SBA's two-year joint venture rule (13 C.F.R. 121.103(h)) and the 8(a) JV approval rules together shape how small firms team for federal work. Coverage from Iowa State CIRAS and Schwabe.
The 2-year rule
The same two or more entities may create additional joint ventures. Each new JV may submit offers for a period of 2 years from the date of the first contract awarded to that JV without the partners being deemed affiliates. After 2 years, the partners are presumed affiliated for size purposes.
The competitive 8(a) JV change
SBA no longer approves JV agreements formed to pursue competitive 8(a) contracts. SBA continues to approve JV agreements formed for sole-source 8(a) contracts. Practical effect: 8(a) firms partnering for competitive 8(a) work face simpler approval but reduced SBA oversight of JV terms — increasing protest risk if JV terms aren't carefully drafted.
Size calculation reminders
- Outside MPP, each JV partner must individually be small under the relevant NAICS
- Size includes the entity's own revenue/employees + affiliates' revenue/employees
- MPP-formed JVs are exempt — protégé's size is unaffected by mentor's size
- The 8(a) partner(s) must perform at least 40% of work performed by the JV (more than ministerial)
What to do
- Track each JV's first-contract date for the 2-year clock
- For competitive 8(a) JVs: invest in JV agreement quality since SBA isn't pre-approving
- If you'll exceed 2 years with the same JV partner, plan a refresh (new JV legal entity)
- For ostensible-subcontractor protest avoidance, see our VSBC-459-P coverage