All small businesses can now qualify for SBA’s mentor-protégé program.
A new change in federal rules could create a huge opportunity for small businesses interested in federal contracts.
The U.S. Small Business Administration will now make its mentor-protégé program available to all small businesses. It’s something that used to be open only to participants in the SBA’s 8(a) Business Development Program for socially and economically disadvantaged small businesses.
Thanks to the new rules, the SBA estimates that 2,000 small businesses could form mentor- protégé partnerships—and go on to land more than $2 billion in federal contracts.
Why Are Mentor-Protégé Partnerships Important?
When a small business and another company enter an official, SBA-sanctioned mentor-protégé arrangement, the “mentor” company will provide the small business with management assistance, training, loans, equity investment and other help.
The idea is to help small businesses increase their capacity for tackling bigger projects.
As a result of this partnership, mentors and protégés also have the ability to form joint ventures. Those joint ventures can then compete for any federal set-aside contracts the protégé small business would qualify for. The protégé company must perform at least 40 percent of the work under the contract.
The final rule change was published in the Federal Register in late July and took effect in late August. You can read it at www.bit.ly/2alDwph.
What Else Should Small Businesses Know?
The SBA’s Office of Business Development is creating a unit that will review proposals for mentor-protégé partnerships. Not only does the SBA have to approve a mentor-protégé agreement, it also has to OK any joint ventures between a mentor and a protégé.
When the SBA sought public comment on the rule, several people were concerned about the agency’s ability to process the volume of applications.
To give itself some breathing room, the SBA will have the power to schedule “open” and “closed” periods for applications. The agency might accept proposals only during certain times of the year.
Joint ventures also must be formalized in writing—something that wasn’t a requirement in the past.
However, mentor and protégé companies don’t necessarily have to create a separate legal entity such as an LLC for a joint venture. A joint venture does have to be listed as a unique entity (complete with its own DUNS number) when registering with the government’s System for Award Management. The protégé also must file annual reports with the SBA.
A mentor-protégé arrangement is designed to last three years, though it can be renewed for another three years. A small business can get permission to start mentor-protégé arrangements with two different mentors, so long as there’s no conflict or competition. Both those partnerships can be renewed for a second three-year term.
What Does This Mean for 8(a)?
The 8(a) mentor-protégé program will continue as a separate program for socioeconomically disadvantaged small businesses. Locally, Ken Surmeier with the SBA’s Kansas City District Office is a point of contact for companies interested in 8(a). You can reach him at email@example.com or (816) 426-4919.