Part 6: Small Business Administration (SBA) Mentor-Protégé Program

BRYN MCNEIL: Welcome to the Cherry Bekaert podcast. My name is Bryn McNeil, and I am an audit partner in our GovCon Industry Group.

With me today is Eric Poppy, a senior manager in our GovCon Advisory Industry Group. Both Eric and I work with a number of 8(a) contractors and understand the intricacies of dealing with the federal government.

We are kicking off a deep dive into the SBA All Small Mentor-Protégé Program and joint ventures (JVs) for 8(a) government contractors. Today, we will provide an overview of the program and JVs, including goals, eligibility requirements, and the benefits for both the mentor and protégé.

This is the first podcast in this series. We will be producing future episodes highlighting compliance issues, including limitations on subcontracting and important elements for your JV agreement.

We will also cover accounting and financial reporting considerations, pricing, affiliation, and general best practices. All of our podcasts and thought leadership resources are posted on our website at cbh.com.

Eric, why don’t you kick things off with an overview of these programs?

ERIC POPPY: Thanks, Bryn. I am excited to discuss this program because we receive many questions regarding Mentor-Protégé Agreements and how affiliation works.

This is a great program that benefits both mentors and protégés as they work with the government, enter new agencies, and gain new past performance.

The SBA All Small Mentor-Protégé Program was originally for 8(a) companies only. In 2016, the program was established to extend these relationships to all small businesses.

Now, Veteran-Owned Small Businesses, Women-Owned Small Businesses, and HUBZone firms can participate. In October 2020, the various mentor-protégé programs were combined, and several changes were implemented.

For example, SBA approval is no longer needed for JVs. The program opens doors to new partners and serves as a great avenue for any small business, not just those in the 8(a) program.

From the federal government's perspective, this program increases industrial capacity. It expands the pool of companies that can assist the government with specific programs.

The SBA's goal is to develop strong protégé firms by providing real business development assistance. This helps small businesses develop more complex processes to compete and grow.

Ultimately, the goal is for these firms to successfully compete for government contracts after they outgrow their small business status.

The SBA will only approve an agreement if it determines the mentor's assistance will promote actual developmental gains for the protégé. Bryn, would you like to walk through the benefits and eligibility requirements?

BRYN MCNEIL: I am happy to do that. We will start with eligibility, as both the mentor and protégé have different considerations to address before entering an agreement.

On the mentor side, a firm must demonstrate a commitment and the ability to assist small business concerns. A mentor can be either a small or large business.

The mentor must show they are a reputable company with good character. They must also demonstrate the value they provide, including their experience and success in the Government Contracting marketplace.

Mentors may generally have one protégé at a time, though they can expand to as many as three. From a protégé standpoint, the firm must meet the relevant size standard.

Eligibility is based on the firm's primary NAICS code or a secondary NAICS code in which it has experience. This should reflect a logical business progression for the firm.

A protégé can typically only have one mentor at a time. However, the SBA may approve a second mentor if the relationship does not compete with or impede the first agreement.

ERIC POPPY: To add to that, we often see clients who want to set up multiple JVs to pursue a specific solicitation and expand into a new agency.

The government monitors these situations closely. They do not want multiple Mentor-Protégé Agreements for one company competing against each other for the same solicitation.

BRYN MCNEIL: I agree. From the protégé perspective, the program is designed to strengthen their competitive position and expand their technical depth.

Protégés can use their mentors to expand their business and demonstrate increased capabilities. This makes them more competitive during the proposal process.

ERIC POPPY: There are many benefits for mentors as well. It creates opportunities for future M&A activity and enhances a firm's reputation in the industry.

Additionally, it helps mentors meet small business subcontracting goals. It is a key part of the subcontracting plan submitted to the government.

Mentors also receive potential extra credit during evaluations for their outreach to diverse small businesses.

The government also benefits by meeting its small business reporting goals and ensuring a viable industrial supply base for future sourcing needs.

BRYN MCNEIL: Those are all excellent points. Eric, is there anything else you want to highlight regarding the program itself?

ERIC POPPY: There are many nuances within the All Small Mentor-Protégé Program. As mentioned, we will dive deeper into accounting, compliance, subcontracting rules, and annual SBA reporting in future episodes.

It is a great program, and we love to see companies participate because they truly see the benefits.

BRYN MCNEIL: I agree. We are going to wrap up for today, but we hope you will join us for our future podcasts on this program.

All episodes are posted at cbh.com. You can find prior podcasts and future recordings there, along with other resources.

If you have any questions, please reach out to us. We are happy to serve as a sounding board or resource for you. Thank you for joining us today.