WOSB joint venture regulations set by the SBA might be stringent. It can be expensive to make mistakes like failing to update a joint venture agreement, including unclear clauses, or relying on an old mentor-protege arrangement.
Mistakes made in good faith are one thing; the joint venture may lose a contract but is likely to escape further consequences. The consequences, however, can be substantially more severe when the government thinks that a contractor deliberately disregarded the joint venture standards, as demonstrated by a recent False Claims Act settlement including claims of fraud in violation of the 8(a) joint venture regulations.
The Department of Justice claims that 8(a) participants Global Environmental, Inc., and non-8(a) entity R&W Builders, Inc. formed a WOSB joint venture. The businesses gave Patriot Commercial Construction, LLC as the name of their joint venture. The joint venture then submitted a bid for a Scott Air Force Base 8(a) set-aside opportunity.
According to what seems to be a joint venture agreement between R&W and GEI, which was required by SBA standards, GEI agreed to be the managing venturer, hire the project manager, and conduct at least 40% of the WOSB joint venture's work. According to the regulations in place at the time, the SBA is presumed to have reviewed and authorized the WOSB joint venture agreement.
Patriot was awarded the contract, but the DOJ said the joint venture failed to fulfill its obligations:
As soon as Patriot was granted an 8(a) award on the MACC, R&W took over management of the joint venture and used its staff to carry out practically all of the work Patriot did. Over the following two years, R&W violated SBA rules by causing Patriot to accept several MACC work orders that were intended for 8(a) Program participants at the time Patriot was under R&W's control.
The press release doesn't say how the government learned about the alleged violations, but eventually, several investigations were started by the Defense Contract Audit Agency, the Air Force Office of Special Investigations, the Department of Defense Office of Inspector General, and the SBA Office of Inspector General. The government then brought a False Claims Act lawsuit against R&W.
To resolve the FCA complaint, R&W agreed to pay the government $400,000 in a settlement. Of course, the $400,000 isn't the full story; in addition, R&W likely paid high legal bills and might have experienced reputational harm.
R&W does not seem to have admitted any wrongdoing, as is common in such settlements, but the government was forthright about R&W's alleged infractions. Gregory P. Shilling, Special Agent in Charge of Defense Criminal Investigative Services Southwest Field Office, stated:
“The Defense Criminal Investigative Service (DCIS) will look into any claims of mistreatment involving government-funded initiatives aimed at assisting veteran, female, and minority-owned small businesses. Plans like this one jeopardize the integrity of the programs as well as the government procurement procedure in general. This can't be permitted.”
The R&W settlement serves as a crucial reminder to contractors that they must meticulously adhere to the SBA's joint venture standards. The consequences of infractions can be very severe, particularly when the government thinks a contractor intentionally broke the law.
A WOSB joint venture (JV) offer from a woman-owned small company (WOSB) and another small business is acceptable.
Submitting a bid as a joint venture with another small business as a WOSB
The following conditions must be satisfied by the WOSB to submit an offer as a WOSB joint venture:
Size: The JV's combined yearly revenue or some employees must match the NAICS code assigned to the contract.
A managing venturer must be a woman-owned small business.
The project Manager for a Woman Owned Small Business must be in charge of carrying out the contract.
A minimum of 51% of net profits must go to women-owned small businesses.
Writing is required for a joint venture.
The joint venture complies with subcontracting requirements
Additionally, unlike other Small Business programs, the SBA does not need to approve these WOSB Joint Venture agreements.
We assist female business owners in creating growth strategies and expanding capacity in addition to assisting Woman Owned Small Businesses in obtaining contracts. Call us today to get more details on the WOSB joint venture.
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