John Klein, deputy administrator of the U.S. Small Business Administration, said this week that in the SBA’s view a protégé may have the same mentor more than once, and that the SBA is working on regulatory language to make that clear.
This may not sound like a big deal, but I must confess I was rather shocked. Twelve years with the same mentor seems like an awful long time.
He said this during a talk at the National 8(a) Association’s 2023 National Small Business Conference in New Orleans—dressed in a lovely sequined Mardi Gras jacket, I might add.
Afterwards, I couldn’t get The Who out of my head: “Meet the new mentor. Same as the old mentor.”
Most government contractors know that the rule is a company can have no more than two mentors during its life. (We always tell potential protégés that they better get it right because you can’t afford to waste one.)
But, according to Mr. Klein, protégés have always been able to use both of their lifetime eligibilities on the same mentor. That means, because the program lasts up to six years, a protégé could potentially have the same mentor for as many as 12 years. What exactly a protégé can learn from a mentor in year 12 that it couldn’t learn in year six was left unsaid.
Again, apparently this is not a change in the rule but merely a clarification as to how SBA has always interpreted the rule. Nevertheless, broadly making this clear could lead to a few unintended negative consequences and unanswered questions.
First, could this actually result in more findings of affiliation between mentor and protégé? Though the Mentor-Protégé Program means that the SBA cannot find affiliation on the basis of assistance provided, one of the main forms of that assistance is joint venturing. Joint ventures are supposed to have a limited shelf life of two years not including the years that joint venture has remaining to perform on a contract. A mentor and protégé that have been together for 12 years could easily have six or more joint ventures. SBA rules say that when two companies joint venture together enough to create a “longstanding inter-relationship or contractual dependence” they will be generally affiliated. Is that enough to meet the longstanding or dependence rule? And/or is that rule eclipsed by the Mentor-Protégé affiliation exception? No clue.
Second, how does that second application work? Presumably the parties cannot simply say we like working together and want to keep doing so. A mentor-protégé agreement has to establish the needs that the mentor can assist with. If they simply submit the same agreement that got approved before, doesn’t that tacitly admit that the mentor didn’t actually help the first time? Or, if the parties intend on being together 12 years, do they need to hold some of the planned assistance in reserve for the back six?
Lastly, and most importantly, let’s hope that 12 years doesn’t become the norm. Powerful mentors could begin requiring a 12-year commitment from their protégés. That’s a significant commitment at the outset—hopefully, significant enough that mentors also will not want to commit themselves to a 12-year-relationship. But, to the extent that mentors have more bargaining power than their potential protégés, this gives them another outlet to exploit that imbalance.
That being said, I get where the SBA is coming from. In the era of $5 billion procurements like OASIS, it’s getting harder and harder for individual small businesses to compete. For those few who have a particularly good thing going with their mentor, it makes sense that the SBA would want to allow them to take full advantage of this asset.
And, we’re for that, so long as the tune doesn’t change to “meet the new boss, same as the old boss.”
SBA: Protégé May Have Same Mentor Twice was last modified: February 17th, 2023 by