SBA Government Contractor Regulations Mean Changes for Small Business

The Small Business Administration (SBA) last year issued proposed rules that could significantly alter the contracting experience for all small businesses in 2016 and beyond.

Specifically, the changes, made in the Small Business Government Contracting and National Defense Authorization Act of 2013 Amendments, will affect the “Mentor-Protege” program for government contractors.

Small Business Trends spoke by phone with Edward DeLisle, an attorney in Philadelphia, Pa., and a member of the Section of Public Contract Law of the American Bar Association, which helped draft a comment on the bill, to get the details on what these changes mean for small businesses moving forward.

SBA mentor-protege programSmall Business Trends: Before we discuss the changes represented by the amendments and what they mean for small business, could you first explain the purpose of the SBA Mentor-Protege program?

Edward DeLisle: The SBA Mentor-Protege program to allow small disadvantaged firms that are part of the government’s 8(a) Business Development Program, to partner with established companies for the purpose of increasing the small business’s ability to win government contracts.

(The 8(a) Program offers a broad scope of assistance to firms that are at least 51 percent owned and controlled by socially and economically disadvantaged individuals.)

Through the program, mentor businesses, which are typically larger, guide their protege, sharing advice the various aspects of running a business. The idea is to assist protege companies in being able to survive long-term.

Small Business Trends: Could you spell out in greater detail the benefits to the protege company in participating in this program?

Edward DeLisle: The two main advantages are business mentoring and business development. Smaller companies get the opportunity to learn from the mentor who provides institutional knowledge, including advice on how to bid for a job, how to win new contracts, manage employees, run crews, handle accounting — all the things that made the mentor company successful over the years.

Small Business Trends: In what ways does the mentor business benefit from the relationship?

Edward DeLisle: The federal government sets aside certain contracts solely for 8(a) companies to bid on. By becoming a mentor, a larger company can partner with the 8(a) company to gain access to those contracts.

Typically, when the government puts contracts out for bid, it’s an open competition in which any business can participate. If the contract is set aside for 8(a) companies, however, the pool of bidders is much smaller, preventing the large company from bidding.

Through the program, mentors can partner with proteges in a joint venture, to pursue opportunities they would not have access to otherwise. Also, by partnering with the larger company, proteges get to bid on jobs that are bigger than they could handle on their own.

It’s a symbiotic relationship that benefits both parties.

Small Business Trends: What is the process companies go through to set up a SBA mentor-protege relationship?

Edward DeLisle: The way it’s always worked, a company would apply to become 8(a) certified. Then, to advance his business interests, the business owner would seek out a larger company in the same industry that would agree to become a mentor.

The two companies would submit a business plan and mentor-protege agreement to the SBA, which then has to agree that the plan would benefit the protege. The SBA would bless the union, so to speak, and the relationship would proceed. The two companies could then find opportunities they could pursue together.

To illustrate, let’s say a general contractor certified as 8(a) wanted to bid on a project set aside just for 8(a) companies — the renovation of a government-owned building, for example.

The mentor and protege would form a joint venture, which the SBA has to approve, and then bid against other 8(a) certified companies for the contract.

Small Business Trends: Could you describe the changes outlined in the amendments?

Edward DeLisle: In February 2015, the SBA issued a proposed rule that would establish one government-wide mentor-protege program for all small businesses while continuing to operate the separate mentor-protege program available to participants in the 8(a) Business Development Program.

The proposed rule would expand the program to small businesses other than those in the 8(a) program and would allow all entities in SBA-approved mentor-protege relationships to seek opportunities, as joint venture partners, for which the protege entity is eligible.

The other businesses include those that are women-owned, service-disabled veteran-owned, HUBZone — and any other small business for that matter — enabling them to benefit from the same advantages experienced by 8(a) companies.

Small Business Trends: In your opinion, do these changes represent an improvement for small businesses or a step back?

Edward DeLisle: The changes represent a huge improvement for small companies because 8(a) companies have always benefitted from the Mentor-Protege program. The amendments expand that program to these other categories of businesses so that they, too, can benefit eventually.

Small Business Trends: What is the anticipated date for when the changes go into effect?

Edward DeLisle: Initially, it was determined the final rules would be issued by the end of the first quarter of 2016. Obviously, that time has come and gone. Now, they’re saying the final set will be issued around June or July of 2016.

Small Business Trends: What other thoughts or suggestions do you have for small businesses regarding the changes?

Edward DeLisle: If yours is one of the other types of businesses and you want to be included in the mentor-protege program, the most important thing is to understand what the rules are and be prepared to take advantage of them.

Find someone who can assist you in expanding your horizons as a small business. More of these relationships will be forming, and you want to participate in the program because your competitors will be.

I recommend that businesses contact their local SBA office or visit the SBA website, as a lot of information is available there as well.

For more information on the proposed rule changes, read “Small Business Contracting May Be Very Different in 2016,” a blog post written by DeLisle and a colleague that addresses this issue in greater detail.

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Paul Chaney Paul Chaney is a Staff Writer for Small Business Trends. He covers industry news, including interviews with executives and industry leaders about the products, services and trends affecting small businesses, drawing on his 20 years of marketing knowledge. Formerly, he was editor of Web Marketing Today and a contributing editor for Practical Ecommerce.

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