Teaming Agreements vs. Joint Ventures: How Small Businesses Partner With Prime Contractors

Very few companies win large federal contracts alone. A smart teaming agreement, joint venture or mentor-protégé relationship lets small businesses reach bigger opportunities, fill capability gaps and build past performance. This guide explains the options and how to structure them correctly.

Prime-Sub Teaming Agreements

A prime-subcontractor teaming arrangement is the most common structure. One company is the prime contractor and holds the contract. Partners perform as subcontractors under subcontract agreements.

A strong teaming agreement covers:

• Scope of work and workshare (percentage or specific tasks) for each partner
• Exclusivity: whether partners can join competing teams
• Proposal responsibilities and cost sharing
• Commitment to negotiate a subcontract upon award
• Confidentiality, non-solicitation of employees and termination terms

Courts have sometimes found vague teaming agreements to be unenforceable "agreements to agree." Attach a draft subcontract or a detailed statement of work to make your workshare commitment stronger.

Joint Ventures

A joint venture (JV) is a separate entity, usually an LLC, formed by two or more companies to pursue a specific contract. For small business set-asides, a JV generally qualifies as small if each member is small under the NAICS size standard, or if it is formed under an SBA mentor-protégé agreement. Set-aside JVs must meet SBA rules on the managing venturer, workshare and the written JV agreement.

The SBA Mentor-Protégé Program

SBA's Mentor-Protégé Program pairs a small business protégé with an experienced mentor, often a large prime. The key benefit: a mentor-protégé JV can compete for small business set-asides as a small business while drawing on the mentor's capabilities and past performance. Mentors may also provide business development help, training and, in some cases, equity investment.

Know the Limitations on Subcontracting

When a small business wins a set-aside, it must keep a required share of the work. Under the limitations on subcontracting rule, the prime cannot pay more than a set percentage of the contract amount to non-similarly situated subcontractors:

• Services: 50%
• Supplies (excluding cost of materials): 50%
• General construction: 85%
• Special trade construction: 75%

Work done by similarly situated subcontractors (for example, other small businesses with the same status) does not count against the limit. Violations can bring serious penalties, so track workshare throughout performance.

How to Find the Right Teaming Partners

• Search award data to find primes that already win at your target agency.
• Attend industry days and agency small business events.
• Check prime contractors' supplier portals and small business liaison officers.
• Use the GovConUnited Teaming and Partners pages to find complementary firms.

Frequently Asked Questions

Is a teaming agreement the same as a subcontract?

No. A teaming agreement governs the pursuit. The subcontract governs actual performance after award.

Can a large business be a mentor?

Yes. Mentors can be large or small businesses that can provide meaningful assistance to the protégé.

What is "ostensible subcontractor" risk?

If a small prime relies too heavily on a large subcontractor to perform primary and vital requirements, SBA may treat them as affiliated, which can make the prime ineligible for the set-aside.

Looking for a teaming partner? Post your capabilities and target agencies below.