Does the SBA Mentor Protégé Approval Stand No Matter What? 13 CFR 124.520
Many solicitations require that the offeror must submit and SBA approved mentor protégé agreement at bid submission. Other federal government solicitations require the mentor protégé agreement to be approved before the award. In the recent case of Size Appeal of North Wind Site Services, LLC, SBA No. SIZ-5988 (2019), which was an 8(a) set aside procurement, the appellant argued somehow that the SBA Area office should have conducted a separate review and approval of the 8(a) mentor protégé agreement. OHA, however suggests that Area Offices are not required to forward all 8(a) eligibility allegations to the Office of Business Development for review.
In a 2018 federal government procurement, the agency Contracting Officer (CO) set aside the procurement entirely SBA 8(a) certified companies under the North American Industry Classification System (NAICS) code 562910, Remediation Services. The NAICS code 562910 size standard was for $20.5 million average annual receipts, but the Agency solicitation also indicated that the procurement fits within the exception for Environmental Remediation Services, which carries a 750-employee size standard. Proposals were due July 3, 2018. R8I was the apparent awardee.
On September 28, 2018, the disappointed offeror, filed an SBA small business size protest against R8I to the agency contracting officer. According to the size protest letter, there was an allegation that R8I “is a prime/subcontractor team between [MDS] and [Cabrera].” The facts of the case somehow show that a joint venture between the two companies was the central issue and not a teaming relationship as the size protest seems to have suggested. The protestor argued that the prime contractor relied too much on its “non-8(a) subcontractor,” in violation of the ostensible subcontractor rule, 13 CFR 121.103(h)(4). (Id.)
SBA Approved Mentor Protégé Relationship? Does the Approval Stand?
Under SBA regulations 13 CFR 121.103(h)(2), your company and the other party to a joint venture arrangement normally are affiliated with one another for any federal government contract performed by the joint venture entity. The regulations authorize an exception, however, for joint ventures between an 8(a) BD participant and its SBA-approved mentor. Specifically:
If there is an SBA approved mentor protégé agreement under 13 CFR 124.520, the two companies may form a qualified joint venture as a small business for any Federal government prime contract or subcontract, provided the protégé qualifies as small for the size standard corresponding to the NAICS code assigned to the procurement.
- Note that the regulation does not say that the mentor has to be a small business. Instead, the burden is on the protégé to be small.
What the regulation does say is that if a government procurement is to be awarded through the 8(a) BD program, SBA must approve the joint venture pursuant to 13 CFR 124.513.
If the SBA has already approved a mentor protégé agreement for a specific procurement, then why would the SBA have to reassess the joint venture?
The exception to the mentor protégé joint venture relationship required to avoid affiliation is when there has been an SBA approved mentor protégé agreement. Note that even if there was not an 8(a) procurement, then the mentor protégé and joint venture agreement must only meet the requirements for the joint venture regulations.
- You always want to read the solicitation carefully and make sure that the protégé is truly a small business under the specified NAICS code.
- Always remember that the analysis for SBA affiliation is different when there is a mentor and protégé involved as compared to having a named subcontractor or a teaming agreement.
If there is an approved SBA mentor protégé agreement, such approval will stand unless your can show that SBA size determination was seriously unreasonable or contained reversible factual and or legal errors. See also the affiliation and size requirements under13 C.F.R. § 121.103(h)(3)(iii).
The bottom line here is to not confuse affiliation when using a teaming agreement with potential affiliation when using a joint venture agreement. Also, when an offeror has an SBA approved mentor protégé agreement, and unless the agency justifies and expressly excludes joint venture relationships in the solicitation, then the SBA’s original approval should stand.
For help with SBA Mentor Protege disputes and small business size protest due to SBA affiliation rules, call the government contract lawyers at Watson & Associates, LLC. Get a FREE Initial Consultation. Call 1-866-601-5518 Toll-Free.