(Editor’s Note. For a lot of good reasons, we have seen significant growth in companies forming  teaming arrangements and creating new business units within existing firms to pursue government contracting opportunities.  We addressed some of the issues in forming these arrangements and selling them to the government in a recent article (DIGEST Q307) where we have received several questions relating to cost issues of these arrangements (not surprising since that is our specialty) so we decided to present an updated version of a piece we wrote several years ago.)

A joint venture is really a legal entity separate and apart from the co-venturers.  This entity, which may be a corporation or partnership, is jointly owned and managed by the co-venturers. Common reasons joint ventures are formed include the need to (1) augment a contractor’s expertise and capabilities (2) access critical proprietary technology controlled by others (3) keep costs down by using lower cost partners (4) pool financial resources to meet up-front investments (5) gain greater geographic reach to maximize political support and (6) meet customer preferences (e.g. favored firms).  Important topics such as the structure of the venture (e.g. corporation vs. partnership), parties’ respective shares, management structure, key activities, responsibilities and disclosure and use of technical data and software are usually expressed in a joint venture agreement.

A new business unit, which we will call a “strategic business unit” (SBU), is a segment of a corporation where the parent of one organization has control over its operations.  When it has the financial and technical wherewithal to do so, a contractor will commonly create an SBU where there is a need to (1) limit financial, tax or legal liability (2) create a self-contained, “lean and mean” organization focused on one program or contract (3) insulate the rest of the company from onerous government rules or (4) eliminate or reduce general and administrative or other indirect expense allocations to allow for greater price competitiveness.

{TAG_FORM_TITLE}

To discuss your needs, contact Bill Lennett, Principal, at 1-925-362-0712 or email him at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it .

First Name:

*

 

Last Name:

*

 

Email:

*

 

Phone:

 

Short Description of Interests and Needs:

*