SBA Expands Mentor-Protégé Program and Eliminates Populated JVs

On July 22, 2016, the U.S. Small Business Administration (SBA) published its much-anticipated final rule establishing a mentor-protégé program available to all small businesses, not just certain SBA-approved 8(a) contractors as is the case under the current program. The SBA’s new “universal” mentor-protégé program will be separate from, but very similar to, the SBA’s current 8(a) mentor-protégé program.

The principal benefit of the new “universal” mentor-protégé program is that “[a] protégé and mentor may joint venture as a small business for any government prime contract or subcontract, provided the protégé qualifies as small for the procurement.” Additionally, the new regulations state that “[s]uch a joint venture may seek any type of small business contract (i.e., small business set-aside, 8(a), HUBZone, SDVO, or WOSB) for which the protégé firm qualifies (e.g., a protégé firm that qualifies as a WOSB could seek a WOSB set-aside as a joint venture with its SBA-approved mentor).”

In addition to implementing the new “universal” mentor-protégé program, the SBA’s final rule eliminates populated joint ventures – both in the mentor-protégé context, specifically, and in the small business context in general. Under the current regulations, a joint venture can be either populated or unpopulated. A populated joint venture is a joint venture that employs its own workers and performs a contract using its own employees, whereas, in an unpopulated joint venture, the venturing members provide employees as subcontractors to the joint venture. While the new regulations eliminate populated joint ventures, the regulations state that a joint venture “may be in the form of a formal or informal partnership or exist as a separate limited liability company or other separate legal entity...”

The SBA’s new regulations have an effective date of August 24, 2016. Additionally, it recently was reported that the SBA would start accepting applications for the new “universal” mentor-protégé program on October 1, 2016. Bradley will continue to monitor this noteworthy development, which has potential implications and opportunities for our clients.