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SBA Proposes Rule to Establish Universal Mentor-Protégé Program for All Small Business Concerns

President Obama signed the National Defense Authorization Act for Fiscal 2013 ("NDAA") into law on January 2, 2013. The NDAA authorized the SBA to establish mentor-protégé programs for all small business concerns ("SBC")—not just socially and economically disadvantaged concerns certified to participate in the 8(a) Business Development Program. Over 2 years later, the SBA finally proposed a rule that would implement a mentor-protégé program allowing all small businesses the opportunity to benefit as a protégé to an approved mentor.

The SBA determined that a single set of mentor-protégé rules, applicable regardless of any other special SBC-status, would facilitate clarity and consistency among the contracting community. If a final rule is implemented along the lines of the "universal" program proposed, HUBZone SBCs, Veteran Owned and Service-Disabled Veteran Owned SBCs, Woman and Economically Disadvantaged Woman Owned SBCs, and other SBCs will have access to a mentor-protégé virtually identical to the 8(a) mentor-protégé program. Among other things, all approved mentor-protégé participants can joint venture and be considered "small" for purposes of small business set-aside contracts provided the protégé is small, mentors can have an equity interest in the protégé, mentors can provide bonding capacity for contracts, and mentors can provide business development assistance. Except for the Department of Defense Mentor-Protégé Program, all mentor-protégé programs currently in effect at other executive agencies will have one year from the date SBA’s final rule is published to have the SBA approve their mentor-protégé programs.

Another way the SBA proposes expanding mentor-protégé access is by removing barriers to being approved as a protégé. Currently, a SBC cannot be a protégé if its average annual receipts exceed one-half the size standard of its primary NAICS Code. If it cannot qualify based on this, then a SBC can only qualify as a protégé if it has never received an 8(a) contract or is within the business-development stage of the 8(a) Business Development program. These two latter eligibility factors would be removed as mentor-protégé access is expanded to all SBCs. However, the SBA has determined that any firm that is small relative to its NAICS Code should be able to participate in federal contracting as a protégé.

The SBA’s proposed universal mentor-protégé program would add additional certification and reporting requirements aimed at ensuring the approved mentor-protégé relationship is serving its purpose and is program-compliant. It would also add the requirement that any concern seeking approval as a protégé be certified by SBA as a small business concern. Also, 8(a) firms who are approved as protégés would be subject to size protests the same as other SBCs.

The full details of the SBA’s proposed rule are attached here. Comments on it are due to SBA April 6, 2015.

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