OHA Confirms That a Size Protest Cannot Challenge a Mentor-Protégé Agreement

Currently, the only way that a large business can ever become a prime contractor on a small business set aside contract is to have an SBA-approved mentor-protégé agreement and to form a compliant joint venture with its protégé.

Does that mean that competitors can use the size protest process to allege that the mentor-protégé agreement is somehow deficient? Not according to a recent SBA Office of Hearings and Appeals decision.

In Sevenson Environmental Services, Inc., a mentor-protégé joint venture called (the alphabet soup friendly) HGL-APTIM, LLC–consisting of the protégé HydroGeoLogic, Inc. and its SBA-approved mentor APTIM Federal Services–had won the small business set-aside contract.

Sevenson Environmental Services, a competitor, had protested the joint venture’s size and lost. It appealed the decision for several reasons, but the most important was that it said that the Area Office failed to adequately consider the argument that the joint venture members had an improper motive to enter into the mentor-protégé relationship and had concealed “the true intent” of the mentor-protégé agreement: to avoid the SBA’s size rules.

Quick aside: Being able to qualify as a small business joint venture despite one of the members being a large business is one of the few perks of the All Small Mentor-Protégé Program for mentors. It’s the carrot that entices them to be a part of it. How can avoiding the size rules be an improper motive when its expressly allowed by the program?

OHA’s opinion didn’t reach the discussion of improper motive. It didn’t have to.

The joint venture responded to the appeal arguing that the allegation was not a proper size allegation and that the All Small Mentor-Protégé Program office is “solely responsible for monitoring mentor-protégé relationships.”

OHA agreed finding there were three reasons why the Area Office was correct to reject that argument. First, the protester had offered no evidence that the motives of the mentor and protégé were improper. Second, that it is the program office that determines the sufficiency of a mentor-protégé agreement. And third, that the Area Office has no authority to invalidate an existing mentor-protégé agreement, which, after all, is a contract.

OHA denied the appeal.

Sevenson is a good reminder that mentor-protégé agreements go through an approval process and the relationship is vetted and approved not only at the beginning but also throughout the relationship. For that reason, size investigations do not need to look at them because the SBA has already reviewed them and signed off.

Does that mean there’s no way to challenge them? Not necessarily. But it’s not at OHA.