Congress has authorized the SBA to create a mentor-protege program for all small businesses, not just socioeconomically disadvantaged companies.

This major change was included in the 2013 National Defense Authorization Act and signed into law by President Obama on January 3.  The 2013 NDAA also addresses the recent proliferation of agency mentor-protege programs (and, by extension, the SBA’s refusal to acknowledge an exception from affiliation for participants in most other agencies’ mentor-protege programs) by requiring most procuring agencies to obtain SBA approval for their mentor-protege programs.

The 2013 NDAA amends the Small Business Act to state that “[t]he [SBA] Administrator is empowered to establish a mentor-protege program for all small business concerns.”  The new mentor-protege program for small businesses “shall be identical to the mentor-protege program of the [SBA] for small business concerns that participate in the program under section 8(a) . . .  except that the Administrator may modify the program to the extent necessary given the types of small business concerns included as proteges.”

With these two sentences, Congress empowered the SBA to adopt a mentor-protege program for all small businesses.  Two questions now arise.  First, will the SBA adopt a  mentor-protege program for all small businesses?  And second, if such a mentor-protege program is adopted, what will it look like?

Call me a cynic for asking the first question, but I think that it needs to be addressed.  After all, in the Small Business Jobs Act of 2010, Congress similarly authorized the SBA to create mentor-protege programs for HUBZone companies, service-disabled veteran-owned small businesses, and women-owned small businesses.  Although the SBA later announced that it would, in fact, create mentor-protege programs for HUBZone, SDVOSB, and women-owned companies, the SBA has yet to introduce proposed regulations creating these programs.  Yes, things often work slowly in Washington, but if  the Jobs Act is any indication, the SBA is not exactly putting mentor-protege expansion on the fast track.

Assuming that the SBA does adopt mentor-protege programs for all small businesses, what will those mentor-protege programs look like?  Unlike the Jobs Act, the 2013 NDAA includes a provision allowing the SBA to deviate from the model used in the 8(a) mentor-protege program.  I would not be surprised if, for example, the SBA refused to allow a small business protege and its large mentor to joint venture as “small” for set-aside contracts, as is the case in the 8(a) program.  The SBA may well see this joint venturing capability as a special benefit of the 8(a) program and not wish to extend it to everyone.

The bottom line is that for small government contractors without socioeconomic designations, the mentor-protege effect of the 2013 NDAA remains to be seen.  The ball is in the SBA’s court.

The ball is also now in the SBA’s court when it comes to the many non-SBA mentor-protege programs, such as those run by the VA, DHS, NASA, and other agencies.  Unlike the case under prior law, the 2013 NDAA prohibits most federal agencies from operating mentor-protege programs, unless those programs are first approved by the SBA.

Within 270 days after the enactment of the 2013 NDAA, the SBA is to issue regulations governing mentor-protege programs of most federal agencies.  These regulations will, among other things, establish eligibility criteria, provide for any benefits that may accrue to a mentor as a result of its participation, and so on.

After the regulations are adopted, each federal agency with a mentor-protege program must submit a plan for its mentor-protege program to the SBA.  The SBA will only approve the plan if the mentor-protege program satisfies the new regulations and the SBA believes that the mentor-protege program will assist proteges in competing for federal contracts and subcontracts.

One year after the SBA issues its regulations, all unapproved mentor-protege programs currently in effect will become invalid.  The only agency-wide exception is the Department of Defense, which runs a mentor-protege program separately authorized by Congress.  The DoD is not required to obtain the SBA’s approval.  (SBA approval is also not required for mentoring assistance provided under a Small Business Innovation Research  Program or a Small Business Technology Transfer Program.)

Companies currently participating in non-SBA, non-DoD mentor-protege programs will not be affected by the change in the rules.  The 2013 NDAA provides that those companies will be able to continue their relationships under their current mentor-protege agreements until the expiration dates specified in those agreements.  At that point, of course, any new mentor-protege arrangement would be subject to the new rules.

The mentor-protege provisions of the 2013 NDAA appear to have largely flown under the radar thus far, but these new provisions could significantly alter the mentor-protege landscape–especially if all small businesses are permitted to access a SBA mentor-protege program.  It will be interesting to see what 2013 brings in the mentor-protege world.

A final, related note: I will be participating in a roundtable on mentor-protege programs on March 26-27 2013 in Midwest City Oklahoma, sponsored by the Mid-America Government Industry Coalition.  The new rules created by the 2013 NDAA are sure to be an important matter of discussion.  If you are in Oklahoma, or can make plans to be there in March, please join me and MAGIC for this forum.