June 2013 Newsletter: EIR News: Butzel Long: Federal Mentor-Protege Programs

Federal Mentor-Protégé Programs

Participating in a federal mentor-protégé program can be one of the best ways for a small business to learn new skills and improve its competitive standing for government contracts. Mentors may benefit, too, by gaining socioeconomic and small business credit with procuring agencies, and in the case of the SBA mentor-protégé program, also by obtaining the ability to compete, together with protégés, as a joint venture on small business and 8(a) set-aside contracts.

Mentor-Protégé Agreements

Every federal mentor-protégé program requires the protégé and its mentor to execute a formal mentor-protégé agreement, setting forth the types of assistance the mentor will provide, benchmarks to ensure that assistance is provided, and so on. The SBA mentor-protégé program, thanks in part to new 8(a) regulations adopted in 2011, is particularly strict in the types of documentation it requires.

You may wish to consider pursuing contracts through compliant mentor-protégé agreements for:

• SBA 8(a) Mentor-Protégé Program
• Department of Defense (DoD) Mentor-Protégé Program
• Department of Veterans Affairs (VA) Mentor-Protégé Program
• Department of Homeland Security (DHS) Mentor-Protégé Program
• Department of Energy (DOE) Mentor-Protégé Program
• NASA Mentor-Protégé Program
• USAID Mentor-Protégé Program
• Department of the Treasury Mentor-Protégé Program
• Department of State Mentor-Protégé Program
• Mentor-Protégé Compliance and Participation

We shall explore here the Small Business Administration’s 8(a) programs, to provide you with some insight into how these programs operate.

Section 8(a) Development Programs

Mentor-Protégé Program for Disadvantaged Firms

The SBA's Mentor-Protégé program enhances the capability of 8(a) participants to compete more successfully for federal government contracts. The program encourages private-sector relationships and expands SBA’s efforts to identify and respond to the developmental needs of 8(a) clients.

This mentoring program is offered under SBA’s 8(a) Business Development program serving disadvantaged firms. SBA’s 8(a) program, named for a section of the Small Business Act, is a business development initiative that helps socially and economically disadvantaged Americans gain access to economic opportunity. The program provides an avenue for disadvantaged Americans to achieve entrepreneurial success and contribute to the strength and vigor of our economy.

As a small business owner, you can join the Mentor-Protégé Program as either the mentor or the protégé. The SBA Mentor-Protégé Program is designed to encourage approved mentors to provide various forms of assistance to eligible 8(a) participants as protégés. Below will highlight some of the benefits of the program.

Benefits of SBA’s Mentor-Protégé program

The SBA's Mentor-Protégé Program is great way for both mentor and protégé to become more successful and grow as a small business.

Under SBA’s Mentor-Protégé program, protégés can gain the following benefits:

• Technical and management assistance: The mentor’s expertise, resources, and capabilities are made available to the protégé.
• Prime contracting: Mentors can enter into joint-venture arrangements with protégés to compete for government contracts.
• Financial assistance in the form of equity or loans: Mentors can own equity interest of up to 40% in a protégé firm to help it raise capital.
• Qualification for other SBA programs: A protégé can obtain other forms of SBA assistance as the result of its good standing in the Mentor-Protégé program.

Eligibility and How to Enter the Mentor-Protégé Program

What are the requirements to become a protégé?

The protégé must meet the following requirements to participate in the program:

• The business must be in the developmental stage of the 8(a) Business Development program
• Have never received an 8(a) contract
• Have a size of less than half the size standard for a small business based on its primary SIC code
• It must be in good standing in the 8(a) Business Development program and be current with all reporting requirements

Protégés have only one mentor at a time.

What are the requirements to become a mentor?

The mentor can be a business that has graduated from the 8(a) Business Development program, a firm in the transitional stage of the program or a small or large business. A mentor must have the capability to assist the protégé and must make a commitment for at least one year. In addition, it must demonstrate the following:

• That it enjoys favorable financial health, including profitability for at least the last two years,
• That it is a federal contractor in good standing, and
• That it can provide valuable support to a protégé through lessons learned and practical experience gained from the 8(a) BD program, or through its general knowledge of government contracting.

Generally, a mentor will not have more than one protégé at a time without SBA authorization.

How does a firm enter the program?

Mentor and protégé firms enter into an SBA-approved written agreement outlining the protégé’s needs and describing the assistance the mentor has committed to providing. The protégé’s servicing district office evaluates the agreement according to the provisions contained in a specified set of parameters. SBA conducts annual reviews to determine the success of the mentor-protégé relationship.

Qualified 8(a) participants may apply to be considered as a protégé or mentor with the SBA District Office where it is registered. To apply for the program, contact your SBA District Office.

What if I do not qualify for the Mentor-Protégé Program?

The SBA has a number of other programs and services available. These include training and educational programs, advisory services, publications, financial programs and contract assistance. The agency also offers specialized development programs for women business owners, veterans, and historically underutilized business zone (HUBZone).

Annual Evaluation of the Mentor-Protégé Relationship

• In its annual business plan update, the protege must report to SBA for the protégé’s preceding program year: All technical and/or management assistance provided by the mentor to the protégé; All loans to and/or equity investments made by the mentor in the protégé: All subcontracts awarded to the protégé by the mentor, and the value of each subcontract;
• All federal contracts awarded to the mentor-protégé relationship as a joint venture (designating each as an 8(a), small business set aside, or unrestricted procurement), the value of each contract, and the percentage of the contract performed and the percentage of revenue accruing to each party in the joint venture; and
• A narrative describing the success such assistance has had in addressing the developmental needs of the protégé and addressing any problems encountered.
• The protégé must annually certify to SBA whether there has been any change in the terms of the Agreement.
• The mentor must annually certify to favorable financial health and good character.
• SBA will review the protégé’s report on the mentor-protégé relationship as part of its annual review of the firm's business plan pursuant to Sec. 124.403. SBA may decide not to approve continuation of the agreement if it finds that the mentor has not provided the assistance set forth in the Mentor-Protégé Agreement or that the assistance has not resulted in any material benefits to the protégé.

If you would like assistance applying for a program or more information, please contract Eric J. Flessland at Butzel Long at 313-983-6901.