Month: August 2015

Preserving Small Business Status in Mentor-Protege Joint Ventures

Authored by summer associate Thomas O’Dea

8(a) small businesses that enjoy the benefits of a mentor-protégé relationship with a larger entity need to be mindful of the very specific requirements of the Small Business Administration’s (“SBA”) guidance regarding joint-venture agreements. The SBA’s Office of Hearings and Appeals (“OHA”) recently found that an 8(a) small business that entered into a mentor-protégé relationship with a larger entity was disqualified from obtaining a design-build contract reserved for small businesses. SIZE APPEAL OF: KISAN-PIKE, A JOINT VENTURE, APPELLANT, SBA No. SIZ-5618, 20142014, WL 6904349 (November 24, 2014). Even though the SBA approved the mentor-protégé agreement, this approval did not ensure continued small business status for the smaller entity.

Generally, the SBA presumes that an 8(a) small business in a mentor-protégé relationship with a larger business is not affiliated with that larger business. 13 CFR § 124.520. However, that presumption does not apply to other agreements such as joint ventures. If affiliated, the small business is ineligible to obtain contract awards reserved for small businesses. To avoid affiliation the mentor and protégé must strictly comply with the SBA’s Joint Venture Requirements found in 13 CFR § 124.513(c) and (d).

Among other things, the joint venture agreement must provide the following: (1) an itemization of all major equipment, facilities, and other resources supplied by each party to the joint venture; (2) a detailed schedule of cost or value of each piece of equipment, facility, or resource supplied by each party; (3) a detailed explanation of each party’s responsibilities with regard to negotiations, labor, and performance, and; (4) a detailed explanation of how any 8(a) partner will perform at least 40% of the work in a more substantial way than just administrative functions.

The OHA’s decision demonstrates that general references to these requirements in a joint venture agreement is not sufficient, and that the mentor and protégé must include details to show compliance with the applicable regulations.

A Word of Caution to Design Builders

Authored by Ashley Moss

The Virginia Department of Professional and Occupational Regulation (“DPOR”) licenses professional contractors, engineers, and architects in Virginia and punishes those who violate licensure laws. Although sometimes overlooked, businesses that provide professional services must also be licensed. For businesses that practice architecture and/or engineering, this “license” is referred to as a “certificate of authority.” Whether a business that is licensed as a contractor in the Commonwealth of Virginia needs a certificate of authority depends on the specific services that it performs.

The licensure laws carve out an exception for licensed contractors who bid upon or perform design-build contracts so long as the actual architectural and engineering services are performed by properly licensed professionals. At some point, however, contractors may find that their projects gradually become more design than build-oriented, which may, depending on the project, require a “certificate of authority” to provide architectural or engineering services. Obtaining and maintaining a certificate of authority requires more than simply completing a few forms and can be dangerous for contractors and architecture/engineering firms alike. Here are a few tips that will help to ensure your compliance:

1. Who is in charge?
A business that provides architectural, engineering, or related services must have at least one full-time “resident” employee or principal who assumes “responsible charge” for the business’ professional services provided, or offered to be provided, from his or her office. “Responsible charge” means that the person exercises direct control and supervision over professional services. A business must have at least one responsible charge who is licensed in each profession that the business practices or offers to practice and each responsible charge must “reside” at the office. This means that s/he must be physically present in the office the majority of its operating hours.

2. One is not always enough.
If you have more than one office that practices engineering, architecture, or a related profession, you must register each office with DPOR. An office that is not registered can be sanctioned for the unlicensed practice of architecture/engineering, even if the business’ primary office is in good standing.

3. Ignorance is not bliss. 
When you sign forms to apply for or renew your professional license or your business’ certificate of authority, you certify that you will comply with all licensing statutes and regulations, not just the ones that you remember or understand.

4. Know your limits.
Even if you are licensed and/or obtained a certificate of authority to provide professional services in Virginia and will prepare all plans from your office in Virginia, you will need additional licenses before providing services for projects in other states (absent some exception).

These are just a few of the most common pitfalls that trap otherwise well-intentioned professionals and businesses. Paying attention to the licensing requirements now will save you considerable time and expense in the long run.

For more information please contact us.

Recent Revisions to AAA Rules

Authored by attorney Brett Saunders

Think about the last major construction project you or your company was involved in.  Chances are, that project was being performed under a contract that contained an arbitration clause.  These clauses require disputes to be resolved through binding arbitration, instead of traditional litigation, and are extremely common in the construction industry.  Almost all of these clauses require the arbitration to be performed under the Construction Industry Rules of the American Arbitration Association (AAA).  The AAA is one of the largest and most well-known arbitration organizations in the United States, and these rules are intended to address various issues that arise during construction disputes.

The Construction Industry Rules were recently revised on July 1, 2015.  The new changes primarily focus on fleshing out the preliminary steps taken before the arbitration hearing takes place and provide a more structured and detailed arbitration process.  For example, now the initial hearing between the parties and the arbitrator is much more thorough.  Under the new rules, the AAA has provided a checklist of 20 items that may be addressed during the preliminary hearing.

Another revision to the Construction Industry Rules allows for emergency relief and an expedited appointment of an arbitrator.  Parties to any construction contract entered into after June 30, 2015 may apply for emergency interim relief before an arbitrator that will be appointed within 24 hours of the AAA’s receipt of the request.  A party may request this relief by notifying the AAA and the other necessary parties to the arbitration.  The AAA will then quickly appoint an emergency arbitrator to address the emergency issue.  Finally, the selected arbitrator now has more power to enforce the Construction Industry Rules in each dispute by issuing orders to parties that refuse to comply with the Rules.

Because construction contracts often require disputes to be governed by the Construction Industry Rules it is important for all parties in the construction industry to be familiar with them, including any changes that have taken place.  A copy of the Construction Industry Rules of the American Arbitration Association, including the most recent revisions, can be found on the AAA’s website.

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