This is the first of a two-part blog series where we will tackle small business joint ventures and the SBA Mentor-Protégé Program. In this blog, we will discuss the SBA Mentor-Protégé Program.
What Does the SBA Have to say About Joint Ventures?
A joint venture is a business entity created by 2 or more businesses to bid on and perform work through their combined efforts, skill, or knowledge. For small business joint ventures, the SBA (Small Business Administration) requires the joint venture to be a separate legal entity that is “unpopulated”, which means the joint venture will not employ the direct employees that will perform the work under the contract; however, the joint venture can have employees that execute the administrative functions of the joint venture.
Additionally, per the SBA, the joint venture must be separately registered in SAM (System for Award Management) and assigned its own DUNS and CAGE number, with the individual partners listed as the owners.
What is the SBA Mentor-Protégé Program?
The SBA Mentor-Protégé Program is a program that provides small businesses (the “protégé”) the opportunity to gain capacity and win government contracts by partnering with experienced government contractors (the “mentor”). The program allows protégés to receive valuable business advice from their mentors in several areas such as guidance on business systems, federal contract procurement process, administrative assistance, and more.
So long as the protégé qualifies as a small business, a mentor and protégé can form a joint venture as a small business for any small business contract (including any type of set-aside contract, so long as the protégé qualifies). To qualify as a protégé, a business must be a small business (according to a business’ NAICS code) with industry experience, must be for profit, and have a proposed mentor applying for the program. To qualify as a mentor, a business must:
- Be for profit.
- Be able to responsibly assist the protégé.
- Provide value to the protégé due to lessons learned and practical experience gained through government contracting.
- Be absent from the federal list of debarred or suspended contractors.
- Possess good character as a company.
How can a Mentor and Protégé bid as a Joint Venture?
For a mentor and protégé to bid on federal contracts as a joint venture, the SBA must approve the Mentor-Protégé agreement. For the SBA to approve the agreement, the SBA must be able to determine that the assistance provided by the mentor will promote real gains for the protégé and not just act as a means to receive federal small business set-aside contracts. The protégé and mentor also cannot be affiliated, meaning one party has the ability to control the other or a third party has the ability to control both.
The agreement can last up to six years once approved and if the initial agreement is for less than 6 years, it can be extended through mutual agreement and notification to SBA before it expires. The SBA says a protégé may have two mentors at the same time, but these relationships cannot conflict with each other, nor can they compete against each other.
How Long Does the Mentor-Protégé Relationship Have to Last?
The mentor-protégé relationship must be maintained for at least one year after the SBA approves the agreement and annual evaluations are required so the SBA can evaluate the performance of the relationship and any benefits provided to the protégé. If a protégé believes it is not receiving the promised assistance from its mentor, the protégé can request that SBA intervene on its behalf with the mentor.
Before a mentor and its protégé can submit an offer for a small business contract as a joint venture, an exclusion from affiliation must be received and the mentor-protégé agreement must be approved.
More information about SBA’s small business Mentor-Protégé program can be found in 13 CFR 125.9.
Redstone GCI is Here to Help
The SBA Mentor-Protégé Program can be useful for government contractors, but it can be tricky to understand. Redstone GCI can assist clients in navigating Mentor-Protégé agreements and understand the potential compliance risk associated. Redstone GCI works with contractors throughout the U.S. and internationally with understanding the Government’s expectations in applying SBA requirements.
Adam is a Senior Consultant with Redstone Government Consulting, Inc. based in our firm’s Huntsville office. Adam supports our government compliance group and his role includes production of pricing models for cost volume proposals, the preparation of complex incurred cost submissions, data modeling and analysis related to indirect rates, and unallowable cost testing. Adam works closely with our directors and managers in performing testing and assessments of DFARS Business Systems, specializing in the accounting system. He also works with other team members to assist clients with compliance requirements of the U.S. Government. Education Adam holds a B.S. degree in Economics from The University of Alabama with minors in Computing Technology & Applications and Management Communication.