The SBA’s Mentor-Protégé Program offers a myriad of benefits to both Mentors and Protégés who participate in the Program. Small business Protégés benefit from the assistance provided by their SBA approved Mentor, which can include anything from guidance on how to find solicitations and make offers, to financial support in the form of loans or bonding. Mentors benefit because participation allows them to compete for and be awarded contracts in which they may not otherwise qualify for. In fact, SBA even provides a bare bones template for Mentor-Protégé Agreements, complete with 21 yes or no questions that every Mentor-Protégé Agreement must include. A “yes” answer to any of those questions requires the applicant to provide additional information demonstrating why this should not disqualify the Mentor and Protégé from working together. But have you ever stopped to consider the reasoning behind these questions? Likely not, if you have never had to check a “yes” answer. However, knowing the “why” behind these questions is information that every small business federal contractor could benefit from. I’m going to take you through these questions to demystify their application, which will allow you to quickly identify potential problems in the future.
When SBA reviews proposed Mentor-Protégé Agreements (MPA), it is always on the lookout for a few potential problems that could disqualify the Mentor and Protégé from the Program. In fact, some of the issues could even result in the Protégé no longer being considered small, and therefore ineligible for SBA’s small business contracting programs entirely. These “problems” are control, ownership, and affiliation. In addition, there are requirements that limit the number of Agreements both the Mentor and the Protégé are permitted to participate in, both concurrently and over time.
Questions A Though D
The first four questions ask whether the Mentor or the Protégé have another SBA approved MPA or an MPA through another program governed by another agency, but why? Well, first, Mentors and Protégés are limited in the number of Mentor-Protégé relationships that they may participate in. Mentors may participate in up to three Protégés at a time as long as the Mentor can prove that the additional relationships with Protégé(s) will not adversely affect the development of the other firm(s). 13 C.F.R. § 125.9(b)(3). This prohibits any of the Mentor’s Protégés from being competitors with each other. Protégés’ participation, on the other hand, is limited to formally working with only two Mentors in total for the lifetime of the business, and generally only one at a time. 13 C.F.R. § 125.9(c)(2). SBA will consider a Protégé’s request for a second simultaneous Mentor-Protégé relationship if the businesses can demonstrate that the second relationship will not compete or conflict with the first relationship.
Question E
Question E states, “Protégé and Mentor do ( ) agree to the assistance being provided through the agreement will help the protégé firm advance its goals as defined in its business plan.” SBA rules require Mentors to demonstrate that it is “capable of carrying out its responsibilities to assist the protégé firm under the proposed [MPA],” and that it “[c]an impart value to a protégé firm.” 13 C.F.R. § 125.9(b)(1). Essentially, Question E requires the Mentor and Protégé to confirm that the Mentor has the means and capability required to benefit the Protégé as laid out in the MPA. Note that you can’t say no on this one, so I don’t suggest trying to write in a “no” answer.
Questions F Through N and P
The largest portion of these questions, nine to be exact, focus on affiliation. I won’t go through the entire catalogue of the ways that affiliation may be found because that was recently done. (To learn more on affiliation, see our recent post about the basics of affiliation both in general and in depth.) For today’s purpose, it’s important to know that affiliation generally looks at control over the Protégé. It is a requirement of the Mentor Protégé Program that the small business Protégé not be controlled by the Mentor. This principle is based on the affiliation rules that apply to small business requirements. While an affirmative response to any of the questions in the Mentor-Protégé Agreement must include an explanation, the affiliation-related requirements are the ones that we see causing an issue most often. SBA wants to know that the Protégé not affiliated with the Mentor, thus making it vital to include satisfactory explanations.
Question O
Question O is not exactly a question, but rather a duty that the Mentor must agree to. One of the requirements of a Mentor is that it must possess good character and a favorable financial position. Therefore, if the initial term of the Mentor-Protégé Agreement is less than the six years permitted by SBA rules, the Mentor and Protégé may extend the term of the Agreement up to a cumulative total of six years. The MPA simply requires the Mentor to agree that, if extended, it will re-certify on an annual basis that it continues to possess good character and a favorable financial position.
Conclusion
SBA’s Mentor-Protégé Program is a popular and successful program that assists small business owners in a multitude of ways. Accordingly, SBA reported 1632 active Mentor-Protégé Agreements as of September 1, 2022, and that number is likely to continue growing. Understanding the questions discussed above will help you identify potential hurdles to participation in the Mentor-Protégé Program, and help to either avoid mistakes that could affect eligibility, or be prepared with knowledge of how to fight the negative presumptions of a “yes,” by knowing SBA’s intent behind the questions.
SBA’s Mentor Protégé Program Agreement can be found here.
Questions about the Mentor Protégé Program? Or need help with another government contracting legal issue? Email us.
Looking for the latest government contracting legal news? Sign up for our free monthly newsletter, and follow us on LinkedIn, Twitter and Facebook.