SBA Merges Its Mentor-Protégé Programs and Makes Numerous Other Changes to the Small Business Program
By: Lori Lange
Published Date: October 22, 2020
Effective November 16, 2020, the Small Business Administration (SBA) will be merging the 8(a) Business Development Mentor-Protégé Program into the All Small Mentor-Protégé Program, resulting in numerous changes to the program that small businesses must be aware of. 85 FR 66146 (Oct. 16, 2020).
Originally established in 1998, the 8(a) Mentor-Protégé Program incentivizes mentor companies to provide various types of assistance to eligible 8(a) small business protégés to enhance the capabilities of the protégé and improve its ability to successfully compete for government contracts and subcontracts. As the 8(a) Mentor-Protégé Program was only available to 8(a) small businesses, in 2016, SBA established the All Small Mentor-Protégé program to permit any type of small business to similarly enter into mentor-protégé relationships.
Since the purposes and benefits of the two programs are identical, SBA determined that it was unnecessary to have two separate programs. Once the SBA final rule takes effect, existing SBA-approved mentor-protégé relationships under the 8(a) Mentor-Protégé Program will operate as SBA-approved mentor-protégé relationships under the All Small Mentor-Protégé Program. The existing 8(a) mentor-protégé relationships will have the same remaining time as they would have had under the 8(a) Mentor-Protégé Program had that program continued. Further, any mentor-protégé relationship approved under the 8(a) Mentor-Protégé Program will count as one of the two lifetime mentor-protégé relationships that a small business may have under the All Small Mentor-Protégé Program.
Requirements and Changes
The 8(a) Mentor-Protégé Program has a few requirements that the All Small Mentor-Protégé Program did not have. For example, the 8(a) Mentor-Protégé Program requires that 8(a) Participants seeking to be awarded an 8(a) contract as a joint venture submit the joint venture agreement to SBA for approval. This requirement, which is not in the All Small Mentor-Protégé Program, will now be eliminated for competitive 8(a) set-asides.
SBA’s final rule made a number of other changes, including:
- Eliminating the 3-in-2 rule for joint ventures. Currently, SBA’s regulations limit joint ventures to no more than three contracts over a two-year period. Under the final rule, the two-year duration for joint ventures will continue but the three contract limit will be eliminated.
- Requiring recertification of size and/or socioeconomic status for set-aside task orders under unrestricted multiple award contracts (MACs). The requirement will not apply to task orders under MACs that have limited pools of contractors based on their size and/or status. Nor will it apply to GSA’s Federal Supply Schedule Program.
- Permitting companies to rebut the presumption of affiliation based upon economic dependence. SBA may presume an identity of interest and thus affiliation based upon economic dependence if a concern derived 70% or more of its receipts from another company over the previous three fiscal years. This presumption may be rebutted by a showing that, despite the contractual relations with another company, the concern at issue is not solely dependent on that other company. This may be done, for example, where the concern has been in business for a short amount of time and has only been able to secure a limited number of contracts or where the contractual relations do not restrict the concern in question from selling the same type of products or services to another purchaser.
- Clarifying that affiliation may be found under the newly organized concern rule where both former and current officers, directors, principal stockholders, managing members, or key employees of one concern organize a new concern in the same or related industry or field of operation, and serve as the new concern’s officers, directors, principal stockholders, managing members, or key employees.
- Adding a provision that a small business joint venture may be awarded a contract requiring a facility security clearance if either the joint venture itself or the individual joint venture partner(s) that will perform the security work has a facility security clearance. Where a facility clearance is required to perform the primary and vital requirements of the contract, the lead small business joint venture partner must have a facility security clearance. If the security work is merely ancillary to the principal purpose of the contract, only the joint venture partner that will perform that work has to have the facility security clearance. This change was made to address concerns that some procuring agencies were not awarding contracts to joint ventures unless the joint venture itself has a facility security clearance even if all joint venture partners have a clearance.
- Adding language that prime contractors may rely on the self-certifications of their small business subcontractors’ status provided the prime contractors do not have a reason to doubt the self-certification.
- Clarifying that only the joint venture partner who has been acquired, is acquiring, or has merged with another company must recertify its size status in order for the joint venture to recertify. Recertification is required when the merger, sale, or acquisition occurs after the offer is submitted but prior to award. If the merger, sale, or acquisition occurs within 180 days of the offer and the joint venture cannot recertify that it is small, the joint venture is not eligible as a small business to receive the award. If the merger, sale, or acquisition occurs more than 180 days after, the contracting agency can award the contract to the joint venture but cannot count the award towards its small business goals.
- Revising the provision restricting an individual from using his/her disadvantaged status to qualify for the 8(a) program if an immediate family member is using or has used his/her disadvantaged status to qualify another concern for the 8(a) program. Under the final rule, the restriction would only apply if the concerns are connected by any common ownership or management; have a contractual relationship that would not conducted at arm’s length; share common facilities; or operate in the same primary NAICS code and the individual seeking to qualify the concern does not have management or technical experience in that primary NAICS code.
These are just some of the more significant changes. SBA made additional changes and clarifications. Given the breadth of the changes to the small business programs, small businesses who have questions about the impact of the changes on their operations should contact qualified counsel.