Where a mentor purchases another business entity that is also an SBA-approved mentor of one or more protégé small business concerns and the purchasing mentor commits to honoring the obligations under the seller's mentor-protégé agreement(s), that entity may have more than three protégés ( i.e., those of the purchased concern in addition to those of its own). Recognizing this issue, SBA’s Final Rule updates the mentor-protégé regulations with the following language: However, this limit of three protégés for the entire corporate family has created complications when a company that was a mentor in at least two existing mentor-protégé relationships purchases another company that is also a mentor in at least two other existing mentor-protégé relationships, which would cause the parties to exceed the maximum allowed (three) within a corporate family. If a parent of the mentor and a subsidiary of the mentor each are parties to separate mentor-protégé agreements, those separate agreements count as two of the three allowed for the entire corporate family at any one time. SBA applies this limitation to the mentor’s entire corporate family. SBA’s ASMPP regulations at 13 CFR § 125.9 have always prohibited a mentor from having more than three protégés at any one time. Updates to the All-Small Mentor-Protégé Program To Address Parent-Subsidiary Relationships.Ī. Expansion of the Three Allowed Mentor-Protégé Agreements if an Excess of Three Results from an Acquisition. Significant Amendments to SBA’s Mentor-Protégé and Joint Venture Regulationsġ. Below we address how the Final Rule made several updates to SBA’s mentor-protégé and joint venture regulations. Significantly, SBA’s rules regarding joint venture agreements must be closely followed in order for the parties to avoid disqualification based on noncompliance. ![]() ( i.e., § 124.513 (c)-(d) for the 8(a) Business Development Program, § 125.8(b)-(c) for small businesses, § 128.402(c)-(d) for Service-Disabled Veteran-Owned Small Business (“SDVOSB”), § 127.516(c)-(d) for Women-Owned Small Business (“WOSB”) Program, etc.) Two firms that are approved by SBA to be a mentor and protégé under SBA’s All-Small Mentor-Protégé Program (“ASMPP”) ( 13 CFR § 125.9) joint venture together as a small business for any Federal government prime contract or subcontract, provided that the protégé qualifies as small for the size standard corresponding to the NAICS code assigned to the procurement, and the joint venture agreement includes all of the provisions required by SBA’s applicable joint venture regulations.Two or more business concerns form a joint venture and each of the parties to the joint venture are small under the size standard corresponding to the NAICS code assigned to the contract or.The two primary exceptions to affiliation for joint ventures are applicable when: Therefore, it is very important for contractors to follow closely SBA’s regulations related to joint ventures to ensure that their joint venture is not inadvertently disqualified from the competition. If a joint venture does not have an applicable affiliation exception, and the aggregated receipts and/or employees of the joint venture partners collectively exceed the size standard associated with a particular procurement, the joint venture will not be eligible to perform the set-aside contract because it will not be a small business. This means that, unless an exception to affiliation applies, SBA will typically aggregate the receipts and/or employees of the joint venture partners when determining the size of the joint venture for all small business programs. Partners to a joint venture that perform a federal government contract or subcontract are considered affiliated under SBA’s regulations unless an exception applies. In this alert, we have summarized the Final Rule’s significant changes related to SBA’s mentor-protégé and joint venture regulations. ![]() Government contractors who compete for SBA’s set-aside contracts should closely review the Final Rule. The Final Rule makes several significant changes to SBA’s 8(a) Business Development Program, HUBZone program, affiliation rules, and various other SBA regulations. ![]() On May 30, 2023, the Small Business Administration’s (“SBA”) Final Rule on Ownership and Control and Contractual Assistance Requirements for the 8(a) Business Development Program (the “ Final Rule”) became effective.
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