The Congressional Research Service has updated two reports that may be of interest to government contractors. The first report provides an overview of federal government Mentor-Protégé programs. The second report provides an overview of small business size standards and how the government calculates business size. While these reports are typically created to inform members of Congress as they engage in the legislative and policy-making process, they contain a lot of helpful and useful information that may be of interest to GTPAC clients.
Roadmap to Joint Venture agreements: legal and accounting considerations
Piliero Mazza and Baker Tilly recently gave a helpful webinar on Joint Venture Agreements. Joint ventures (JVs) can be a powerful tool to improve a government contractor’s odds of winning federal contracts. With the SBA’s Mentor Protégé Program facilitating JVs and large multiple award contracts making many firms form JVs, an understanding of how JVs work from a legal and accounting perspective is a must.
Watch the webinar on-demand at: JD Supra
SBA’s change to joint venture bank account rule is another trap for the unwary
If you are part of a joint venture between a small protege and its large mentor under the SBA’s Mentor-Protege Program, heads up: the SBA recently amended its list of mandatory requirements for joint venture agreements to cover what happens to funds leftover in the joint venture bank account at the end of a project.
Like the revised recordkeeping rules SmallGovCon discussed in an earlier post, the new required provision only applies to mentor-protege joint ventures pursuing small business set-aside contracts–not to JVs seeking 8(a), SDVOSB/VOSB, WOSB/EDWOSB or HUBZone work. Confusingly (and again, like the recordkeeping rules), SBA’s decision to change only the small business set-aside regulation, 13 C.F.R 125.8, means that the same joint venture agreement may not be valid for both small business set-aside contracts and socioeconomic contracts.
Continue reading at: SmallGovCon
Podcast: Teaming agreements, joint ventures, and mentor-protégé
It is common for two or more companies to work together to win and successfully perform federal government contracts. The relationship between those companies must be formally documented and agreed to in order to define roles and responsibilities and avoid future issues. The Contracting Officer Podcast recently held a podcast with Koprince Law on teaming agreements, joint ventures, and mentor-protégé arrangements.
You can listen to the podcast for free here:
SBA proposes combining 8(a) Mentor-Protégé Program with the All Small Mentor-Protégé Program
On November 8, 2019, the Small Business Administration published a proposed rule to combine the 8(a) Business Development (BD) Mentor-Protégé Program with the All Small Mentor-Protégé Program. 84 Fed. Reg. 60,846 (Nov. 8, 2019) . The far-reaching SBA proposal also includes changes to the mentor-protégé programs, changes affecting joint ventures, changes for certain details in the 8(a) Program, and new requirements for certain multiple-award contracts, among others. Comments on the proposed rule are due January 17, 2020.
Combining the 8(a) BD and All Small Mentor-Protégé Programs
Although the 8(a) Mentor-Protégé Program seems to have been around forever, SBA started it relatively recently, in 1998. The purpose of the program is to enhance the ability of the minority-owned protégé to compete for government and commercial contracts, through business assistance for the protégé, such as technical or management training, financial assistance in either equity investments or loans, and subcontracts. But it also proved popular because it enabled large firms to form joint ventures with 8(a) protégés, which were then eligible to compete for any opportunity for which the protégé qualified.
In 2010 and 2013, in two separate legislative enactments, Congress created a similar mentor-protégé program, first for the other socioeconomic preference programs – the Service-Disabled Veteran-Owned Small Business Concern (SDVOSB) Program, the HUBZone Program, and the Women-Owned Small Business (WOSB) Program – and subsequently expanding it to cover all small businesses (the “All Small Mentor-Protégé Program”).
Since the purposes and benefits of the two programs are identical, SBA now proposes to eliminate the 8(a) Mentor-Protégé Program and allow 8(a) companies to continue to form mentor-protégé joint ventures through the All Small Mentor-Protégé Program.
Continue reading at: Miles & Stockbridge
Protégé subcontract revenues from mentor hold no basis for economic dependence
An important benefit of a mentor-protégé agreement (MPA) is that no determination of affiliation may be found between a protégé and its mentor solely because of assistance provided under the agreement. A recent decision of the Small Business Administration (SBA) Office of Hearings and Appeals (OHA), Avar Consulting, Inc., upheld a size determination which found that a protégé was not affiliated with its SBA-approved mentor through economic dependence, even though the revenues it received from the mentor constituted over 70% of the revenues it received between formation and the date of size self-certification. A small business government contractor that anticipates future affiliation with a business under the 70% economic dependence rule should consider entering into an SBA-approved small business MPA with that business to prevent future revenues it receives from the business from being considered when economic dependence is assessed.
Continue reading at: Piliero Mazza
OIG report: SBA’s all small mentor-protégé program falling short
The Small Business Administration (SBA) Office of Inspector General (OIG) recently issued a public report on the SBA’s All Small Mentor-Protégé Program (ASMPP), in which the SBA OIG found certain shortcomings in the SBA’s administration of the program. As discussed below, the report also provides a series of recommendations, most of which the SBA has accepted.
What is the ASMPP?
The SBA began accepting applications for the ASMPP in 2016 and has seen a surge in applications each subsequent year. Under the ASMPP, any small business – including 8(a) small businesses, Historically Underutilized Business Zone small businesses, veteran-owned and service-disabled veteran-owned small businesses, woman-owned and economically disadvantaged woman-owned small businesses – may enter into an agreement with a large business under which the large business will provide mentorship and assistance. In return, the large and small businesses are permitted to joint venture to perform federal small business set-aside contracts.
Continue reading at: Buildsmart blog
Uncertainty in how small business joint ventures must be managed
U.S. Small Business Administration (“SBA”) regulations require that mentor-protégé and socioeconomic joint ventures designate the protégé or socioeconomic member as the “managing venturer” of the joint venture. However, the regulations do not define “managing venturer” or state how much control such a “manager” must maintain over the joint venture. In the context of typical small business operating entities (i.e., notjoint ventures), SBA’s Office of Hearings and Appeals (“OHA”) has offered detailed guidance on what it means to “control” such entities, but this case law has never been applied to joint ventures. This leaves joint venturing firms without any direction on the subject — beyond the general requirement that they designate a “managing venturer.”
As discussed in more detail below, this is a “gap” in SBA regulations and case law that has led to uncertainty in the governance of small business joint ventures. Given the increasing use of joint ventures by contractors pursuing small business set-aside procurements, this uncertainty is increasingly harmful to the business community.
This article surveys the available OHA case law in order to identify the specific limits of the aforementioned “gap,” and then offers predictions and recommendations for the way that SBA should define the term “managing venturer” in order to minimize business uncertainty and thereby promote small business development through joint venture participation.
Continue reading at: Miles and Stockbridge
All small mentor-protégé program 2019 mid-year report
The Small Business Administration (SBA) began accepting applications for the All Small Mentor-Protégé Program (ASMPP) in 2016 and has seen a surge in applications in each subsequent year.
Under the ASMPP, any small business – including 8(a) small businesses, Historically Underutilized Business Zone (HUBZone) small businesses, veteran-owned and service-disabled veteran-owned small businesses (VOSB/SDVOSBs), woman-owned and economically disadvantaged woman-owned small businesses (WOSBs/EDWOSBs) – may enter into an agreement with a large business under which the large business will provide mentorship and assistance. In return, the large and small businesses are permitted to joint venture to perform federal small business set-aside contracts.
As of mid-year 2019, below are some fast figures about the ASMPP, as reported by the SBA, that both large and small businesses need to know…
Continue reading at: BuildSmart
Key lawmakers introduce bill to reauthorize and improve DoD mentor-protégé program
A bipartisan pair of senators have introduced a bill to make it easier for small businesses to do business with the Pentagon, through larger defense firms.
Sens. Martin Heinrich, D-N.M., and Joni Ernst, R-Iowa, on Monday, May 6th announced the Defense Small Business Advancement Act, which is meant to reauthorize and improve the Department of Defense Mentor-Protégé Program. One of several such programs the federal government offers, the Defense Department’s program was established in 1991, then repeatedly expanded and renewed until the administration and Congress allowed it to expire last year.
“Small businesses often struggle to overcome the hurdles of bureaucracy and fail to break through the existing network of suppliers to the Department of Defense, which is the single largest department in the federal government,” Heinrich, ranking member of the Senate Armed Services Subcommittee on Strategic Forces, said in a statement.
Continue reading at: Defense News
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