Final rule issued on mentor-protege

Expanded to cover WO, SDV, HUBZone, other SBs

On August 24, the long-awaited final rule setting up a new governmentwide mentor-protégé program for all small businesses goes into effect, opening up many new opportunities for small firms.

Previously, only 8(a) Small Business Program participants were able to receive benefits under a mentor-protégé program run by the Small Business Administration.

However, in the National Defense Authorization Act of 2013, Congress authorized the SBA to establish a mentor-protégé program for all small business concerns, and ordered that it be closely modeled on the 8(a) mentor-protégé program.

The SBA published the proposed rule for the program in February 2015 and the final rule on July 25. Steven Koprince describes this as “a game-changer in the world of small business contracting” in his July 22 blog entry.

The goal is to allow mentors to provide diverse types of business assistance to protégés. This assistance may be technical or managerial, or financial assistance in the form of equity investments and/or loans; subcontracts; and/or assistance in performing Federal prime contracts through joint venture arrangements.

“The explicit purpose of the 8(a) BD mentor-protégé relationship is to enhance the capabilities of protégés and to improve their ability to successfully compete for both government and commercial contracts,” the final rule states.

“Similarly, the mentor-protégé program for all small business concerns is designed to require approved mentors to provide assistance to protégé firms in order to enhance the capabilities of protégés, to assist protégés with meeting their business goals, and to improve the ability of protégés to compete for contracts.”

Here are some of the highlights from the rule:

• Any concern that demonstrates a commitment and the ability to assist small business concerns may act as a mentor. A mentor may be large or small.
• Generally, a mentor will have no more than one protégé at a time. However, SBA may authorize a concern to mentor more than one protégé at a time where it can demonstrate that the additional mentor-protégé relationship will not adversely affect the development of either protégé. Also, three protégés is the limit.
• To qualify as a protégé firm, a concern must qualify as small for the size standard corresponding to its primary NAICS code, or it may say it is seeking business development for a secondary NAICS code and qualify as small for the size standard corresponding to that NAICS code.
• If a firm is “other than small” in its primary NAICS code, it can still seek to qualify as small in a secondary NAICS code. The firm must demonstrate how the mentor-protégé relationship is a logical business progression for the firm and will further develop or expand current capabilities. SBA will not approve a mentor-protégé relationship in a secondary NAICS code in which the firm has no prior experience.
• A protégé firm may generally have only one mentor at a time. SBA may approve a second mentor for a particular protégé firm where the second relationship will not compete or otherwise conflict with the assistance set forth in the first mentor-protégé relationship. Also, the second relationship must pertain to an unrelated NAICS code and the protégé firm is seeking to acquire a specific expertise that the first mentor does not possess.
• SBA may authorize a small business to be both a protégé and a mentor at the same time where the small business can demonstrate that the second relationship will not compete or otherwise conflict with the first mentor-protégé relationship.
• A protégé and mentor may joint venture as a small business for any government prime contract or subcontract, provided the protégé qualifies as small for the procurement.
• The protégé firm may sell an equity interest of up to 40% to the mentor.
• The mentor and protégé firms must sign a written agreement, which must be approved by the SBA.

More information: Federal Register 81FR48557 - publication of Final Rule https://goo.gl/wQOqPU
Koprince blog http://goo.gl/WVo6sF

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