U.S. Small Business Administration (“SBA”) regulations require that mentor-protégé and socioeconomic joint ventures designate the protégé or socioeconomic member as the “managing venturer” of the joint venture. However, the regulations do not define “managing venturer” or state how much control such a “manager” must maintain over the joint venture. In the context of typical small business operating entities (i.e., notjoint ventures), SBA’s Office of Hearings and Appeals (“OHA”) has offered detailed guidance on what it means to “control” such entities, but this case law has never been applied to joint ventures. This leaves joint venturing firms without any direction on the subject — beyond the general requirement that they designate a “managing venturer.”
As discussed in more detail below, this is a “gap” in SBA regulations and case law that has led to uncertainty in the governance of small business joint ventures. Given the increasing use of joint ventures by contractors pursuing small business set-aside procurements, this uncertainty is increasingly harmful to the business community.
This article surveys the available OHA case law in order to identify the specific limits of the aforementioned “gap,” and then offers predictions and recommendations for the way that SBA should define the term “managing venturer” in order to minimize business uncertainty and thereby promote small business development through joint venture participation.
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