB joint venture to be eligible for an SDVOSB set-aside, the SDVOSB partner must be the managing venturer. The SBA rules require that the SDVOSB member of the joint venture perform at least 51 percent of the work performed by the joint venture. If the non-veteran-owned business is taking on the majority of the work, that joint venture would not be compliant with SBA's requirements for an SDVOSB joint venture and would not be eligible for the set-aside.

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answered Priya S. Verified vendorCapture manager, IT services · Herndon, VA · 222 rep

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Sign up to answerCite the FAR clause or procurement code where you can.

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