Mentor-Protégé Joint Ventures: Too Much of a Good Thing?

Over the past few years, several large multiple award contract competitions have included requirements that appear to give competitive advantage to Mentor-Protégé Joint Ventures (MPJVs), particularly over solo small businesses. These contracts include VA T4NG2, Polaris, and VA IHT 2.0. The result is an expanding perception that MPJVs are securing a disproportionately high number of orders under small business multiple award contracts.

The main intent of the MPJV program is to enlist the help of large businesses to support burgeoning small businesses in their development as government contractors. The implication of this intent is that the mentor-protégé relationship is built to last for more than a single procurement. Anecdotal evidence indicates, however, that small businesses are forming mentor-protégé joint ventures to bid on specific multiple award contract competitions to meet those procurements’ past performance and experience requirements. This seems particularly to be the case in scorecard-based solicitations.

SBA’s Proposed Reforms

The SBA is taking notice of these impacts to the small business community and is asking for industry input on this hot policy topic. A recent proposed rule posted in the Federal Register on July 22nd, addresses the key items around MPJVs pursuing multiple award contracts. Specifically, SBA is considering two key ideas:

1. Eliminate the Exception to Affiliation: SBA is considering removing the exception to affiliation between SBA-approved mentors and protégés for these contract types. Removing this affiliation exception would make “most” MPJVs ineligible for multiple award contracts but still allow them to compete for single award contracts.

2. Time Limitations: An alternative SBA proposal involves limiting the affiliation exclusion for MPJVs to contracts not exceeding five years. SBA noted that this change would align better to MPJVs being limited in scope and duration.

Balancing Optimism With Caution

While these proposed rule changes seem positive on their face, uncertainties remain regarding how industry and buyer agencies will respond to this potential change in policy. These uncertainties include the following:

• Impacts to future buyer agency past performance and experience requirements aligning to individual small businesses’ ability to qualify and score adequately in these areas
• Differentiation between “maturity types” of MPJVs; e.g., no prior working relationship vs. demonstrated experience with the mentor, as the latter aligns more to SBA goals
• Discouraging large businesses from participating as mentors in the MPJV program if the incentive of leveraging a protégé’s small business status for pursuing long-term multiple award contracts is eliminated
• The ongoing concern that MPJV participation in large single award contract competitions would continue to preclude capable individual small businesses from bidding or being awarded
• Ongoing legal challenges if SBA attempts to arbitrarily institute affiliation rules for a popular and widely leveraged small business development program

What Small Businesses Need to Know

We applaud the SBA for recognizing the challenges that MPJV rules have placed on individual small businesses competing for government contracts and also for soliciting the input of industry on their proposed changes. We recommend that industry members review and understand these proposed ideas, as they could impact how an individual small business can more favorably position for bidding government contracts. Also, businesses already involved in MPJVs should closely monitor these developments as they could significantly impact their ability to participate in future competitions.

For more information on this SBA ruling and how to grow your business in federal contracting, please reach out to Blake Harvey at [email protected].