New Consolidated SBA Mentor/Protégé Rule Is in Effect - Three-in-Two Rule Eliminated

The Small Business Administration's (SBA) final rule consolidating the 8(a) Mentor/Protégé Program into the All-Small Mentor/Protégé Program is now in effect as of November 16, 2020. The rule, issued on October 16, 2020, makes various other changes to the rules related to affiliation and the 8(a) program.

Notably, the rule eliminates the "three" in the "Three-in-Two" rule, which previously limited joint ventures to performing three small business contracts in a two-year period. Companies that violated this rule ran the risk of the SBA finding the joint venture partners were affiliated under 13 CFR § 121.103.

Under the new rule, for affiliation purposes joint ventures operating within the SBA's programs will still be limited to a two-year term but will not be limited to a particular number of contracts it can bid and perform in that period. Additionally, joint ventures seeking 8(a) contracts no longer need to seek SBA approval prior to the award of a competitively bid 8(a) contract. SBA approval is still required under 13 CFR § 124.513(e) for joint ventures seeking 8(a) sole source contracts.

The goal of the consolidation of the mentor/protégé programs was to reduce redundancy and confusion between these two programs and lessen the administrative burden on the agency. Companies currently operating under or approved for the 8(a) Mentor/Protégé Program will continue to operate normally, with all details transferred to the All Small Program, except that the administration of the relationship will now be under the All Small Program office rather than the local 8(a) office.

The rule also clarifies 13 CFR § 124.109 related to changes of ownership for 8(a) companies owned by Alaska Native Corporations (ANC) and tribes. Under the new rule, ANCs or tribes who reorganize ownership of a participant entity by replacing or changing a wholly owned intermediary company between the ANC/tribe and the participant no longer need to seek approval from the SBA for a change of ownership.