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Oles Morrison

SBA’s Expanded Mentor-Protégé Program to be Launched as a “Pilot Program” in Summer 2016?

By on December 2, 2015 | Posted in Legislative and Regulatory Developments

As many readers may know, in February 2015, the U.S. Small Business Administration (“SBA”) released its proposed rule to establish a mentor-protégé program for all small businesses.  Currently available only to participants of the SBA’s 8(a) Program, the SBA’s proposed rule would create a new mentor-protégé program open to all small businesses, including firms in the HubZone, Women-Owned Small Business, and Service-Disabled Veteran Owned Small Business programs.  Having been relatively silent since proposing the changes, it seems the SBA’s mentor-protégé expansion program might soon become a reality.  However, that immediate reality may only be as a “pilot program.”

Concerned about the delay in implementing the new program, the House Committee on Small Business Subcommittee on Contracting and Workforce called a hearing to examine the progress of the program, and invited testimony from the SBA to provide an update on the program.  The Subcommittee had expressed concerns over a number of issues related to the progress of the program, including the SBA’s ability and preparedness to cope financially with the expected influx of mentor-protégé applications commensurate with the expansion, and what impact President Obama’s veto of the FY 16 NDAA will have on the progress of the program.

According to the testimony of the SBA’s Associate Administrator for Government Contracting Business Development, John Shoraka, the SBA is currently drafting a final rule and has begun planning for implementation of the new program.  In response to questions from members of the Subcommittee, Mr. Shoraka testified that the SBA anticipates that the final rule will be issued in the first quarter of 2016, to be launched in the later part of the summer of 2016.  However, Mr. Shoraka further testified that it will initially be launched as a “pilot program” to determine the program’s impact, “and from there decide how its implemented fully.”  Unfortunately, Mr. Shoraka did not clarify what he meant by the program being launched on a “pilot” basis, but Mr. Shoraka’s references in his testimony to a limit on SBA resources available to implement the mentor-protégé expansion indicates that the “pilot” program may be limited to a smaller scope of participants than indicated in the proposed regulations.

If SBA’s regulations are implemented in their proposed form, the SBA’s new mentor-protégé program would introduce some significant variations from the existing 8(a) mentor-protégé program, including the following:

  • Mentor Qualifications – In accordance with the National Defense Authorization Act (“NDAA”)’s definition of a mentor as a “for-profit business concern of any size,” the new program would not allow non-profit business to serve as mentors in any mentor-protégé program. This change would alter the 8(a) regulation that currently allow for non-profit mentors.
  • Protégé Qualifications – With respect to protégé qualifications, the new small business mentor-protégé program proposes to eliminate the requirement that a protégé must be less than half the size standard corresponding to its primary NAICS code. A protégé’s size would also be affirmatively verified by the SBA as a small business before the firm can act as a protégé.
  • No Agency-Specific Mentor-Protégé Programs – The proposed rule would prohibit any non-SBA federal agency (other than the Department of Defense) from conducting their own independent mentor-protégé program without approval from the SBA. Agencies that currently have their own programs would be allowed to continue to operate them for one year, but thereafter would need to go through the SBA approval process to continue with its independent program.

However, given the significant interest in the proposed regulation, and the number and nature of the written and oral comments received, it is difficult to predict the exact impact of the new program until the final regulations are issued.  But one thing is for sure, the impact will be very significant to the government contracting community.  As Mr. Shoraka noted during the hearing, the regulations could result in the expansion of SBA’s mentor-protégé from 389 eligible participants in the 8(a) program to over 2,000 potential participants in the new mentor-protégé program.