Mentor-Protege Agreements: Benefits for Big and Small.

• Author: Kampen, Rob

* During the last three fiscal years, the Defense Department awarded more than $77 billion to small businesses through set-asides under programs generally managed by the Small Business Administration. Consequently, large businesses are precluded from competing for these contracts.

But the SBA's All Small Mentor Protege Program offers opportunities for large businesses to mentor small businesses where the two entities may pursue these set-aside contracts together. The intent of the program is to encourage large businesses to work with small businesses to increase and expand the small firms' capabilities. In doing so, the large businesses may compete for this pool of previously inaccessible contracts.

While contract awards are the most sought-after prize, the program offers many other benefits for both mentor and protege.

The regulatory purpose of the program is to "enhance the capabilities of protege firms" and improve their "ability to successfully compete for federal contracts." That being said, a recent SBA report also recognized that the program is intended to benefit both mentors and proteges. This same report indicated that as of April 2019 there were 759 active mentor-protege agreements.

The real benefit of this program comes from the mentor and protege being able to enter a joint venture and compete for federal small business set-aside contracts without being found affiliated. While eligibility for these set-aside contracts usually requires a company to be small under SBA's size standards, one exception to this rule is when two firms are "approved by SBA to be a mentor and protege," according to the rule.

Qualification for this exception requires SBA's approval of the proposed mentor-protege agreement. Once the agreement is approved, the mentor and protege may form joint ventures to pursue small business opportunities without worrying about the size of the mentor. Equally beneficial is that the agreement itself is not the basis to find affiliation between the mentor and protege, as that would undermine the purpose of the program.

As one can deduce, mentors are usually large businesses and proteges are usually small businesses. While mentors can also be small businesses, the regulatory context infers that mentors are primarily large firms. As with most government programs, however, it is not so simple as mentors being large and proteges being small.

Each mentor must satisfy four SBA-mandated requirements. First, a mentor must be...