Joint Ventures and Teaming Arrangements in Government Contracting

Teaming Agreements vs. Joint Ventures

Teaming agreements and joint ventures are two different legal structures for partnering on government contracts. A teaming agreement is an informal arrangement where two or more companies agree to work together on a specific procurement — typically one company is the prime contractor and the other is a subcontractor. The teaming agreement governs how they’ll cooperate during the proposal and performance phases.

A joint venture (JV) is a separate legal entity created by two or more companies to pursue a specific contract or set of contracts. The JV submits proposals and receives awards in its own name. In the government contracting context, JVs are particularly valuable because they allow small businesses to combine their capabilities while maintaining small business status under specific SBA rules.

SBA Mentor-Protégé Program

The SBA All Small Mentor-Protégé (MP) program allows a large or experienced small business (the mentor) to form a joint venture with a less experienced small business (the protégé). The JV can compete for any set-aside contract for which the protégé qualifies, and the JV is evaluated as small based on the protégé’s size alone.

This is extraordinarily powerful. A small 8(a) firm with 10 employees can form a mentor-protégé JV with a large business employing thousands, and the JV qualifies as a small 8(a) business. The JV gets the mentor’s resources and past performance while competing in the small business pool.

The MP agreement must be approved by SBA, and the protégé must demonstrate that it will receive meaningful developmental assistance from the mentor. The SBA evaluates whether the arrangement genuinely benefits the protégé or is simply a vehicle for the mentor to access set-aside contracts.

Joint Venture Requirements and Rules

SBA rules require that in any small business JV, the small business partner must own at least 51% of the JV, manage the JV (the managing partner must be from the small firm), and perform at least 40% of the work on any contract the JV wins. These "3-in-2" rules ensure the small business is meaningfully involved, not just a pass-through.

Each JV is typically limited to three contract awards within a two-year period (or an unlimited number over the term of a single IDIQ). After that, the JV is no longer eligible for small business set-asides and must re-form or dissolve.

JV formation requires a formal agreement covering governance, management structure, profit/loss sharing, work allocation, dispute resolution, and dissolution procedures. The agreement must comply with SBA regulations and should be reviewed by an attorney experienced in government contracting.

When to Team vs. Go It Alone

Team when the contract requires capabilities you don’t have, past performance you lack, or a scale of operations beyond your current capacity. Don’t team if the opportunity is within your capabilities — teaming always means sharing revenue and introducing coordination complexity.

Before approaching a potential teaming partner, clearly articulate what you bring to the table and what you need from them. The strongest teams combine complementary capabilities rather than overlapping ones. If both firms do the same thing, one of you is unnecessary.

Teaming agreements should be executed before the proposal is submitted. Attempting to formalize a team after winning creates legal and operational risk. Include clear provisions for what happens if the team doesn’t win, either party wants to exit, or disputes arise during performance.