The Small Business Administration’s new authority to expand its mentor-protégé program to cover all small federal contractors was arguably the most important provision affecting small vendors in the recent defense authorization law signed on Jan. 2.

“We are still studying it, but it could have a pretty tremendous effect,” John Shoraka, SBA associate administrator for government contracting and business development, told Set-Aside Alert.

As a mentor-protégé pair, small firms partner with large firms, often in qualifying joint ventures.

The SBA is in discussions with the Office of Federal Procurement Policy to determine whether a rule to implement the new law can be added onto a previously-developed SBA proposed rule, Shoraka said. The previously-developed rule is due to be released within about three months to expand mentor-protege programs to women-owned, service-disabled veteran-owned and HUBZone firms, he added.

Details about how the SBA will apply the authority in the new law are unclear, and the overall impact is uncertain.

On the one hand, the new authority could provide a huge boost for federal mentor-protégé programs to thousands of small businesses, while possibly also putting un-mentored firms at a disadvantage. But the SBA also could limit the benefits of the new programs to curtail its impact.

Furthermore, there could be risks ahead for the dozen or so mentor-protégé programs that currently exist at federal agencies outside the SBA. Under the new law, all federal mentor-protege programs must be under the SBA’s purview.

The current SBA mentor-protégé program covers firms in the 8(a) category only. It is being enlarged under the coming proposed rule noted by Shoraka.

It will be enlarged again under the National Defense Authorization Act of fiscal 2013, which authorized the SBA to establish a mentor-protégé program for all small business concerns.

Congress directed the SBA to use 8(a) as a model, but also allowed the SBA discretion.

Specialists agree that the new authority could be very significant. “This is a startling change, and will have a greater impact than many people realize,” Richard Oliver, government contracts attorney with McKenna Long, told Set-Aside Alert. “The mentor-protégé relationship creates a much more robust competitive force. It will be difficult for a small business without a mentor-protégé relationship to compete for federal contracts.”

However, the impact will depend on how the SBA chooses to exercise the new authority, suggested Isaias Alba, partner with Piliero Mazza PLLC (See page 4). The SBA could create the new mentor-protege programs in such a way that limits their popularity--for example, by eliminating the ability to joint venture without fear of affiliation, he wrote.

SBA has rules against affiliation, which involve businesses being controlled by another business or by a third party. The current 8(a) mentor-protege program allows for an exemption from affiliation.

Another area in question is how the new authority will affect the 12 or more mentor-protege programs operating outside the SBA. Those programs may be vulnerable, according to Alba.

Under the new law, federal agencies are banned from creating, or continuing, mentor-protégé programs unless those programs are approved by the SBA, Alba said.

Mentor-protege programs that are not SBA-approved may be subject to cancellation, he added.

Those cancellations would not go into effect for months, until after the SBA issues regulations to carry out the expanded mentor-protege program. The exact timetable is unknown.

Even so, non-SBA mentors and proteges may be at risk.

“Mentors and protégés participating in those programs should realize that they could be eliminated,” Alba wrote.