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Monday, April 4, 2011

Small Business Mentor-Protégé Programs

Robert Jay Dilger
Senior Specialist in American National Government

Kate M. Manuel
Legislative Attorney

Mentor-protégé programs typically seek to pair new businesses with more experienced businesses in mutually beneficial relationships. Protégés may receive financial, technical, and/or management assistance from mentors in obtaining and performing federal contracts or subcontracts, or serving as suppliers under such contracts or subcontracts. Mentors may receive credit toward subcontracting goals, reimbursement of certain expenses, or other incentives.

The federal government currently has several mentor-protégé programs that seek to aid small businesses in various ways. For example, the 8(a) Mentor-Protégé Program is a government-wide program designed to assist small businesses “owned and controlled by socially and economically disadvantaged individuals” that are participating in the Small Business Administration’s (SBA’s) Minority Small Business and Capital Ownership Development Program (commonly known as the 8(a) Program) in obtaining and performing federal contracts. Toward that end, mentors may (1) form joint ventures with protégés that are eligible to perform federal contracts set aside for small businesses; (2) make certain equity investments in protégé firms; (3) lend or subcontract to protégé firms; and (4) provide technical or management assistance to their protégés. The Department of Defense (DOD) Mentor-Protégé Program, in contrast, is agency-specific. It is designed to assist various types of small businesses and other entities in obtaining and performing DOD subcontracts and serving as suppliers on DOD contracts. Mentors may (1) make advance or progress payments to their protégés that DOD reimburses; (2) award subcontracts to their protégés on a noncompetitive basis when they would not otherwise be able to do so; (3) lend money to or make investments in protégé firms; and (4) provide or arrange for other assistance.

Other agencies also have agency-specific mentor-protégé programs designed to assist various types of small businesses or other entities in obtaining and performing subcontracts under agency prime contracts. The Department of Homeland Security, for example, has a mentor-protégé program wherein mentors may provide protégés with rent-free use of facilities or equipment, temporary personnel for training, property, loans, or other assistance. Because these programs, unlike the SBA and DOD programs, are not based in statute, they generally rely upon preexisting authorities (e.g., authorizing use of evaluation factors) or publicity to incentivize mentor participation. See Table A-1 for a summary comparison.

Although there are some issues with the accuracy and thoroughness of some federal agency records, there are currently more than 750 mentor-protégé agreements in place.

Congressional interest in small business mentor-protégé programs has increased in recent years, in part because of reports that large businesses serving as mentors have improperly received federal contracting assistance intended for small businesses. The SBA’s suspension (and later reinstatement) of a mentor in the 8(a) Mentor-Protégé Program for possible fraud, as well as reports of other fraud in several of the SBA’s contracting programs, has also contributed to congressional interest. The 111
th Congress enacted legislation (P.L. 111-240) authorizing the SBA to establish mentor-protégé programs for small businesses not participating in the 8(a) Program and requiring the Government Accountability Office (GAO) to assess the effectiveness of mentorprotégé programs generally. Depending upon the SBA’s actions and/or the GAO’s findings, Members of the 112th Congress may consider legislation (e.g., S. 493) or oversee agency actions. Members may also take similar actions in response to changes in the rules for the 8(a) Mentor- Protégé Program that took effect on March 11, 2011.

Date of Report: March 28, 2011
Number of Pages: 24
Order Number: R41722
Price: $29.95

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