On Monday, July 25, the U.S. Small Business Administration (“SBA”) issued a Final Rule creating its long-anticipated mentor-protégé program. The Final Rule establishes a “universal” mentor-protégé program, modeled on an existing and current program limited to firms participating in its 8(a) business development program. The new program is “universal” and open to any qualifying small business, from run-of-the-mill small businesses to disadvantaged business entities such as Service-Disabled Veteran-Owned Small Businesses.
The program may be of interest to federal contractors on account of the role the SBA anticipates for businesses that are too large to receive federal awards set aside for small businesses. Under the Final Rule, mentor-protégé teams receive special benefits, including the ability to bid on small business set-asides as joint venture partners, and certain exemptions from the SBA’s affiliation rules to allow the mentor to both perform more work than would otherwise be permitted and take an equity stake in its protégé business that might otherwise disqualify the protégé. However, the Final Rule anticipates specific roles for both mentors and protégés under the program, so interested businesses should consider the prospective responsibilities before pursuing entry into the program. In particular, interested businesses should be mindful of the Final Rule’s expectation that small business protégés will perform substantive work and that mentors will provide meaningful assistance to the protégés’ long-term growth. Time will tell how effectively the SBA will police these expectations in approving joint venture agreements, but it is clear the program is designed against partnering with small business protégés simply to funnel work to large businesses.
The Final Rule is effective August 24, and the SBA has reserved the right to limit application processing for prospective mentor-protégé partnerships should interest prove overwhelming. Accordingly, interested businesses should immediately assess the value of pursuing a mentor-protégé partnership to be prepared to submit an application at the earliest possible time.