SDVOSB Joint Venture
Also known as: SDVOSB JV, service-disabled veteran joint venture
What you do here: Manage the JV as the SDVOSB partner, own 51%, take 40% of profit, perform 40% of the work
At a Glance
- Who it's for
- An SDVOSB that wants to pursue a set-aside jointly with a partner firm
- What it does
- Lets two firms bid one set-aside as a single joint-venture offeror
- Governing authority
- 13 CFR § 128.402 (SDVOSB JV requirements) and § 125.18 / § 125.8
- Ownership / control
- SDVOSB owns ≥51%, is the managing venturer, and provides the responsible manager
- Work / profit split
- SDVOSB performs ≥40% of the JV's work and gets profits commensurate with its work (≥40%)
What It Is
An SDVOSB joint venture is a legal arrangement in which an SDVOSB and one or more other firms combine to pursue and perform a specific set-aside (or a series of them) as a single offeror. The SBA lets a qualifying JV compete for SDVOSB set-asides even though it isn't itself a single company — but only if it follows the rules in 13 CFR § 128.402. The SDVOSB partner must be the managing venturer, must own at least 51% of the joint venture, and must provide the JV's project manager ("responsible manager"). The JV agreement must be in writing and contain specific required provisions — an itemized statement of profit distribution, a bank-account requirement, the work each partner will perform, and more. Profits must be split commensurate with the work performed, with the SDVOSB receiving at least 40%. Crucially, the joint venture as a whole must perform the limitations on subcontracting, and the SDVOSB partner must perform at least 40% of the work done by the joint venture (its work can't be merely administrative). If the partners are both small, the JV is generally not treated as affiliated for that contract; if one partner is large, the JV only escapes affiliation through an SBA-approved mentor-protégé relationship.
When You Use It
- When an SDVOSB needs a partner's capacity, past performance, or bonding to be competitive on a larger set-aside.
- When two SDVOSBs want to combine to reach a size or scope neither could hit alone.
- When an SDVOSB protégé teams with its approved mentor to bid an SDVOSB set-aside (see the mentor-protégé JV).
- When the partners want to jointly hold and manage the prime contract, not just a prime-sub relationship.
Key Features
| Feature | What It Means |
|---|---|
| 51% SDVOSB ownership & managing venturer | The SDVOSB must own at least 51% of the JV and be the managing venturer, controlling day-to-day management and providing the responsible manager. |
| 40% work rule | The SDVOSB partner must perform at least 40% of the work performed by the joint venture, and that work must be more than administrative or ministerial. |
| Profit commensurate with work (≥40%) | Profits are split according to the work each partner performs; the SDVOSB must receive at least 40% of the JV's profits. |
| Written JV agreement with required terms | 13 CFR § 128.402(c) lists mandatory provisions — profit distribution, a JV bank account, itemized major equipment/facilities, and the party responsible for records. |
| JV meets limitations on subcontracting | The joint venture as a whole must satisfy the self-performance floor, and compliance is measured across the venturers together as if they were one. |
| Two-year / three-award limits | A specific JV entity can generally be awarded set-aside contracts for two years from its first award; the same JV isn't an unlimited, permanent vehicle. |
The SDVOSB Angle
A joint venture is the SBA's blessed way for a smaller SDVOSB to punch above its weight — but the rules are unforgiving and are a favorite target of status protests. The SDVOSB must genuinely run the venture: 51% ownership, the managing venturer role, the responsible manager, at least 40% of the work, and at least 40% of the profit. A JV that looks like the SDVOSB fronting for a larger partner will lose a protest. Draft the JV agreement to hit every mandatory provision in § 128.402, keep a real JV bank account and records, and document that the SDVOSB actually performs its 40% share of the work — not just signs the paperwork.
How to Set It Up
- Confirm the SDVOSB partner is certified in SBA VetCert and will own ≥51% and manage the JV.
- Verify both partners are small under the NAICS size standard — or use an approved mentor-protégé JV if one is large.
- Draft a written JV agreement with every mandatory provision in 13 CFR § 128.402(c).
- Assign work so the SDVOSB performs ≥40% of the JV's work and the JV meets the limitations on subcontracting.
- Open a dedicated JV bank account, keep JV records, and register the JV where the solicitation requires.
Watch Out For
- A JV where the SDVOSB doesn't truly control management, or performs only token work, fails § 128.402 and loses status protests.
- Splitting profit unequal to the work (or below the SDVOSB's 40%) is a common and fatal drafting error.
- Two large-partner JVs affiliate unless the large firm is an SBA-approved mentor of the SDVOSB protégé.
- The JV — not just the SDVOSB — must meet the limitations on subcontracting; the venturers' work is measured together.
- Populating the JV with the partner's employees (a "populated" JV) is generally not allowed for set-aside JVs.
Run the Numbers
Frequently Asked
Can two SDVOSBs form a joint venture to bid a set-aside?
Yes. Two (or more) SDVOSBs — or an SDVOSB and another small business — can form a joint venture to pursue an SDVOSB set-aside under 13 CFR § 128.402, provided the JV meets the rules: the SDVOSB is the managing venturer and owns at least 51%, the JV agreement contains the required provisions, the SDVOSB performs at least 40% of the JV's work and receives at least 40% of profits, and the JV as a whole meets the limitations on subcontracting. If both partners are small, the JV is generally not affiliated for that contract.
How much of the work must the SDVOSB partner perform in a joint venture?
The SDVOSB partner must perform at least 40% of the work done by the joint venture, and that work must be more than administrative or ministerial functions. In addition, the joint venture as a whole must meet the limitations on subcontracting (13 CFR § 125.6), so the venturers together must self-perform the required share (e.g., 50% of the cost of personnel on a services contract).
Does a joint venture make the partners affiliated?
For a specific set-aside contract, a joint venture of small businesses is generally not treated as affiliation — the SBA looks at each venturer's size individually. Two exceptions matter: a JV between a protégé and its SBA-approved mentor is expressly exempt from affiliation even though the mentor is large, and a JV that ignores the § 128.402 rules can still be found to be a sham that affiliates the partners. Outside these JV rules, general affiliation principles in 13 CFR § 121.103 still apply.
Primary Sources
- 13 CFR § 128.402 — Joint venture requirements (VetCert)
- 13 CFR § 125.18 — SDVO SBC eligibility and JV rules
- 13 CFR § 125.6 — Limitations on subcontracting
Plain-English reference, not legal advice. Teaming, joint-venture, affiliation, and subcontracting rules are fact-specific and the SBA regulations and FAR are amended from time to time — always read the current 13 CFR and FAR text, confirm the requirements with the contracting officer and your SBA resources, and consult qualified counsel before structuring a joint venture, teaming agreement, or subcontract you intend to rely on.
Change log (1)
- LaunchedPublished the federal teaming, joint venture & subcontracting arrangements reference covering how an SDVOSB works with other firms on a set-aside — the prime contractor and subcontractor roles, the FAR Subpart 9.6 contractor team arrangement (teaming agreement), the SDVOSB joint venture (13 CFR § 128.402), the SBA mentor-protégé joint venture (13 CFR § 125.9), the similarly situated entity that counts a sub's work as self-performance (13 CFR § 125.6), the ostensible subcontractor rule (13 CFR § 121.103(h)), general affiliation (13 CFR § 121.103), the small business subcontracting plan (FAR Subpart 19.7 / 52.219-9), and flow-down clauses (FAR 52.212-5 / Subpart 44.2) — each with an at-a-glance quick-facts card, a when-you-use-it list, a key-features table, an SDVOSB-specific angle, a how-to-set-it-up checklist, watch-outs, FAQPage, Article, Dataset, and BreadcrumbList structured data, primary-source citations, and cross-links into the glossary, regulation explainers, how-to guides, set-aside comparisons, FAQ, clauses, forms, and the limitations-on-subcontracting, subcontracting-goal, set-aside eligibility, and size-standard calculators.