United States: SBA Proposes Broad Expansion Of Mentor-Protégé Program

On February 5, 2015, the Small Business Administration ("SBA") issued a proposed rule that implements portions of the Fiscal Year 2013 National Defense Authorization Act pertaining to establishment of a mentor-protégé program available to all small businesses, instead of just certain SBA-approved 8(a) contractors as is the case under the current program. The SBA explains in its proposed rule that Service-Disabled Veteran-Owned Small Business ("SDVOSB"), HUBZone and woman-owned small business ("WOSB") companies will be included in the proposed "universal" mentor-protégé program and that "having five separate small business mentor-protégé programs could become confusing to the public and procuring agencies and hard to implement by SBA."

The new mentor-protégé program would permit, among other things, "a protégé [to] joint venture with its SBA-approved mentor and qualify as a small business for any Federal government contract or subcontract, provided the protégé qualifies as small for the size standard corresponding to the NAICS code assigned to the procurement." The new program would also allow mentor-protégé joint ventures to qualify as "small" for any socioeconomic contract for which the protégé is qualified. Thus, for instance, a joint venture between a WOSB protégé and its SBA-approved large business mentor would qualify for a WOSB set-aside contract.

The SBA is seeking comments from the public on a number of aspects of this proposed rule, including whether there should be a maximum of two mentors per protégé and whether the SBA should require all joint ventures in this program to be formed as separate legal entities. One issue that the SBA, acting in concert with other agencies, could stand to clarify in the final rule is what impact, if any, the new "universal" mentor-protégé program will have on the various agency-specific mentor-protégé programs, such as the Department of Veterans Affairs' mentor-protégé program. Public comments currently are due by April 6, 2015. We will continue to monitor this noteworthy development.

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