Small businesses often partner to win federal work they could not win alone. There are two basic structures: a prime contractor with subcontractors, usually documented in a teaming agreement, and a joint venture, where two or more companies form a combined offeror. The FAR recognizes both. Choosing the right one depends on the work, the set-aside, and how much risk and control each partner wants.
What the FAR says about teaming
FAR subpart 9.6 defines a "contractor team arrangement" as either two or more companies forming a partnership or joint venture to act as a potential prime contractor, or a potential prime agreeing with one or more companies to have them act as its subcontractors on a specified contract or program. The government will recognize these arrangements as long as they are identified and the company relationships are fully disclosed in the offer — or, for arrangements made after the offer, before they take effect (FAR 9.603).
FAR 9.604 also makes clear that the government still holds the prime contractor fully responsible for performance regardless of any team arrangement, can determine the prime's responsibility based on the team, and keeps its right to consent to subcontracts.
Option 1: Prime-subcontractor teaming
How it works
One company is the prime and signs the contract with the government. The others are subcontractors to the prime. A teaming agreement, signed before the proposal, typically covers:
- Which company is prime and which are subcontractors
- Each party's role in preparing the proposal
- The scope and, often, the share of work each subcontractor will receive if the team wins
- Exclusivity — whether partners can join competing teams
- Confidentiality and protection of proprietary information
- What happens if the team loses, the prime wins only part of the work, or the government objects to a subcontractor
When it fits
When one company can perform most of the work and lead the customer relationship, and partners fill specific gaps. It is simpler to set up than a joint venture.
Watch out for
- Limitations on subcontracting. On a set-aside, the small business prime must not pay more than a specified share of the contract to subcontractors that are not similarly situated (FAR 52.219-14 and 13 CFR 125.6). Plan workshare accordingly.
- Affiliation. SBA can find a prime and a subcontractor affiliated under its rules in 13 CFR 121.103 — for example, under the "ostensible subcontractor" rule, where a subcontractor performs the primary and vital requirements or the prime is unusually reliant on it. Affiliation can make the prime other than small for that contract. SBA's rule also says a prime may use a subcontractor's experience and past performance to strengthen its offer; the concern arises when the subcontractor performs the primary and vital work.
- Enforceability. Teaming agreements that only promise to negotiate a subcontract later can be hard to enforce. Have a lawyer review important agreements.
Option 2: Joint venture
How it works
Two or more companies form a joint venture — often a separate entity — that submits the offer and holds the contract. The JV needs its own SAM.gov registration and UEI. The partners share work, risk and profit as their JV agreement provides.
Joint ventures and small business set-asides
SBA's rules let certain joint ventures compete for set-asides. A joint venture between a protégé and its SBA-approved mentor can compete as a small business for any small business contract, provided the protégé individually qualifies as small, and can pursue any type of set-aside for which the protégé qualifies, including 8(a), SDVOSB, WOSB and HUBZone set-asides. See SBA Mentor-Protégé Program. Joint ventures for program set-asides must meet specific requirements for the JV agreement, control and the work the program participant performs. See SBA's joint venture page and 13 CFR 125.8.
Past performance
Under FAR 15.305(a)(2)(vi), evaluators consider the joint venture's past performance and, if it does not demonstrate past performance, consider the past performance of each party. That can help a newer small business partnered with an experienced firm.
When it fits
When the partners bring roughly complementary, substantial capabilities; when the set-aside requires a program participant to lead but the work needs a larger partner's capacity; or when the parties want to share risk and reward more evenly.
Watch out for
- More paperwork: a written JV agreement with required provisions, separate registration, and often separate accounting.
- Rules on who must manage the JV and perform what share of the work for program set-asides.
- Size: under 13 CFR 125.8, a joint venture can generally offer as a small business only if each partner is small under the contract's NAICS size standard, unless an exception applies — such as an SBA-approved mentor-protégé joint venture.
- Time limits: under 13 CFR 121.103(h), a specific joint venture generally may submit offers for two years from its first contract award; after that, the partners may be deemed affiliated. Orders under contracts already awarded can continue.
A quick comparison
- Who signs the contract: teaming — the prime; JV — the joint venture.
- Setup effort: teaming — lower; JV — higher.
- Customer relationship: teaming — the prime owns it; JV — shared through the JV's management.
- Set-aside eligibility: teaming — depends on the prime's status; JV — depends on SBA's JV rules and the partners' status.
Frequently asked questions
Is a teaming agreement legally binding?
It depends on how it is written and on applicable law. Agreements that only commit to negotiate a future subcontract may be difficult to enforce. Get legal advice for important deals.
Does a joint venture need its own SAM.gov registration?
Yes. A joint venture that will be the offeror must register in SAM.gov and obtain its own Unique Entity ID.
Can a small business team with a large business on a set-aside?
Yes, within limits. The small prime must meet the limitations on subcontracting and avoid affiliation problems. A mentor-protégé joint venture is another route.
Do I have to disclose my teaming partners?
FAR 9.603 says the government recognizes team arrangements that are identified and fully disclosed in the offer, or before an arrangement made after the offer takes effect.
This guide is general information, not legal advice. Rules change — always check the solicitation and the official sources linked here.