My parents taught me that it’s not polite to say, “I told you so.”  Mom and Dad are big proponents of being polite, and their lessons (by and large) stuck.  For instance, even in this day and age of abbreviated text messages and quick emails written on handheld devices, I always begin and end every business email with a salutation, and end with “regards,” or something along those lines.  Unnecessary?  Perhaps.  But I like to think I am going the extra mile toward being polite.

Today, however, politeness is going to have to take a little hiatus, because I can’t resist saying, “I told you so.”  For more than a year, I have been warning small government contractors that assistance received from a mentor firm under any federal mentor-protege program other than the SBA 8(a) mentor-protege program or DoD mentor-protege program is probably not shielded from the SBA’s affiliation analysis.

Now, the SBA Office of Hearings and Appeals has confirmed that participating in the VA’s mentor-protege program does not offer any protection from affiliation.

Before we examine the particular SBA OHA decision at issue, it’s worth considering how we got here.  Prior to March 2011, the SBA’s affiliation rules provided an exception to affiliation for assistance provided by a mentor firm under a “federal mentor protege program.”  Understandably, most contractors (and their attorneys) read the regulation as providing an affiliation “shield” for any federally-sanctioned mentor-protege program.

But the SBA had other ideas.  In the preamble to an October 2009 proposed amendment to the affiliation regulations, the SBA stated that it had never intended to allow other agencies to authorize exceptions from affiliation.  Instead, the SBA stated that it would only recognize an exception to affiliation under one of two circumstances: (1) if the mentor-protege program was specifically authorized by statute (as opposed to the internal regulations of another agency); or (2) if the mentor-protege program was formally approved by the SBA pursuant to a process spelled out in the size regulations.

The SBA’s final rule, putting in place the changes first proposed in October 2009, was adopted in March 2011.  That’s when I began warning small government contractors about the apparent risks of participating in most federal mentor-protege programs.  Until now, though, there have not been any SBA OHA decisions confirming my position.

No more.  In Size Appeal of J.R. Conkley & Assocs., Inc., SBA No. SIZ-5326 (2012), the VA issued a SDVOSB set-aside for construction at the Las Vegas VA Medical Center.  After the VA identified R.E.M. Engineering Co., Inc. as the apparent successful offeror, a competitor filed a SBA size protest, alleging that R.E.M. was ineligible due to affiliation with Swinerton Builders, a large company.  In defense, R.E.M. argued, in part, that it and Swinteron were parties to a VA-approved mentor-protege agreement, and exempt from affiliation on the basis of assistance provided under that agreement.

SBA OHA rejected this argument.  It wrote that participants in a mentor-protege program are only entitled to an exception from affiliation under the limited bases described in the revised regulations.

Here, R.E.M. was not an 8(a) firm, so the exception for the 8(a) mentor-protege program did not apply.  As for the other potential bases of an exception from affiliation, SBA OHA Judge Christopher Holleman wrote, “I find no evidence that the VA-Mentor-Protege Program has qualified for either the statutory or the regulatory exception, and R.E.M. has not cited any statutory or regulatory provision to that effect.”  Judge Holleman concluded that “the VA mentor-protege agreement did not shield R.E.M. from affiliation analysis.”

Fortunately for R.E.M., even though SBA OHA found that the assistance R.E.M. had received from Swinerton under the VA mentor-protege agreement could be used to find affiliation, the specific assistance in this case did not rise to the level of creating affiliation.  SBA OHA ultimately found that R.E.M. and Swinerton were not affiliates.  Because it appeared that R.E.M. had been relying on the VA mentor-protege agreement as an affiliation shield, R.E.M. dodged a bullet with this ruling.

So, where does the J.R. Conkley & Associates SBA size appeal leave us?  In short, SBA OHA has confirmed that assistance provided by a mentor under a federal mentor-protege program may be used by the SBA in an affiliation analysis unless the particular mentor-protege program in question meets one of the requirements set forth in the March 2011 SBA size regulation.  To the best of my knowledge, to date, only two federal mentor-protege programs qualify for the exception from affiliation: the SBA 8(a) mentor-protege program (which, of course, is approved by the SBA), and the DoD mentor-protege program, which is statutorily based.

As for the many other federal mentor-protege programs out there–VA, NASA, State, DHS, and so on–be very, very careful.  Until the SBA says otherwise, you should assume that any assistance you receive from am mentor under one of those other programs may be used by the SBA in an affiliation analysis.  Of course, if you took my advice to heart, and treated those other mentor-protege programs with kid gloves, you can now tell your colleagues, “I told you so.”