SBA's Small Business Mentor Protégé Program Expands Opportunities for Small and Large Businesses

The federal government has an annual goal that small businesses receive 23 percent of prime contracts dollars, resulting in federal agencies setting aside many procurements exclusively for small businesses or socio-economic categories of small businesses. The final rule’s expansion of the joint venture affiliation exception from the 8(a) mentor protégé program to the small business mentor protégé program is a significant benefit, enabling both small and large businesses to pursue previously unavailable acquisition opportunities. When joint venturing with their mentors, small businesses are able to pursue larger, more complex contracts, which allows small businesses to gain significant experience and past performance credentials. Large businesses also can reap significant benefits through the joint ventures, by gaining access to work that is restricted to small business concerns.

New Small Business Mentor Protégé Program

The small business mentor-protégé program, set forth in 13 C.F.R. § 125.9, establishes requirements that are generally consistent with the established 8(a) mentor protégé program. Indeed, where the small business mentor protégé program and the 8(a) mentor protégé program regulations differed, the final rule amends the 8(a) regulations to ensure consistency between the programs and streamline the SBA’s administration and oversight.

Mentor Eligibility. Under the final rule, only “for profit” entities can be mentors in the small business and the 8(a) mentor protégé programs. The SBA requires mentors to have the financial capabilities to fulfill their business development assistance as described in the mentor protégé agreement.

Protégé Eligibility. A protégé must qualify as small under its primary NAICS code to be eligible for the small business mentor protégé program. The final rule eliminates the more limited 8(a) protégé eligibility requirements (i.e., half of the NAICS size standard, in the developmental phase of the 8(a) program, or never received an 8(a) contract) and revises the 8(a) regulations to implement the same expanded standard as it employs for small business protégés.

Duration and Number. The SBA limits small business and 8(a) mentor protégé agreements to an initial term of three years, with an option to extend for three additional years, for a total of six years. Graduating 8(a) protégés can transfer their mentor-protégé arrangement to the new small business program by providing notice to the SBA. Additionally, the SBA limits mentors to one protégé and protégés to one mentor. The SBA, however, has discretion to permit mentors to have up to three protégés in the aggregate and protégés to have up to two mentors if certain circumstances are met.

Simultaneous Status. In a change from the current 8(a) rule, the SBA permits a small business to be simultaneously a protégé and a mentor.

Elimination of Size Determination Requirement. The final rule removes the requirement for a protégé to obtain a size status determination prior to participating in the small business mentor protégé program. Instead, the SBA will rely on small business self-certifications and the current size protest system to protect the integrity of the program.

Application and Approval of Mentor Protégé Arrangements. The SBA has created a new unit within the Office of Business Development solely dedicated to processing and reviewing applications to the small business mentor protégé program. The new unit will make recommendations for approval, and the ultimate authority for decisions will rest with the director or his designee (who also processes and approves applications for the 8(a) mentor protégé program). The SBA is not currently imposing open and closed enrollment periods, but reserves the right to implement such periods in the event that demand becomes unsustainable.

Ownership Interests. The final rule permits mentors to retain up to a 40 percent ownership interest in protégés at the completion of the mentor protégé arrangement. The SBA will rely on the affiliation rules to determine whether the large business’ ownership interest creates affiliation.

Past Performance. The SBA mandates that procuring agencies must consider the past performance of the mentor and the protégé when evaluating the proposal of a joint venture.

Impact to Agency Mentor Protégé Programs. Except for the Department of Defense’s mentor protégé program, agency-specific mentor protégé programs are likely to be eliminated, unless the agency seeks approval from the SBA within one year. Businesses participating in agency mentor protégé programs will likely need to transition to the SBA’s small business mentor protégé program.

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