The SBA is processing the typical “All Small” Mentor-Protege Program application in a lightning-fast eight days.
Speaking at the National 8(a) Association 2017 Small Business Conference, John Klein, the SBA’s Associate General Counsel for Procurement Law, confirmed that All Small mentor-protege agreements are being processed very quickly. I was in the audience this morning for Mr. Klein’s comments, which also included many other interesting nuggets on the SBA’s new All Small Mentor-Protege Program.
Mr. Klein’s comments included the following:
- Specificity of Mentor-Protege Agreements. When it comes to processing All Small mentor-protege agreements, the SBA is looking for specificity in terms of the assistance that the mentor will provide the protege. The SBA wants to see the sort of detail that can be tracked and evaluated to determine whether it was actually provided (and, if so, whether it was successful). Mr. Klein provided an example: a mentor committing to perform a certain type of training for a specific number of hours.
- Focus on Protege. The mentor-protege agreement should focus on the benefits that the arrangement will provide to the protege. The SBA knows that joint venturing is an important reason why mentors and proteges alike pursue mentor-protege arrangements (and joint venturing should be mentioned in the agreement if the parties will pursue it), but joint venturing can’t be the primary focus of a successful mentor-protege agreement.
- Equity Interest in Protege. Mr. Klein acknowledged that the regulations allow the mentor to obtain up to a 40% interest in the protege, but he cautioned small businesses to think carefully before giving up a large equity stake in the company. If the parties do agree to allow the mentor to take an equity interest, the mentor-protege agreement must demonstrate that doing so was beneficial to the protege. The equity interest cannot appear to primarily benefit the mentor. Although the mentor is not required to divest its equity interest upon the expiration of the mentor-protege agreement, the parties should be very careful that the equity interest doesn’t result in an affiliation once the mentor-protege agreement expires.
- Secondary NAICS Codes. Mr. Klein confirmed that a company looking to be mentored in a second NAICS code must demonstrate that it has previously done work in that NAICS code. The All Small Mentor-Protege Program allows a company to receive mentoring in a secondary NAICS code, but is not intended for a company that has outgrown its primary NAICS code and is merely search for any NAICS code in which it is still small.
- Second Protege. If a mentor wants a second (or third) concurrent protege, it is up to the mentor and protege–in the second or third application, if possible–to demonstrate that the additional protege is not a competitor of the first. Mr. Klein suggested that there are various ways to do this, such as showing that the second protege is in a different geographic area, industry, or niche than the first.
The All Small Mentor-Protege Program continues to draw a great deal of interest from large and small contractors alike. It’s very helpful to hear from SBA officials like Mr. Klein exactly what the SBA is looking for when it processes applications. And of course, it’s wonderful that processing is currently going so quickly. Here’s hoping that’s one contracting trend that continues.