If your joint venture (“JV”) was awarded an 8(a), SDVOSB, HUBZone, or WOSB set-aside contract in the months following SBA’s July 2016 final rulemaking, you should be getting ready to submit your annual performance of work report (“Annual Report”). The final rule, which became effective at the end of August 2016, amended SBA’s regulations to clarify the conditions for creating and operating JVs. One such condition is to submit the Annual Report to the contracting officer and to SBA, explaining and certifying how the performance of work requirements set forth in the joint venture agreement (“JVA”) have been met during each year of the contract.
For set-aside contracts, the JV must comply with the applicable limitation on subcontracting (e.g., no more than 50% for services) and the qualifying partner to the JV must perform at least 40% of the JV work. In addition, the work performed by the qualifying JV partner must be more than administrative or ministerial functions so that it gains substantive experience. Furthermore, the ways that the parties will ensure that the JV and the qualifying JV partner will meet the performance of work requirements must be specified in the JVA, where practical.
The Annual Report submission allows all parties to know where the JV stands with respect to the performance of work requirements and what must be done to come into compliance in the future if the JV’s performance is below the required amount at any point in time. It also allows a contracting officer to more closely oversee the performance of a contract where the reports show inadequate performance to date. For these reasons, your Annual Report should contain a detailed explanation of how the JV and the qualifying JV partner met the performance of work requirements.
Thus, in addition to identifying the percentages of work performed, you should discuss the specific contract functions of the parties so it is clear to the contracting officer (and to SBA) that the qualifying JV partner gained substantive experience. Moreover, if the JV and/or the qualifying JV partner fell short of performing the required amount of work, the Annual Report should explain the reasons why and, more importantly, what the parties plan to do the following contract year to ensure future compliance with the performance of work requirements.
Lastly, a JV’s failure to perform a contract in accordance with the JVA or the performance of work requirements is a basis for suspension and debarment, which is all the more reason why the exercise of completing and submitting the Annual Report should not be taken lightly.
ABOUT THE AUTHOR: Peter Ford heads our Boulder, Colorado office and is a partner in our government contracts group. He may be reached at [email protected].