Alert! SBA Proposes to Consolidate the All-Small and 8(a) Mentor/Protégé Programs

As many small business government contractors know, the SBA offers two mentor/protege programs: one reserved for 8(a) participants; the other, a universal program open to all small businesses—not just 8(a) companies.

Since the All-Small Mentor/Protege Program was rolled out in 2016, many have wondered why the SBA still runs two programs, instead of a single, consolidated program.

Fans of government efficiency, your cries are soon to be answered. Earlier today, the SBA issued a comprehensive proposed rule that, among other things, would consolidate the 8(a) Mentor/Protégé Program into the All-Small Mentor/Protégé Program.

To understand the rationale for consolidating these programs, it’s important to consider recent history. Owing to the success of the SBA’s 8(a) Mentor/Protégé Program, Congress authorized the SBA, in the Small Business Jobs Act of 2010, to implement separate mentor/protégé programs for SDVOSB, HUBZone firms, and WOSBs. In 2013, Congress further authorized the SBA to implement a mentor/protégé program benefitting small businesses.

In response, the SBA implemented a consolidated mentor/protégé program in 2016—the All-Small Mentor/Protégé Program, which allows any small business, regardless of socioeconomic designation, to act as a protégé.

Because the All-Small Mentor/Protégé Program has its roots in the 8(a) Mentor/Protégé Program, their purposes are identical: both aim to develop the capabilities of protégé firms, to improve their capability to compete for and successfully perform government and commercial contracts.

The programs also carry identical benefits: protégé firms get the identified business development assistance, and the mentor and protégé enjoy expanded opportunities for joint venture relationships and (some) immunization from affiliation and control concerns.

Given the similarities of the programs, it makes sense that the SBA would consolidate them. In fact, “SBA believes that having two separate mentor-protégé programs is unnecessary and causes needless confusion in the small business community.” In my anecdotal experience, the SBA’s belief is true: I often field calls from clients and prospective clients about the differences between the two programs, and whether they should apply for one over the other.

To eliminate this confusion—and to help ensure efficiency—the SBA proposes to merge the 8(a) Mentor/Protégé Program into the All-Small Mentor/Protégé Program. “[T]his proposed rule,” the SBA explains, “would eliminate a separate 8(a) BD Mentor-Protégé Program and continue to allow any 8(a) Participant to enter a mentor-protégé relationship through the All-Small Mentor-Protégé Program.”

As the proposed rule notes, the SBA will essentially roll the 8(a) Mentor/Protégé Program into the All-Small Mentor/Protégé Program. It makes clear, moreover, that 8(a) participants can apply for an approved mentor/protégé relationship under the All-Small Program.

One thing the proposed rule doesn’t address, at least to my eyes, is how this change will affect existing 8(a) mentor/protégé relationships. Will those relationships remain in effect until they conclude or are otherwise terminated? Or will existing 8(a) mentor/protégé relationships roll over into the All-Small Mentor/Protégé Program? Clarity from the SBA on this point would be helpful.

The SBA also proposes several other changes to the existing All-Small Mentor/Protégé Program. Among them:

  • The SBA seeks comment on whether it should exclude very large businesses (that is, businesses whose revenues exceed $100 million annually) from participating as mentors in the program. It is considering this option at the behest of “mid-size” companies, who can no longer qualify as small businesses but also can’t adequately compete against corporate behemoths.   
  • The SBA would promote the program to Puerto Rican businesses, by not only excluding Puerto Rican protégés from the maximum number of protégés a mentor might have at one time, but by also incentivizing mentors to subcontract work to Puerto Rican businesses.
  • The SBA intends to clarify when a protégé may seek a mentor/protégé relationship outside of its primary NAICS code. Though the SBA says it “intended that a firm could be a protégé in a secondary NAICS code for which it qualifies as a small business if it has done work previously in that secondary NAICS code,” it acknowledges that the current regulatory language is not clear.

All told, the SBA’s consolidation of the mentor/protégé programs is a significant change. But it’s important to note that the SBA’s proposed rule is just that—proposed. Comments on the SBA’s proposed rule are due before January 17, 2020.

In addition to consolidating the mentor/protégé program, the SBA has also proposed major revisions to other aspects of its regulations that, no doubt, will impact small business federal government contractors. We’ll have additional posts discussing those changes over the next several days.

If you have any questions about how the SBA’s proposed regulatory changes might affect your business, please give me a call.