SBA recently issued a proposed rule purportedly concerning the HUBZone Program and its regulations–but actually, covering a bevy of other discussions and proposed changes relating to size, SBA’s other small business socioeconomic programs, and even teaming. Specifically, regarding teaming, SBA revealed that it has apparently decided to take a deeper look into the immense success of mentor-protégé joint venture teaming. It is also requesting comments on this concern, as well as potential policy changes for joint venturing in SBA programs, more generally.
The proposed rule’s commentary says:
Specifically, SBA is seeking input on the perception that mentor-protégé joint ventures are winning an inordinate number of orders issued under small business multiple award contracts and seeks suggestions on how to incentivize a more equitable marketplace for individual small businesses who compete against mentor-protégé joint ventures for multiple award, small business contracts.
SBA is not off-base, by any means, with its concern that it can be difficult for small businesses to compete with large and small business mentor-protégé teams. But it is a bit surprising to hear this concern posited as an issue with the mentor-protégé teams–rather than the standard encouragement for more small businesses to take advantage of the mentor-protégé program and its joint venture opportunities themselves, which is what we are more used to.
SBA did elaborate a bit more on its concerns and why it has directed industry attention to potential policy changes in that regard. It said, “[t]here is also a perception that small businesses often enter joint ventures to seek multiple award contract awards because procuring agency past performance and experience requirements make it difficult for many small businesses to qualify for the awards individually.”
SBA also had some potential policy changes to propose for consideration, including whether or not it should eliminate the exception to affiliation for SBA-approved mentors and protégés for multiple award contract vehicles. SBA said:
Such a change would continue to allow joint ventures to seek and be awarded single award small business contracts, but would make joint ventures ineligible for multiple award contracts. If that would occur, SBA would expect the past performance and experience required for award of future multiple award contracts to be adjusted to allow individual small businesses to more easily qualify for award.
Another potential policy change SBA proposed for consideration would be to more strictly limit the term for which mentor-protégé joint ventures can receive the exception from affiliation–specifically, only allowing the affiliation exception “for contracts or orders that do not exceed five years.” In that regard, SBA said:
As SBA has previously stated, SBA believes that a joint venture should not be an on-going entity, but something with limited scope and limited duration. Thus, SBA has limited the duration that a joint venture can submit offers for the award of contracts to two years from the date of its first contract award. SBA is questioning whether a joint venture performing a contract or order that exceeds five years is truly a limited duration entity.
Now, because this is technically a HUBZone proposed rule, SBA did bring the HUBZone Program into the conversation a little bit. For qualified HUBZone mentor-protégé joint ventures, SBA is considering how to “clarify the applicability of the HUBZone price evaluation preference to” HUBZone mentor-protégé joint ventures. SBA reiterated what the HUBZone price preference does, stating:
Under the HUBZone price evaluation preference, where a procuring agency will award a contract on an unrestricted basis (i.e., full and open competition), the agency must deem the price offered by a certified HUBZone small business concern (including a HUBZone joint venture that complies with the requirements of § 126.616) to be lower than the price offered by an apparent successful large business offeror if the price offered by the certified HUBZone small business concern is not more than 10% higher than the price offered by the large business.
SBA then brought up its concern that it may not be “appropriate for a HUBZone mentor-protégé joint venture to benefit from the HUBZone price evaluation preference when the joint venture is already benefitting from its large business mentor’s lower cost structures and pricing.” And yet again, SBA doesn’t just come with a problem, it suggests a solution, stating:
SBA is considering whether to propose eliminating the HUBZone price evaluation preference’s applicability to all joint ventures formed under the Mentor-Protégé Program or, alternatively, to offers submitting by a HUBZone joint venture where the mentor exceeds the applicable size standard corresponding to the North American Industry Classification System (NAICS) code assigned to the contract.
SBA is also requesting comments and input in that regard.
Again, since this was a HUBZone proposed rule, some of these concerns and possible policy changes might sneak up on the unsuspecting government contractor reader (like it did me). So, please make sure to give any input to SBA if you feel strongly about any of these concerns, proposed options for solutions, or maybe other solutions SBA hasn’t thought of yet. SBA says that any of the policy changes described above are to be addressed in a separate proposed rulemaking after it has a chance to address and consider industry input, as well as any testimony from the tribal consultation meeting in that regard. Finally, make sure you keep your eyes open for any subsequent blogs on these topics, as they develop–because you know we will keep you posted on something this significant.
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