Joint Ventures – SBA must approve agreement prior to award of 8(a) contract

JV may not be awarded more than 3 contracts over a 2 year period without a finding of general affiliation

Mentor-Protege Program changes – mentor can have as many as 3 proteges at once, protege can have another mentor for a secondary NAICS code, mentor must demonstrate financial health, non-profit mentor is okay, cannot be a mentor and a protege at the same time, assistance must be tied to protege’s approved business plan.

Mentor and protege may JV as a small business provided the protege qualifies as small for the procurement.

The SBA must approve the Mentor Protege Agreement before the two firms submit an offer as a JV in order to receive exclusion from affiliation.

Once protege leaves the M/P program, only ongoing contracts are protected by affiliation exclusion

Consequences to mentor for failure to provide assistance agreed to in plan – termination of agreement, ineligible to be Mentor, possible substitution of Protege firm for JV on the contract.

Economic disadvantage rules – total personal assets cannot exceed $4 million initially/$6 million for continuing eligibility.  IRAs the only excluded asset, residence and business are included.

Economic disadvantages rules – net worth $250k initially; $750k continuing eligibility.  Excludes IRAs (new exclusion); excludes FMV of primary residence, excludes value of business. Personal income – $250k initially, $350k continuing.  Averaged over previous 3 years. Income received from S Corp, LLC or partnership excluded from net worth where used by owner to pay taxes or funds reinvested into company.

SBA can consider spouse financial condition if spouse has a role in the busines, or has loaned money or provided credit support to, or guaranteed a loan to business.  Must submit separate financial information for spouse unless legally separated.

Excessive withdrawals – withdrawal excludes officer salaries (unless firm circumventing regulations by payment of salaries).  Firms with sales up to $1 million – $250,000; firms with sales of $1 million – $2 million – $300,000; firms with sales over $2 million – $400,000

8(a) Joint Ventures – “populated” or “unpopulated”:

• If a populated JV, JV must demonstrate how performance of the contract is controlled by the 8(a) managing venturer, and the non-8(a) JV partner may not act as subcontractor
• If an unpopulated JV (or has only administrative personnel) – project manager must be employee of 8(a) managing venturer, 8(a) partner must perform at least 40% of the work performed by the joint venture (compare “significant portion” prior language).  8(a) must receive profits commensurate with work performed

NAICS Code and Size Standard – 8(a): if participant exceeds size standard for its primary NAICS for 3 successive program years, SBA may graduate the firm from the 8(a) program.

Can avoid graduation by changing to a secondary NAICS code in adjusted business plan if the firm demonstrates that through growth its primary industry is changing.

Military call-up of 8(a) owner: owner can elect suspension if called to active duty to preserve full 9-year program term

Review/audit rules – new thresholds

Contact Hindson & Melton LLC for more information.

The construction contract award was made to DQSI, Corporation, which was the 8(a) entity approved by SBA. However, the proposal had been submitted by DQSI, LLC. It is undisputed that the award was made to a legal entity other than the entity that submitted the proposal.

The protester alleges that DQSI, Corporation no longer exists because it converted to a LLC in 2009. Further, the protester alleged that DQSI, Corporation did not receive advance SBA approval of the change in business structure or ownership. SBA confirmed that DQSI, Corporation was the 8(a) eligible participant.

The protest against the 8(a) award to DQSI, LLC was sustained by GAO, and the Army instructed to terminate the contract for convenience if DQSI, LLC is not eligible for the 8(a) award.

These seminars are in partnership with Defense Management Group, Defense Network Alliance, Economic Futures Group, South Carolina Manufacturers Alliance, Spartanburg Chamber of Commerce, Update SC Alliance, and the Charleston Regional Development Alliance.

For more information contact Karen Hindson or your area Dixon Hughes Goodman office.

Joint Ventures – SBA must approve agreement prior to award of 8(a) contract

JV may not be awarded more than 3 contracts over a 2 year period without a finding of general affiliation

Mentor-Protege Program changes – mentor can have as many as 3 proteges at once, protege can have another mentor for a secondary NAICS code, mentor must demonstrate financial health, non-profit mentor is okay, cannot be a mentor and a protege at the same time, assistance must be tied to protege’s approved business plan.

Mentor and protege may JV as a small business provided the protege qualifies as small for the procurement.

The SBA must approve the Mentor Protege Agreement before the two firms submit an offer as a JV in order to receive exclusion from affiliation.

Once protege leaves the M/P program, only ongoing contracts are protected by affiliation exclusion

Consequences to mentor for failure to provide assistance agreed to in plan – termination of agreement, ineligible to be Mentor, possible substitution of Protege firm for JV on the contract.

Economic disadvantage rules – total personal assets cannot exceed $4 million initially/$6 million for continuing eligibility.  IRAs the only excluded asset, residence and business are included.

Economic disadvantages rules – net worth $250k initially; $750k continuing eligibility.  Excludes IRAs (new exclusion); excludes FMV of primary residence, excludes value of business. Personal income – $250k initially, $350k continuing.  Averaged over previous 3 years. Income received from S Corp, LLC or partnership excluded from net worth where used by owner to pay taxes or funds reinvested into company.

SBA can consider spouse financial condition if spouse has a role in the busines, or has loaned money or provided credit support to, or guaranteed a loan to business.  Must submit separate financial information for spouse unless legally separated.

Excessive withdrawals – withdrawal excludes officer salaries (unless firm circumventing regulations by payment of salaries).  Firms with sales up to $1 million – $250,000; firms with sales of $1 million – $2 million – $300,000; firms with sales over $2 million – $400,000

8(a) Joint Ventures – “populated” or “unpopulated”:

• If a populated JV, JV must demonstrate how performance of the contract is controlled by the 8(a) managing venturer, and the non-8(a) JV partner may not act as subcontractor
• If an unpopulated JV (or has only administrative personnel) – project manager must be employee of 8(a) managing venturer, 8(a) partner must perform at least 40% of the work performed by the joint venture (compare “significant portion” prior language).  8(a) must receive profits commensurate with work performed

NAICS Code and Size Standard – 8(a): if participant exceeds size standard for its primary NAICS for 3 successive program years, SBA may graduate the firm from the 8(a) program.

Can avoid graduation by changing to a secondary NAICS code in adjusted business plan if the firm demonstrates that through growth its primary industry is changing.

Military call-up of 8(a) owner: owner can elect suspension if called to active duty to preserve full 9-year program term

Review/audit rules – new thresholds

Contact us for more information or for details on the new regulation.