On July 22, 2024, the U.S. Small Business Administration (SBA) published a Notice of Tribal Consultations seeking public comments on potential changes to its mentor-protégé joint venture program, citing a “perception that mentor-protégé joint ventures are winning an inordinate number of orders issued under small business multiple-award contracts.” The title of the notice notwithstanding, this significant change would affect all businesses with a mentor-protégé agreement.

Let’s take a look at what the Mentor-Protégé Program is and what changes are under consideration.

What is the SBA’s Mentor-Protégé Program?

The SBA’s Mentor-Protégé Program is designed to provide small businesses (protégés) with the support and resources of larger, more experienced companies (mentors). The objective is to increase the capabilities and competitiveness of small businesses in the marketplace so they can achieve long-term stability. Mentors offer technical, management, financial assistance, and business development advice.

A key feature of the program is the ability for mentors and protégés to form joint ventures to bid on government contracts. This arrangement allows small businesses to leverage the expertise and resources of their mentors, increasing their chances of winning contracts they might not qualify for independently. It also allows mentors to submit proposals for projects set aside for small businesses. The mentor and protégé cannot be affiliated under SBA’s size affiliation rules found here.

What are the proposed changes to the Mentor-Protégé Program?

The SBA has raised concerns about the fairness of the marketplace for individual small businesses competing against joint ventures. The SBA is exploring two potential changes to address these concerns.

• Eliminating the exception to affiliation for multiple-award contracts: The SBA is considering eliminating the exception to affiliation between an SBA-approved mentor and its protégé for multiple-award contracts. While joint ventures could still pursue single-award small business contracts, they would be ineligible for multiple-award contracts. The rationale behind this proposal is to create a more equitable environment for individual small businesses.
• Limiting the duration of joint ventures: Another potential approach is allowing an exclusion from affiliation for a joint venture between a protégé firm and its mentor only for contracts or orders that do not exceed five years. Historically, the SBA has maintained that joint ventures should have a limited scope and duration. Currently, a joint venture can submit offers for contract awards for up to two years from its first contract award date. The SBA is questioning whether a joint venture performing a contract or order exceeding five years can rightfully be considered a limited duration entity.

What are the implications for small businesses and the marketplace?

The agency will accept comments through at least the end of the tribal consultation meetings on September 17, 2024. Any potential changes would not take effect for anywhere from several months to years, presuming the SBA currently has little to no contract data to support its “perception.”

The SBA’s proposed changes could have far-reaching implications for the small business community and the market as a whole. The Mentor-Protégé Program is popular, with many small businesses receiving invaluable support from larger mentor firms. Meanwhile, the program attracts large businesses who want to participate in set-aside contracts, particularly long-term multiple-award contracts. Limiting the eligibility of mentor-protégé joint ventures to compete for set-aside contracts could discourage the participation of large businesses.

As these changes are considered and potentially implemented, businesses must stay informed and adapt. To participate in the public comment period and attend consultation meetings.

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