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Oles Morrison

Eleven Major Changes Coming to SBA’s Mentor-Protégé Program

By on July 28, 2016 | Posted in Legislative and Regulatory Developments

SBAlogoThis week, the U.S. Small Business Administration (SBA) published its long awaited final rule providing for a major expansion of its mentor-protégé program.  These regulations, which represent monumental changes to the federal contracting landscape (for small and large businesses), will go into effect August 24, 2016.  In the coming days and weeks we will publishing a number of posts breaking down the impact of these changes in greater detail.

Today, we begin by highlighting eleven of the most important changes coming next month as a result of these new regulations:

  1. SBA has created a second mentor-protégé program, which will be open to all small businesses, with benefits similar to those available under SBA’s existing 8(a) mentor-protégé program

SBA will be starting a second mentor-protégé program open to all small business, with benefits and requirements similar to those in SBA’s existing 8(a) Mentor-Protégé Program.  Mentor-protégé joint ventures approved under the new small business program will be considered a small business for any procurement that the protégé, on its own, would be considered small.  For example, an approved mentor-protégé joint venture under the small business program, with the protégé being a WOSB, will qualify as small for any small business set-aside or WOSB set-aside that the protégé would qualify for on its own, but would not qualify for 8(a) or SDVO or HUBZone set-asides.  SBA will continue running the 8(a) mentor-protégé program separately (with some revisions), and SBA has tailored the 8(a) and small business mentor-protégé programs to be as similar as possible.  An 8(a) firm will be eligible to submit a mentor-protégé application under either program.

  1. Protégés no longer have to be quite as small to qualify for SBA’s mentor-protégé programs

Previously, to be a protégé under the 8(a) mentor-protégé program, a firm had to be less than half the size of the size standard applicable to its primary NAICS code, or being in the developmental stage of the 8(a) program, or have never received an 8(a) contract.  Under the new regulations, a firm will only need be smaller than the size standard of its primary NAICS code.  This new rule will apply to both the 8(a) and small business mentor-protégé programs.

  1. Mentor-Protégé joint ventures will be tracked through SAM.gov

In order to facilitate the tracking of awards to mentor-protégé joint ventures, all mentor-protégé joint ventures in either SBA program will be required to register the joint venture as a separate entity in SAM.gov, with its own unique DUNS number and CAGE code.  The firm’s SAM.gov registration must also be identify the firm as a joint venture, and must identify the members of the joint venture.

  1. There will be no open/closed enrollment periods (for now)

Because of the expansion of the mentor-protégé program to all small businesses, SBA anticipates an influx in applications to the program.  As a result of this expected influx, SBA had considered utilizing open and closed enrollment periods.  Instead, for now, SBA will accept applications to the new mentor-protégé program at any time.  However, SBA has left open the possibility of switching to open/closed enrollment periods in the future if the need arises.  To help facilitate the review and approval of applications, a separate unit will be created within SBA’s Office of Business Development whose sole function will be to process mentor-protégé applications.  In addition, contrary to previous statements by SBA, the new program is not being launched merely on pilot basis.

  1. The end of “populated” mentor-protégé joint ventures

Until now, 8(a) mentor-protégé joint ventures could be “populated” (persons performing the contract work would be employed directly by the joint venture) or “unpopulated” (persons performing the contract would be employed by the partners to the joint venture).  Because of the difficulties in tracking the benefits gained by the protégé in a populated joint venture, SBA will required all mentor-protégé’s in either of its program to be unpopulated (though they may still be populated with administrative personnel).

  1. Non-profits will no longer be able to serve as mentors

Previously, non-profit entities could serve as mentors in the 8(a) mentor-protégé program.  Under the new regulations for both of SBA’s mentor-protégé program, only for-profit entities will be eligible to become mentors.

  1. 8(a) mentor-protégé joint ventures may transfer to the SBA Small Business Mentor-Protégé Program upon graduation

Upon a protégé’s graduation from the 8(a) program, the mentor-protégé can transfer itself to the SBA’s Small Business Mentor-Protégé program by simply giving notice to SBA, without having to separately apply for that program.  As result of this change, SBA will lift its previous ban on approving mentor-protégé agreements in the final six months of the protégé’s 8(a) lifespan.

  1. Mentors will be limited to no having more than three protégés at any one time across both of SBA’s mentor-protégé programs

Generally, mentors will only be allowed to have one protégé at a time.  However, SBA may approve up to three protégés for a mentor at a time, where the mentor can demonstrate that having multiple mentor-protégé relationships will not interfere with the development of any of the protégés.  The mentor’s three protégé maximum will be counted in the aggregate across both of SBA’s mentor-protégé programs.

  1. A protégé may have no more than two mentors in its lifetime, and mentor-protégé agreements will have a maximum duration of three years, and may be approved for a second three-year term

Protégés in both programs will be limited to a maximum of two different mentors across the protégé’s lifetime.  The term of a mentor-protégé agreement may not exceed three years, but may be extended once by an additional three years.  This will apply to protégés in both the 8(a) and small business mentor-protégé programs.

  1. 8(a) mentor-protégé joint ventures will be susceptible to size protests filed by their competitors on 8(a) set-asides

Abrogating case law from SBA’s Office of Hearings and Administrative Appeals, SBA now authorizes unsuccessful offerors on a competitive 8(a) set-aside to file size protests challenging the size of a SBA-approved 8(a) mentor-protégé joint venture named as the apparent successful offeror.

  1. In small business set-asides procurements, agencies will be required to consider projects performed by the individual members of a joint venture offeror 

While in most procurements agencies already consider the experience and past performance of the individual members of a joint venture offeror, there was previously no regulation compelling an agency to do so.  As part of these new regulations, in evaluating the past performance and experience factors in a small business set-aside procurement, an agency will be required to consider projects performed by the individual members of a joint venture offeror (not just projects performed by the joint venture itself).

Stay tuned in the coming days and weeks for further coverage on the monumental expansion of SBA’s mentor-protégé program.