The SBA’s mentor-protégé program offers powerful benefits. To help ensure that only legitimate small businesses take advantage of the program, the SBA asks applicants a series of questions about potential affiliation between the prospective mentor and protégé.
But once the SBA signs off on a mentor-protégé agreement, that’s that. As the SBA Office of Hearings and Appeals recently confirmed, competitors cannot use the size protest process to challenge whether an SBA mentor-protégé agreement should have been approved in the first place.
OHA’s decision in Size Appeal of Sevenson Environmental Services, Inc., SBA No. SIZ-6087 (2021) involved a mentor-protégé agreement between HydroGeoLogic, Inc., a small business, as protégé, and APTIM Federal Services, a large business, as mentor. The mentor-protégé agreement specified that HGL’s primary NAICS code was 562910 (Environmental Remediation Services). However, the agreement stated that HGL sought mentoring under a secondary NAICS code, 541715 (Research and Development in the Physical, Engineering, and Life Sciences (except Nanotechnology and Biotechnology)).
The SBA approved the mentor-protégé agreement on May 29, 2019. HGL and APTIM subsequently formed a joint venture, HGL-APTIM JV, LLC.
In July 2020, the Corps of Engineers issued a solicitation seeking environmental remediation services at the Welsbach/General Gas Mantle Superfund Site in New Jersey. The solicitation was issued a small business set-aside under NAICS code 562910, with a corresponding 750-employee size standard.
HGL-APTIM JV submitted a proposal, and the Corps subsequently identified the joint venture as the apparent successful offeror. A competitor, Sevenson Environmental Services, Inc., then filed a size protest. Sevenson contended, in part, that the SBA should not have approved the mentor-protégé agreement between HGL and APTIM.
Sevenson noted that APTIM was the incumbent contractor for the remediation work, but was ineligible to bid as a prime because it was not a small business. Sevenson contended that HGL did not require the assistance of a mentor under NAICS code 562910 because HGL had “equal if not more” experience than APTIM under that NAICS code. In fact, Sevenson pointed out, “HGL has engaged APTIM as a subcontractor for other projects with NAICS code 562910.”
Sevenson argued that HGL and APTIM chose NAICS code 541715 for their mentor-protégé agreement to “circumvent SBA regulations.” In other words, Sevenson suggested, the SBA never would have approved the mentor-protégé agreement under NAICS code 562910, and should not be able to use the mentor-protégé agreement to pursue contracts under that NAICS code.
The SBA Area Office held that it did not have the authority to review the approval of a mentor-protégé agreement. The Area Office issued a size determination finding HGL-APTIM to be an eligible small business. Sevenson then appealed to OHA.
OHA wrote that the SBA Area Office cannot review “a charge that the [SBA Mentor-Protégé Office] should not have approved the MPA in the first place, or that the MPA itself is improper.” Such allegations “are not valid grounds for a size protest, as SBA regulations prohibit any finding of affiliation or control based on a [MPA].” It is “beyond the scope of an Area Office’s review” to inquire into the motives of a mentor and protégé in entering into a mentor-protégé agreement, and in any event, in this case, Sevenson’s arguments were merely “speculative.”
OHA denied Sevenson’s size appeal and affirmed the size determination holding HGL-APTIM to be an eligible small business.
If a competitor has concerns about whether a mentor-protégé agreement should have been approved, the competitor can raise those concerns informally with the SBA’s Mentor-Protégé Office. But as the Sevenson Environmental Services case demonstrates, a size protest is not a vehicle to challenge a competitor’s MPA.
One more note. There seems to be a relatively common misconception that once a mentor-protégé agreement is approved, the parties can only form joint ventures to pursue contracts designated with the same NAICS code set forth in the joint venture agreement. As Sevenson Environmental Services shows, however, that’s not the case. Once a mentor-protégé agreement is approved, the parties can avail themselves of the special joint venturing benefit to pursue contracts in any NAICS code–as long, of course, as the protégé qualifies for those contracts by size and socioeconomic status.
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