Exploring the World of Government Contracting: A Guide to Joint Ventures (JV) With Chelsea Meggitt
The world of government contracting can be tricky and confusing, but fear not—we've got the perfect guide to lead you through it.
Meet our newest Building an Agile Future guest Chelsea Meggit—the expert on government contracting. As the CEO of Collaborative Compositions, Chelsea has spent over a decade helping small to mid-size businesses navigate the ins and outs of government contracting.
From Federal Acquisition Regulation-based (FAR) and non-traditional contracting mechanisms to the art of breaking through those "impossible" ceilings, Chelsea has seen it all.
Not only that, but Chelsea is also a renowned business strategist and the co-author of the book Government Marketing Best Practices 2.0: What You Need to Know for Accelerated Success.
During our conversation, Chelsea delved into the advantages of forming a Joint Venture (JV) in the world of government contracting, shared her secrets on finding the perfect partners for JVs, and highlighted potential pitfalls to avoid.
Here’s what Chelsea had to say.
JVs vs. teaming agreements—what’s the difference?
“JVs are a type of teaming agreement, but not all teaming agreements are JVs,” said Chelsea.
According to her, the main difference between a JV and a traditional prime-subcontractor relationship is the question of who is the prime contractor.
“In a JV, the parties are all responsible for the delivery of the contract. So they are all considered ‘prime contractors’ in that situation. In a traditional prime-sub relationship, the subcontractor does not have the privity of a contract with the government, and the customer of that subcontractor is the prime contractor, not the government,” said Chelsea.
Why is a JV better?
According to Chelsea, Joint Ventures (JVs) offer several benefits over traditional prime subcontractor teams. One key advantage is that all parties in a JV have the opportunity to have a direct contractual relationship with the government, which generates prior past performance for all companies involved. This can be used to secure future work opportunities.
Additionally, a JV typically forms a separate legal entity, allowing the companies or individuals involved to maintain their operations and control. This separate legal entity structure can provide more stability and control for the companies or individuals involved in a JV.
“All parties in a joint venture get the opportunity to have privity of contract and then have that contractual relationship with the government. This allows both companies to have a contract in which they can generate prior past performance. So they can take that and use it in another bid for more work,” said Chelsea.
This is a key advantage compared to the traditional prime-subcontractor team, where only the prime contractor has a direct contractual relationship with the government.
How to find the right partners for your JV
Finding the right partners for a JV can be a challenging task.
According to Chelsea, one strategy for small businesses is to take advantage of the mentor-protégé program. This program provides additional business development resources to help small businesses reach out to larger prime contractors and facilitate discussions about potential synergies and strategic alignments.
But it is also important to note that forming a JV should not be done lightly, as it comes with legal and financial responsibilities.
As Chelsea suggests, "I wouldn't necessarily recommend everyone just go form a JV with all their teaming partners. Because there is that legal burden of having an LLC and all the legal formation documents that go into that. Ideally, I think it should be between companies that have done at least a little bit of work together.”
Therefore, forming a JV with companies that have already worked together and share similar visions and goals is advisable.
Industry events, networking events, and conferences can also be great opportunities to meet potential partners and start discussions about forming a JV.
Pitfalls you could avoid when entering a JV
When entering a JV, there are some pitfalls to watch out for. Chelsea highlighted a few key areas to be mindful of.
One of the most common issues she sees is the concept of "affiliation" and the rules surrounding it. Essentially, it states that two or more small businesses can form a JV for a small business if both are under a size standard in the RFP (Request for Proposal), but only if they are not otherwise affiliated.
This can be tricky to navigate as the definition of "affiliated" is quite vague. Chelsea advises being mindful of having a longstanding relationship between the same JV partners, as this can ultimately lead to an affiliation issue.
Another important thing to keep in mind is the timelines surrounding JVs. According to Chelsea, a JV can only compete for work for two years after winning the first contract. After that, the JV is no longer eligible to compete for contracts, but the partnership can be dissolved, and a new JV can be formed to continue on the contract.
Lastly, Chelsea notes that forming a JV is heavily based on relationships, which can be similar to being married. If the relationship between partners deteriorates and a dispute arises, it can cause long-term issues for small businesses. Therefore, it's important to choose partners carefully and have a clear understanding of expectations and goals before entering into a JV.
Thanks, Chelsea, for an insightful conversation!