SBA to Start Accepting Mentor-Protégé Applications

On Oct.1, 2016, the Small Business Administration (SBA) will begin accepting applications for the new All Small Mentor-Protégé Program. This program has been several years in the making and follows authorizations in the Small Business Jobs Act of 2010 and the National Defense Authorization Act of 2013, which allowed the SBA to create mentor-protégé programs for all small business programs.  Rather than create individual mentor-protégé programs for each small business program, such as women owned or service disabled veteran owned small businesses, the SBA has developed a single program for all small businesses that meet the eligibility criteria. The SBA finalized the regulation underlying this new program, 13 CFR 125.9, on July 25, 2016.  Previously only the 8(a) Disadvantaged Business program had a mentor-protégé program.  Subject to SBA approval, the program allows a small business concern (SBC) to partner with a large business concern qualifying mentor company to assist with the small business’s development.  Small businesses and their large business mentors that qualify for the new program will be eligible to bid on small business set-aside contracts as a joint venture, provided the small business qualifies for the award.  In other words, if a contract is set aside for a veteran-owned small business, a veteran-owned small business that meets the size standard for the contract may team up with its large business mentor to bid on and perform the contract. The review process for the mentor-protégé applications will be centralized through the SBA’s main office in Washington D.C. and only applications submitted online through certify.sba.gov will be accepted.  Applicants must first register with the System for Award Management (SAM) prior to applying for the program. The applications must include

• a mentor-protégé agreement (MPA), which outlines the goals of the relationship between the mentor and the protégé
• an outline how the mentor company will assist the protégé in achieving those goals, as well as a timeline for accomplishing the goals
• a description on how the SBA will measure or evaluate the protégé’s development

The MPA is generally for a three-year term, though the MPA may be extended for an additional three years if the parties can demonstrate that the mentor has provided the agreed assistance as set forth in the MPA and will continue to provide similar assistance. Protégé SBCs may apply to the program under the company's primary or secondary NAICS code, as long as the protégé qualifies as a small business under the NAICS code under which the application is made.  If the protégé chooses its secondary NAICS code it must specify that it is seeking business development assistance in that particular industry.  This is a self-certification process; however, if the protégé does not qualify as small under its primary NAICS code and applies under its secondary code, it must demonstrate to the SBA how having a mentor-protégé relationship under its secondary code will develop and expand the company’s current capabilities. The SBA will not approve an application for a secondary NAICS code if the protégé has no prior experience in that industry.  A protégé may have up to two mentors, though generally only one mentor will be permitted.  To obtain a second mentor, the protégé must establish that the second mentor will not compete or conflict with the goals outlined in the first MPA. Mentors may be businesses of any size (i.e., large) and must be in good standing to contract with the Government.  Mentors cannot own more than a 40% equity interest in its protégé firm.  Generally, mentors will only have one protégé, though the SBA may authorize a second protégé if the mentor can establish that the second relationship will not adversely affect the other protégé.  For example, the protégé companies cannot be competitors in the same industry.  A mentor cannot have more than three protégés under 13 CFR 124.520.  A protégé may also be a mentor if it can demonstrate to the SBA that the second agreement will not adversely affect the first relationship. As this is an entirely new program, the timeline for the application review process remains to be seen.  The SBA’s certify.sba.gov portal is also brand new and has not yet been tested by the public.  Given than the SBA has seen significant reductions in staffing during the past several years and that it generally takes several months, at minimum, to receive SBA approval for other issues, applicants should be prepared to be patient through the approval process. Although the SBA will not consider applications submitted prior to October 1, it may be prudent for those who wish to participate in the program to submit their applications as early as possible once the SBA begins accepting applications.