In a Final Rule issued on July 25, 2016, the Small Business Administration (SBA) made changes to its regulations pertaining to mentor-protege arrangements between large and small U.S. Government contractors. Effective today (August 24, 2016), the Final Rule establishes a universal, Government-wide mentor-protege program available to all types of small business concerns. Previously, the SBA mentor-protege program was limited primarily to small businesses in SBA's 8(a) business development program, and excluded other types of small business contractors from participation. Other agencies, such as the Department of Defense (DoD) have mentor protege programs that allow broader participation, but other agencies have postponed or tabled similar programs in anticipation of a more robust centralized mentor protege program from SBA.
Pursuant to the Final Rule, SBA will continue its mentor-protege program for 8(a) concerns, but all small businesses, including 8(a) firms, may choose to participate in the new universal mentor-protege program either immediately or upon graduation from the 8(a) business development program. However, all other U.S. Government agencies except DoD must now apply to SBA to continue their mentor protege programs beyond one year; it seems likely most agencies will simply defer to SBA's universal program in the future.
SBA's new universal mentor-protege program is modeled significantly on SBA's 8(a) mentor-protege program. It allows for-profit large businesses to mentor small business proteges by providing administrative, managerial, financial, strategic and other support, including subcontracts, under a formal mentor protege agreement (MPA). It also enables mentors and proteges to enter into joint ventures that qualify to compete as small businesses, without giving rise to affiliation as a result of the MPA assistance and joint venture arrangement. Mentors must apply to SBA to participate and generally will not be permitted to mentor more than three proteges at a time. Proteges generally may have only a single mentor, but may apply to SBA to allow a second mentor to help develop business under a secondary NAICS code. MPAs must be in place for at least one year, and must be in place prior to submission of a proposal to the U.S. Government. MPAs may extend for a period up to three years and may be extended for an additional three year period. In some circumstances, SBA may also allow small businesses to serve as mentors to other small businesses.
The Final Rule provides significant new opportunities for small businesses to work with other government contractors, small and large, to pursue government contracts and subcontracts. Coupled with other regulatory changes implemented by SBA earlier this year, which we addressed in an earlier post, these changes undoubtedly will boost small business participation in U.S. Government acquisitions for the foreseeable future.