![]() ![]() But it does not often make sense for a joint venture to go through the process of obtaining a GSA Schedule because joint ventures, by definition, are limited purpose entities. Rather, because the joint venture is an entity separate from its members, the joint venture itself must hold a GSA Schedule in order to pursue orders thereunder. One of the biggest hiccups for venturers (and potential venturers) is that the unpopulated joint venture they form cannot use the GSA Schedule contract of either or both of the venturers. If venturers decide to proceed this way, the markup should be addressed in the joint venture agreement. In these cases, the joint venture would retain income, and any profit would be required to be distributed to the venturers commensurate with the work performed. (Of course, if the venturers are paid in accordance with their workshare, presumably such payment includes profit.) Sometimes venturers decide to have the joint venture apply a markup to their separate costs, similar to a prime contractor’s markup on a subcontractor’s invoice. Such a scenario leaves no income at the joint venture level and, therefore, no profits to distribute. For instance, if the joint venture bills its customer $1,000, of which one venturer did 40% of the work and the other venturer did 60% of the work, then one venturer is going to be paid $400 and the other is going to be paid $600, respectively. But, more often than not, unpopulated joint ventures are pass-through entities in which revenues of the joint venture go directly to the venturers as compensation for their work on behalf of the joint venture. SBA’s regulations make clear that each participant in the joint venture must receive profits from the joint venture commensurate with the work performed by the concern. For example, if the joint venture is awarded an ID/IQ contract, the venturers may want to consider implementing an ordering procedure whereby, upon award of an order to the joint venture, the joint venture will likewise issue an order to each venturer specifying their respective scopes of work.Īnother complexity of unpopulated joint ventures is the handling of profits. ![]() However, it may be prudent for the venturers to contract with the joint venture. There is no SBA requirement for the venturers to do so and, indeed, the joint venture agreement itself must specify the venturers’ responsibilities with regards to contract performance. Often, venturers do not enter a separate contract with the joint venture specifying the venturers’ work on behalf of the joint venture. Because the contract is held in the name of the joint venture, the venturers act like subcontractors in contract performance. When an unpopulated joint venture is awarded a contract, employees of the venturers perform the work on behalf of the joint venture. While SBA’s preference for unpopulated joint ventures is meant to benefit small business venturers and provide them with more hands-on experience, it creates wrinkles for the venturers. As a result, companies that want to form a joint venture for set-aside opportunities and not be affiliated with each other need to form an unpopulated joint venture. SBA has all but eliminated populated joint ventures (i.e., a joint venture with employees of its own performing direct labor). ![]()
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