The U.S. Small Business Administration (SBA) has established a new government wide mentor-protégé program to benefit all qualified small businesses under a new rule that will go into effect on August 24, 2016. This new rule, implementing changes mandated by the Jobs Act of 2010 and the 2013 National Defense Authorization Act, will provide all small businesses with the opportunity to obtain developmental assistance from larger mentors and to form joint ventures with those mentors to pursue set-aside contracts.

The key elements of the new program include the following:

• SBA approval required for participation in the program:
• • Protégés must qualify as a small businesses.
  • Mentors may be large or small businesses and generally will be limited to have only one protégé at a time.
  • Written mentor protégé agreement (MPA) must be approved by SBA before it takes effect.
  • Protégés must make annual reports to SBA.
• A small business with an SBA approved MPA will not be deemed to be affiliated with its mentor firm solely because the protégé firm receives assistance from the mentor under the MPA.
• A protégé may joint venture with its SBA approved mentor and still qualify as a small business for a federal government contract (or subcontract), provided the protégé qualifies as small for the size standard corresponding to the NAICS code assigned to the procurement. Similarly, such JVs will qualify for contracts reserved or set-aside for specific programs such as HUBZone, SDVOSB or WOSB, if the protégé firm also meets the particular program specific requirements.
• JV agreement must be in writing and SBA must approve the JV agreement before a mentor protégé JV may avail itself of these benefits.
• The JV must perform the applicable percentage of work required by the limitations on subcontracting requirements and the small business partner must perform at least 40% of the work performed by the JV.
  • Compliance certification and reporting is mandated prior to performance, on an annual basis and at close out.
• Past performance of member companies will be evaluated in addition to past performance of mentor protégé JV itself.

The SBA’s existing 8(a) Business Development mentor-protégé program (8(a) BD MPP) will remain in existence, so 8(a) companies will have the option to participate in either the 8(a) BD MPP or in the new Small Business Mentor Protégé Plan (SB MPP). However, the new SB MPP will effectively replace the individual mentor-protégé programs operated by individual federal agencies (other than the Department of Defense which is exempted from the requirement to end such programs within the next year).

This new rule is expected to significantly increase the opportunities for small and large businesses to partner with one another and might even increase the number of set-aside opportunities generated by the federal government. Small federal contractors are urged to review their existing mentor protégé relationships and to act quickly to take advantage of the benefits of the new program.

For more information, please contact MWL attorney Peter A. Fish.