#GovConThoughts: SBA Rule Adds Turbo Chargers to its Mentor-Protégé Program, Joint Ventures
[My #govconthoughts series provides a quick take on recent developments in the government contracting space.]
The Small Business Administration's ("SBA") Mentor-Protégé Program ("MPP") is one of SBA's defining programs that helps promote small business by requiring SBA-approved mentor companies to provide assistance to protégés to help them successfully compete for federal contracts. With 2,589 active mentor-protégé agreements ("MPA"), the program is both wildly successful and sought after. Just grab a meal at the Tysons Silver Diner during the work week and you will probably find someone discussing the MPP, whether it be the need to find a mentor or what opportunities to bid with a mentor-protégé joint venture. But the program's success did not stop SBA from finding ways to give it a boost.
Recently, SBA issued a regulatory update that gives protégés more ways to receive assistance from their mentors (including joint ventures) thanks to a change to its MPP rules regarding corporate families. Specifically, SBA amended 13 C.F.R. § 125.9(e) to recognize that a mentor that is a parent or subsidiary of a corporate family may include other subsidiaries in the group that it plans to participate in the mentor-protégé arrangement. This participation includes not only assistance (e.g., management, BD, etc.) but also joint ventures. In other words, if a mentor has three subsidiaries and those entities are named in the MPA as providing assistance, the protégé may form a joint venture with any of those subsidiary firms and compete as a small business.
As SBA commented, "[t]he purpose of allowing subsidiary companies of a mentor to participate in the business development of a protégé firm and to form joint ventures to seek procurement opportunities with the protégé is to broaden the protégé's experience, not limit it." Simply put, SBA's amendment is a game changer for small businesses and mentors alike. Notably, SBA also clarified the mentor's three protégé limit, stating that the total includes "in the aggregate a parent company and all of its subsidiaries." In any event, SBA's rule on corporate families turbo charges the MPP, as it gives protégés more options for assistance and joint ventures, which will inevitably lead to greater success in federal contracting.
The MPP will continue to be one of SBA's sought after programs because of the development assistance that protégés receive from participating mentors. With SBA's regulatory amendment, protégés now have more ways to get valuable assistance from large mentors, including by forming joint ventures with other subsidiaries in the mentor's corporate family. And because SBA's amended regulation requires companies in the mentor's corporate family to be named in the MPA, current MPP participants will need to amend their MPAs (which requires SBA's prior approval) before forming a joint venture with a subsidiary in the mentor's corporate family. This is particularly important both because the SBA-approved MPA serves as the basis for SBA's exception to affiliation and because SBA size protests are a viable means to challenge awards to joint ventures.
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