SBA’s “Universal” Small Business Mentor-Protégé Program’s Impact On Other Agencies

With the finalization of the new SBA Small Business Mentor Protégé Program, other agencies without statutorily-authorized mentor-protege programs must seek SBA approval of their mentor-protege programs within one year, if they wish those programs to continue.

In a final rule scheduled to be effective August 24, 2016, the SBA questioned the need for other agencies (except the Department of Defense) to continue to operate their own mentor-protege programs, but provided a road map for agencies to preserve their separate mentor-protege programs if they wish.

As we have discussed in detail on SmallGovCon, the new “universal” small business mentor-protégé program establishes a government-wide program open to all small businesses, consistent with the SBA’s mentor-protégé program for participants in SBA’s 8(a) Program. But the final rule doesn’t just add a new SBA mentor-protege program–it may also signal the end of many other Federal mentor-protege programs.

Under the final rule, a Federal department or agency can no longer operate its own mentor-protégé program, unless: 1) the agency submits a program plan to the SBA, and 2) receives the SBA Administrator’s approval of the plan within one year of the SBA’s mentor-protégé regulations finalization. The requirement for SBA approval does not apply to DoD, which has special statutory authority to operate its own mentor-protege program. However, the SBA approval requirement does apply to most other Federal mentor-protege programs, including those operated by the VA, NASA, DHS, State Department, and so on.

The SBA “received only a few comments” regarding the proposal to require most agencies to obtain SBA approval to continue independent mentor-protege programs. These commenters “agreed with the statutory provisions in questioning the utility of other Federal mentor-protege programs” now that the SBA has established a mentor-protege program open to all small businesses. However, commenters raised two specific concerns about the potential phase-out of other agencies’ mentor-protege programs: 1) Would the new regulations be a disincentive for mentors to utilize their protégés as subcontractors? And, 2) would the SBA have the necessary resources to handle mentor-protégé applications for the entire government?

Many of the other agency-specific mentor-protégé programs incentivize mentors to utilize their protégés as subcontractors. For example, some agencies provide additional evaluation points to a large business submitting an offer on an unrestricted procurement where the large business is using its protege as its subcontractor. Other agencies give a large prime contractor additional credit toward its subcontracting plan goals where the large prime contractor uses its protege as a subcontractor.

The SBA acknowledged that the new small business mentor-protege program “assume[s] more of a prime contractor role for proteges, but would also encourage subcontracts from mentors to proteges as part of the developmental assistance that proteges receive from their mentors.” The SBA declined to adopt specific subcontracting incentives as part of its final rule, but will allow individual procuring agencies the flexibility to do so. The SBA writes:

SBA believes that it is up to individual procuring agencies whether to provide subcontracting incentives for any specific procurement, SBA also believes that these incentives should be authorized and used, where appropriate. As such, this final rule identifies subcontracting incentives as a possible benefit to be provided by procuring activities in appropriate circumstances. The final rule authorizes procuring activities to provide incentives in the contract evaluation process to a firm that will provide significant subcontracting work to its SBA-approved protégé firm.

With respect to the processing of mentor-protege applications, the SBA writes that it is “working to adequately process mentor-protege applications,” but if it is unable to handle the volume of applications and agreements, the SBA may institute “open” and “closed” periods wherein the SBA would only accept mentor-protégé applications in the “open” periods. Since the SBA itself is unable to predict whether it will have the resources to process mentor-protege applications year-round, other agencies will have to decide for themselves whether this uncertainty is a reason to maintain separate mentor-protege programs.

The government’s mentor-protege programs have been in a state of flux since early 2013, when Congress first directed the SBA to adopt rules governing other agencies’ mentor-protege programs. In 2017, we should finally get some long-awaited clarity as to whether other agencies’ mentor-protege programs will continue.