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MENTOR-PROTG PROGRAM:
WHAT IT IS, HOW TO USE IT TO YOUR ADVANTAGE,
AND RECENT DEVELOPMENTS
Presented By:
13 C.F.R. 124.520
Purpose: Enhance the capabilities of the protg, assist the protg with meeting the
goals established in its SBA-approved business plan, and to improve its ability to
successfully compete for contracts.
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WHAT IS THE MENTOR-PROTG PROGRAM?
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WHAT IS THE MENTOR-PROTG PROGRAM?
The SBA's Mentor-Protg Program is great way for both mentor and protg to
become more successful and grow as a small business. Under SBAs Mentor-Protg
program, protgs can gain the following benefits:
Prime contracting Mentors can enter into joint-venture arrangements with protgs
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 protg firm to help it raise capital.
Qualification for other SBA programs - A protg can obtain other forms of SBA
assistance as the result of its good standing in the Mentor-Protg program
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WHAT IS THE MENTOR-PROTG PROGRAM?
Provided you follow the regulations and structure your mentor protg relationship
correctly, no affiliation issues!!
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MENTOR PROTG PROGRAM ELIGIBILITY
WHO IS ELIGIBLE TO BE A MENTOR?
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MENTOR PROTG PROGRAM ELIGIBILITY
WHO IS ELIGIBLE TO BE A MENTOR?
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MENTOR PROTG PROGRAM ELIGIBILITY
WHO IS ELIGIBLE TO BE A PROTG?
(iii) Have a size that is less than half the size standard
corresponding to its primary NAICS code.
The mentor and protg firms must enter a written agreement setting forth an assessment of the
protg's needs and providing a detailed description and timeline for the delivery of the assistance the
mentor commits to provide to address those needs (e.g., management and/or technical assistance,
loans and/or equity investments, cooperation on joint venture projects, or subcontracts under prime
contracts being performed by the mentor). The mentor/protg agreement must:
(i) Address how the assistance to be provided through the agreement will help the protg firm
meet the goals established in its SBA-approved business plan;
(ii) Establish a single point of contact in the mentor concern who is responsible for managing and
implementing the mentor/protg agreement; and
(iii) Provide that the mentor will provide such assistance to the protg firm for at least one year.
The agreement must also provide that either the protg or the mentor may terminate the agreement
with 30 days advance notice to the other party to the mentor/protg relationship and to SBA.
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HOW DOES A FIRM ENTER THE PROGRAM?
STEP 2: EVALUATION OF WRITTEN AGREEMENT
After it is finished, the written agreement must be submitted to, and evaluated and
approved by, the AA/BD.
SBA determines that the agreement is merely a vehicle to enable the mentor to
receive 8(a) contracts.
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HOW DOES A FIRM ENTER THE PROGRAM?
STEP 2: EVALUATION OF WRITTEN AGREEMENT
WHAT IF YOUR BUSINESS IS NOT APPROVED FOR THE MENTOR PROTG PROGRAM?
The protg may revise the proposed mentor/protg agreement and provide
any additional information and documentation pertinent to overcoming the
reason(s) for the initial decline to its servicing district office.
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WHAT IF YOUR BUSINESS IS NOT APPROVED FOR THE
MENTOR PROTG PROGRAM?
APPEAL PROCESS
The AA/BD will issue a written decision within 45 calendar days of receipt of the
protg's request. The AA/BD may approve the mentor/protg agreement, deny it on
the same grounds as the original decision, or deny it on other grounds.
If denied, the AA/BD will explain why the mentor/protg agreement does not meet
the requirements of 124.520 and give specific reasons for the decline.
If the AA/BD declines the mentor/protg agreement solely on issues not raised in the
initial decline, the protg can ask for reconsideration as if it were an initial decline.
If SBA's final decision is to decline a specific mentor/protg agreement, the 8(a) firm
seeking to be a protg cannot attempt to enter another mentor/protg relationship
with the same mentor for a period of 60 calendar days from the date of the final
decision.
The 8(a) firm may, however, submit another proposed mentor/protg agreement with
a different proposed mentor at any time after the SBA's final decline decision.
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HOW DOES A FIRM ENTER THE PROGRAM?
STEP 3: CONTINUED MONITORING
In its annual business plan update required by 124.403(a,) the protg must report to SBA for
the protg's preceding program year:
(i) All technical and/or management assistance provided by the mentor to the protg;
(ii) All loans to and/or equity investments made by the mentor in the protg;
(iii) All subcontracts awarded to the protg by the mentor, and the value of each
subcontract;
(iv) All federal contracts awarded to the mentor/protg 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 to the joint venture; and
(v) A narrative describing the success such assistance has had in addressing the
developmental needs of the protg and addressing any problems encountered.
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HOW DOES A FIRM ENTER THE PROGRAM?
STEP 3: CONTINUED MONITORING
The protg must report the mentoring services it receives by category and hours.
The protg must annually certify to SBA whether there has been any change in the
terms of the agreement.
SBA will review the protg's report on the mentor/protg relationship as part of its
annual review of the firm's business plan pursuant to 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/protg agreement or that the assistance has
not resulted in any material benefits or developmental gains to the protg.
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HOW DOES A FIRM ENTER THE PROGRAM?
STEP 3: CONTINUED MONITORING
In addition, the SBA will also continue to monitor the mentor/protg relationship to
ensure that the purpose of the program is being fulfilled.
Where SBA determines that a mentor has not provided to the protg firm the
business development assistance set forth in its mentor/protg agreement, SBA will
notify the mentor of such determination and afford the mentor an opportunity to
respond.
The mentor must respond within 30 days of the notification, explaining why it has not
provided the agreed upon assistance and setting forth a definitive plan as to when it
will provide such assistance. If the mentor does not respond, it faces some serious
consequences.
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HOW DOES A FIRM ENTER THE PROGRAM?
STEP 3: CONTINUED MONITORING
If the mentor fails to respond, does not supply adequate reasons for its failure to provide the agreed
upon assistance, or does not set forth a definite plan to provide the assistance:
The firm will be ineligible to again act as a mentor for a period of two years from the date SBA
terminates the mentor/protg agreement; and
The SBA may recommend to the relevant procuring agency to issue a stop work order for each
Federal contract for which the mentor and protg are performing as a small business joint venture
pursuant to paragraph (d)(1) of this section in order to encourage the mentor to comply with its
mentor/protg agreement.
Where a protg firm is able to independently complete performance of any such contract, SBA
may also authorize a substitution of the protg firm for the joint venture.
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HOW DOES A FIRM ENTER THE PROGRAM?
STEP 3: CONTINUED MONITORING
SBA may consider a mentor's failure to comply with the terms and conditions of
an SBA-approved mentor/protg agreement as a basis for debarment on the
grounds, including but not limited to, that the mentor has not complied with the
terms of a public agreement under 2 CFR 180.800(b).
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ARE THERE OTHER MENTOR PROTG PROGRAMS?
In addition to the SBAs program, there are several agency specific mentor-protg
programs. Some are:
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ARE THERE OTHER MENTOR PROTG PROGRAMS?
Each of these agency specific programs has its own rules, its own benefits and drawbacks.
For example, with the exception of the DoD Program, most dont get you around the
affiliation issue. However, many are open to other types of small businesses, not just 8(a).
In addition to these agency specific programs, as I will discuss in the Recent Developments
section, the SBA may be developing mentor-protg programs for VOSB/SDVOSB, HUBZone,
WOSB/EDWOSB, etc. pursuant to the 2013 NDAA.
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RECENT DEVELOPMENTS
AFFILIATION
Competitor alleged that the mentor and protg were affiliated, and therefore, not
small.
SBA Area office found that there were ties between the mentor and the protg, but
found that they were not affiliated due to their mentor protg relationship. The SBA
Area office found that the mentor/protg relationship precluded a finding of
affiliation.
On appeal, SBA OHA disagreed. It found that SBA regulations do not establish a total
exception from affiliation for 8(a) mentors and protgs; rather, 13 C.F.R.
121.103(b)(6), states that [a]n 8(a) BD Participant is not affiliated with its mentor
solely because the protg firm receives assistance from the mentor under the
agreement. However, [a]ffiliation may be found for other reasons.
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RECENT DEVELOPMENTS
AFFILIATION
In Patriot, the principals of the companies were brothers, the protg had
subcontracted to the mentor twice, and the companies had engaged in four joint
ventures. It was also alleged that they shared the same address. Moreover, OHA
found that the companies appear to have freely shared their employees and that
such sharing went well beyond that required to perform the joint ventures
OHA found that the SBA area office had erred in finding that the mentor protg
relationship automatically precluded a finding of affiliation.
OHA remanded the case to the SBA for consideration of whether the extensive
sharing of employees between the two concerns, outside of the contracts the
approved joint ventures performed, was beyond the scope of assistance provided
under the mentor/protg agreement, and thus constituted a basis for finding
affiliation between the [mentor and protg] for other reasons.
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RECENT DEVELOPMENTS
AFFILIATION
The takeaway? This case makes it clear that OHA does not consider the
mentor-protg program a free pass.
If you are using the program correctly, it should shield you from a finding of
affiliation based on the ties formed as a part of the mentor/protg
relationshipbut it will not protect you from a finding of affiliation based on
things that would, independently, constitute an affiliation.
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RECENT DEVELOPMENTS
2013 NDAA
However, the SBA did not issue regulations to establish the programs.
In an effort to again prompt the SBA to enact more programs, Section 1641
of the 2013 Fiscal Year National Defense Authorization Act:
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RECENT DEVELOPMENTS
2013 NDAA
Common errors about the NDAA and what it said about the mentor/protg
program:
The NDAA does not REQUIRE the SBA to enact these programs; it merely
authorizes it.
Any programs the SBA establishes will likely be modeled on the 8(a)
program, but do not need to be identical.
The NDAA does not require the SBA to enact regulations relating to the new
mentor/protg programs, if any, within 270 days. The 270 day requirement
refers to the mentor/protg programs of other agencies
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RECENT DEVELOPMENTS
2013 NDAA
NDAA also likely to unify the mentor/protg requirements across the different
individual mentor/protg programs of individual agencies, as discussed above.
In effect, Congress has instructed the SBA to create uniform requirements for
other agencies mentor/protg programs. This should ensure consistency.
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Questions?
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Edward T. DeLisle, Esq.
Cohen Seglias Pallas Greenhall & Furman PC
30 S. 17th St., 19th Floor
Philadelphia, PA 19103
215.564.1700
edelisle@cohenseglias.com
www.cohenseglias.com
www.fedconblog.com
@ed_edelisle (Twitter)
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