THE SBA’s NEW SMALL BUSINESS MENTOR-PROTÉGÉ PROGRAM Brad Reaves ReavesColey PLLC brad.reaves@reavescoley.com 757.410.8066

Small Business Mentor Protégé FINALLY! – On July 25, 2016 the SBA Issued the FINAL RULE expanding the Mentor Protégé Program across ALL Small Businesses Final Rule Published at 81 Fed. Reg. 142 https://www.federalregister.gov/articles/2016/07/25/2016-16399/small-business-mentor-protg-programs This FINAL Rule was effective August 24, 2016 Applies to 8(a) Mentor Protégé Agreements and Joint Venture Agreements (going forward) Applies to ALL Small Business, SDVOSB, WOSB/EDWOSB, and HUBZone Mentor Protégé Agreements and Joint Ventures (going forward)

Quick Background of Rule The Final Rule implements the Small Business Jobs Act of 2010, which directed SBA to expand the 8(a) Mentor Protégé Program to: SDVOSBs WOSBs/EDWOSBs; and HUBZones The Final Rule also implements provisions of the 2013 NDAA which required the SBA to further expand the Mentor Protégé Program to ALL Small Businesses Over 18 months since the February 5, 2015 Proposed Rule Hard to overstate the importance of these Changes

Small Business MP Expansion TWO MAJOR REASONS why the Mentor Protégé expansion is such a “big deal” for both Small Business and Large Business Government Contractors First: Small businesses of any type (NOT just 8(a)’s) can receive assistance from (and form Joint Ventures (JVs) with) Large Businesses to perform work on small business set-aside procurements for federal prime contracts AND subcontracts without affiliation concerns! Second: Large businesses can now have direct access to set-aside procurements by JV-ing with a small business (who qualifies for the set aside)

Current Exceptions to Affiliation An approved SBA 8(a) Protégé and its Mentor (can be a large business) are not considered to be affiliates when they form a SBA-approved JV and comply with other regulations. (13 CFR 121.103 (h)(3)(iii)) Approved protégé and its mentor under the DOD Mentor Protégé program (Mentor can be a large business) are not considered affiliates simply because of assistance provided under Mentor Protégé Agreement, but, importantly, currently, no exception for JV affiliation for ANY OTHER Mentor Protégé Programs exists in the regulations. (13 CFR 121.103(b)(6)) NEW - Two small business JV partners who are both small for the NAICS code applicable to the Contract (13 C.F.R. 121.103(h)(3)) NEW - Approved Mentor and its Protégé under the SBA’s expanded Mentor Protégé Program when they form a SBA-approved Joint Venture and comply with other regulations (13 C.F.R. 125.9)

SBA Regulations on Set-Aside JV’s Apart from the general regulations governing small business JVs, the SBA has specific regulations governing JV’s for Small Businesses (NEW), 8(a)’s, SDVOSBs, WOSBs/EDWOSBs, HUBZone’s Here are the specific regulations: 13 CFR 125.8 – Small Business JV 13 CFR 124.513 - 8(a) JV (requires SBA approval) 13 CFR 125.18 – SDVOSB JV 13 CFR 126.616 – HUBZone JV 13 CFR 127.506 – WOSB/EDWOSB JV

SBA Regulations on Set-Aside JV’s, cont. Extremely important to comply with JV Requirements for Specific Set-Aside Programs – otherwise, JV will be susceptible to a size or a status protest Additionally, under the NEW regulations (13 C.F.R. 125.8), there is a significant Certification of Compliance requirement for Mentor Protégé JVs: Prior to performance of any set aside contract by a Mentor Protégé JV, the small business partner to the JV MUST submit a written certification to the Contracting Officer AND to the SBA signed by both the Mentor and Protégé stating that the parties have entered into a JV Agreement that fully complies with the applicable regulations AND that the parties will meet the performance of work requirements

Performance of Work Requirement For any Small Business (or other set-aside category) JV, the small business MUST perform as least 40% of the work performed by the Joint Venture (this is NEW, previously this requirement only required to 8(a) Joint Ventures) The work performed by the small business (or other set-aside category) MUST be more than administrative or ministerial functions so that it gains substantive experience The amount of work done by the JV partners will be aggregated, and the work done by the small business (or other set-aside category) must be 40% of the total done by the partners In determining compliance, the work done by a Mentor and any “affiliate” of the Mentor at any subcontracting tier will be counted

THE SBA’s NEW SMALL BUSINESS MENTOR-PROTÉGÉ PROGRAM Brad Reaves ReavesColey PLLC brad.reaves@reavescoley.com 757.410.8066