In a climate where category management is picking up steam and requirements are getting larger and more complex, your next competitor may be a joint venture, backed by the past performance and qualifications of a large mentor. So how can small businesses take advantage of the new and potentially game-changing program permitting these structures? And how can small business advocates and Congress ensure the program evolves to best protect the interests of their constituents?
There was a lot of buzz about the SBA’s All Small Mentor Protege Program (ASMPP) even before it launched, and since it’s gone live, the buzz has grown to a roar. It’s natural that there would be this much excitement about such an impactful program, but what are the truly critical aspects a small business contractor should know and be taking advantage of? When my (former) office at SBA was launching the program, we knew that there would be significant interest in accessing the program’s benefits. In addition, we knew that as a new program, there would have to be adjustments and tweaks along the way. We also knew that in an environment where category management was being promoted and requirements were becoming larger and more complex, a joint venture (with a larger firm) under a mentor protege agreement would be an ideal tool for small businesses to remain competitive.
For small businesses, it is important to understand the ultimate objective of the ASMPP, learn how to leverage it, avoid pitfalls along the way, and “graduate” successfully. Similar to the 8(a) mentor protege program, the ASMPP is intended to develop smaller, more nascent firms entering the federal marketplace by fostering productive relationships with established firms. It’s imperative to remember the ASMPP is a business development program, and not a contracting program. Small businesses should beware of anybody that is only interested in pursuing set-aside contracts, and be aware that SBA will not approve an MPA if the sole objective is to pursue contracting opportunities.
To take advantage of the ASMPP, a small company will act as a protege under a Mentor Protege Agreement (MPA). When selecting a possible mentor, the protege must be careful to structure the MPA so that it clearly defines the benefits that will be received by the protege during the course of the agreement. Further, since a small firm can only have two mentors in its entire life, it is critical to tread carefully and choose wisely. We work with our clients to undertake a needs assessment and determine where gaps exist, how mentors can provide technical assistance to address those gaps, and which potential mentors are best aligned for such partnerships. Each MPA must have support in some, but not necessarily all, areas of technical assistance. These six areas identified by SBA are: 1) management and technical assistance; 2) financial assistance; 3) business development assistance; 4) contracting assistance; 5) international trade assistance; and 6) general and administrative assistance. Each of these areas should be analyzed and a detailed plan should be developed that identifies the needs, details how the needs will be met, outlines the time frame to deliver the assistance, and highlights the resources that will be dedicated by the mentor. The agreement itself is simple and in fact a template is available on SBA’s website, but picking the right mentor can be a challenge and getting a strong agreement in place takes time and effort.
Although at first glance, it can appear the protege is getting the bulk of the benefit of the program, mentors are definitely not left out in the cold. The biggest benefit received by the mentor is how it’s treated when it creates a joint venture under the MPA with the protege. The joint venture takes on the characteristics of the protege and allows the companies to jointly pursue small business set-aside contracts. The mentor can perform a substantial portion of the set-aside project (up to 60%). What many mentors neglect to understand or grasp though, especially if they are new to the program, is that the requirements regarding the creation of the joint venture entity are very restrictive and strictly reviewed and monitored. In essence, the protege has to be in control of the joint venture, and this gives many would-be mentors heartburn. Often times, newer firms find it difficult to explain these requirements to the would-be mentor and it can cause the relationship between the mentor and protege to sour. We assist our clients in navigating the joint venture relationship and work with attorneys to ensure a joint venture agreement is drafted in a manner that can prevail in case of a protest. And given that more and more joint ventures are competing in the marketplace, you can rest assured that at some point in time, your joint venture will be protested. So properly structuring and executing JV’s is a critical and valuable investment.
Now that we are more than two years into the program, it is time to assess impact and make improvements to the program for continued benefit to small businesses. We know that a significant number of small businesses have established an MPA with a larger firm. What is difficult to ascertain, though, is how the small businesses have benefited, and how much of the small business spend is ending up with firms that are, frankly, other than small.
These are important questions to answer in order to determine how best to adjust the program to meet original Congressional intent. The current administration has done an admirable job of processing MPA applications, tracking performance, and monitoring annual reports. What remains to be seen is how Congress will analyze the data and which adjustments it will make as a result.
We are confident that the program can achieve Congress’s intent and help small businesses remain competitive in today’s climate of complex and large contracts and category management. We look forward to helping advance the program and demonstrate its value to the long-term sustainability of the small business set-aside programs. Please come visit us at the Reservation Economic Summit (RES) in booth #133, in Las Vegas during the week of March 25 to learn more. We will be sharing mentor protege and joint venture guidelines and best practices with our visitors and hope to meet you there.