Businesses of all sizes face challenges in the government contracting arena. Small businesses struggle to win government contracts due to lack of resources or inability to compete with well-established large government contractors. Meanwhile, large businesses are often “sized out” of contracts in their respective industries that are set aside for small businesses. The solution? A mentor-protege relationship. Or is it?

Overview of the Program

The All Small Mentor-Protégé Program (ASMPP) was established in 2016 to extend mentor-protégé relationships approved by the Small Business Administration (SBA) to every small business. The Program’s main goals are to develop protégé firms generally through mentor-provided business development assistance and to help protégé firms successfully compete for government contracts.

The Small Business Jobs Act of 2010[1] authorized the SBA to establish mentor-protégé programs for small businesses owned and controlled by service-disabled veterans, small businesses owned and controlled by women, and certified HUBZone small businesses and was modeled after the 8(a) Business Development program.[2] The National Defense Authorization Act (NDAA) for Fiscal Year 2013[3] authorized the SBA to establish a mentor-protégé program for all small businesses. With some exceptions, the 2013 NDAA requires agencies seeking to carry out mentor-protégé programs to obtain approval of such programs by the SBA.[4]

Based on these two laws, the SBA published a final rule in the Federal Register on July 25, 2016, which among other matters established “a government-wide mentor-protégé program for all small business concerns, consistent with the SBA’s mentor-protégé program for participants in the SBA’s 8(a) Business Development program.” The final rule became effective on August 24, 2016, and the ASMPP began accepting applications on October 1, 2016. Since then, several federal agencies have ended their mentor-protégé programs opting instead to encourage firms interested in these types of relationships to consider participating in the ASMPP.

General Statistics

At the time of issuance of the rule creating the ASMPP, the SBA estimated that approximately 2,000 small businesses could become active in the Program.[5] Since the Program’s establishment almost two years ago, participation in the Program has grown.[6] (Refer to FIGURE 1.)

Mushriqui_Fig1

 

In addition, the SBA’s “FY 2020 Congressional Justification” and “FY 2018 Annual Performance Report”[7] provides additional metrics regarding the Program’s success:

In FY 2018, applications increased by 6 percent from FY2017 with 648 partnerships. Information received from the first cohort indicates the program has supported more than 945 jobs and generated more than $280 million in government contracts through Mentor-Protégé relationships. Significantly, protégé firms won 32 percent of contracts offered independently from their mentor and increased by 17 percent increase [sic] Full-Time Equivalent (FTE) employees.

The SBA established a government-wide Federal Mentor Protégé Program Council (FMPPC) to build a community of practice for Mentor-Protégé Program providers, to share best practices, and to provide a forum for program innovation and problem solving. The Agency hosted a mentor-protégé conference, drawing more than 400 participants, which increased mentor-protégé knowledge of joint ventures, as well as rules and compliance requirements for agreements. It provided a high-demand forum for businesses to meet potential partners and learn from best-practice panels of successful pairs, and to hear various federal agency small business advocates discuss how to be successful in their respective agency acquisitions.[8]

The ASMPP receives an average of 300 applications per year. Participants are advised to allow 90 days for application processing, according to the SBA. To the SBA’s credit, however, Program participants have reported much shorter Mentor Protégé Agreement (MPA) processing times.

Stakeholder Opinions

To assess how other aspects of the ASMPP have fared since its inception almost two years ago, I met with SBA representatives, Lori Gillen, the director of the Program, as well as with the former deputy director, Sandra Clifford. For a whole stakeholder perspective, I also spoke with the representatives of mentor and protégé firms of varying sizes and durations of participation in the Program.

For Better or For Worse

One common theme that kept resurfacing throughout my conversations with the various stakeholders is that a mentor-protégé relationship established under the ASMPP is analogous to a “marriage.” SBA representatives expressed a sense of excitement as to the Program’s growth and success. Assistance provided to protégés is robust and making an impact. Overall, based on annual reports received, protégés scored the experience at 4.5 out of 5. As the data in FIGURE 2 show, protégés are getting the assistance that leads to their growth. From the SBA’s perspective, the success of the Program is generally assessed by measuring growth in categories such as increases in FTE employees and whether or not protégé firms got contracts — either as part of a joint venture or separately, and if so, in what dollar values.

Mushriqui_Fig2

 

This general sentiment of excitement was echoed by many of the mentors and protégés with whom I spoke. From the mentor perspective, John Tornillo, the executive vice president and chief operating officer of Martek Global Services, Inc., stated that the Program is one of the most important, efficient, and responsive small business assistance programs. Meanwhile, the chief executive officer of Neutral Posture, Inc., a recently approved protégé firm under the Program, stated that the Program had positioned the company to add value to larger businesses. Rebecca Boenigk emphasized the Program had made it possible for Neutral Posture to enter into a mutually beneficial agreement with its mentor.

Finding the “Right” One

When I asked how mentors and protégés “found” each other, most stakeholders stated that the mentor and protégé had done business together in the past in some way, shape, or form. Because of the time it takes to develop these types of relationships, it may take years between initial point of contact and entering into an SBA-approved MPA. SBA representatives stated that annual reports indicated that the majority of protégés had subcontracted or teamed with their mentors prior to submitting an MPA for SBA approval.

Boenigk, of Neutral Posture, Inc., met her company’s mentor through serving with the mentor’s CEO on an industry board, more than 10 years ago. Once both companies made the decision to participate in the ASMPP, it took months to get legal, finance, government sales teams, and other various internal approvals from both companies. Tornillo, of Martek Global Services, Inc., similarly met a protégé at an NCMA industry event well before formally taking that company on as a protégé. Not surprisingly, all stakeholders indicated that each mentor and protégé must be the right “fit” for the other, including sharing common values and ways of doing business.

Several mentors and protégés recommended that firms interested in participating in the ASMPP should endeavor to create relationships within their industry and find out from their current customers which businesses they are currently working with that perform well. For protégés, that may mean finding a firm that’s willing to take you on and let the relationship take its time to develop and grow. Consider, as a protégé, what value you can add to a potential mentor and its existing customers. For mentors, it may mean that relationships of this nature need to be part of an overall strategy if one does not already exist. Look for a protégé that compliments and accents what your firm does — including competitors!

I also asked various stakeholders how they felt about “matchmaking,” whether by the SBA or through third parties. The sentiments were mixed.

SBA representatives indicated that the industry has expressed its desire and interest in adding a matchmaking component to the ASMPP. They also indicated that although the SBA is open to the idea of creating a matchmaking database, albeit hesitantly, such an effort is currently not in the works. They also had concerns whether such a platform would allow for the proper development of long-term relationships necessary for the success of any MPA. That being said, the SBA welcomes public comment directly or through the expected proposed rule regarding the merging of the ASMPP and 8(a) Business Development program.[9]

On the other hand, mentors (in particular) expressed concerns about any type of matchmaking efforts. Ludmilla Parnell, the director of small business partnerships at General Dynamics Information Technology, stated that a matchmaking platform could be problematic. For one, it allows for a passive approach, whereas a more proactive approach is needed for the relationship to succeed and be beneficial for all parties involved. Several mentors also added that protégés should be weary of large businesses that use a “cold call” approach as unfamiliarity with one another can lead to problems — especially if and when both firms start working together.

Despite the six-year maximum duration (two terms of three years each) of the ASMPP, it was clear that both mentors and protégés were in this process for the long haul. Many emphasized the importance of making sure that the “marriage” lasts forever (or at least as long as SBA allows it). Others stated that even after an MPA expires, firms anticipate continuing to work together under the general subcontracting limitations and affiliation rules.

Most Common Benefits

As previously stated, the ASMPP was created to mainly assist protégés with business development efforts that include strategies to identify contracting and partnership opportunities. According to the SBA, protégés can also benefit from:

  • Guidance on internal business management systems, accounting, marketing, manufacturing, and strategic planning;
  • Financial assistance in the form of equity investments, loans, and bonding;
  • Assistance navigating federal contract bidding, acquisition, and performance processes;
  • Education about international trade, strategic planning, and finding markets; and
  • General and administrative assistance (e.g., human resource sharing or security clearance support).

One protégé, an early participant in the program, has achieved a lot in less than two years. This includes four additional employees, increasing annual revenues from $5.3 million to $10 million, becoming ISO 9001-2015 certified, expanding into new lines of business, acquiring new IT systems, and learning ways to find new contracting opportunities with various federal agencies.

Although the ASMPP is not geared to benefit mentors, it certainly incentivizes firms to serve as mentors, essentially “making it worth their while.” The Program provides mentors with the opportunity to team up with small business protégés without limiting the socioeconomic status of such protégés. It allows mentors to compete on and win government contracts for which they would not otherwise be eligible, such as set asides and sole-source procurements (or being disqualified altogether as an affiliated entity if the small business is not a protégé). If a mentor and protégé form a joint venture, the Program also allows the mentor to perform a larger percentage of such contracts, up to 60% (of the work performed by the joint venture) instead of 50%, resulting in increased revenues. It is also a way for large businesses in a particular industry to get into the government contracting arena even if the firm has limited or no federal experience.

The SBA currently limits mentors to no more than three protégés at the same time and protégés to no more than two mentors over the life of the small business. These limitations do not seem to bother the majority of the protégés I spoke to. They seemed to prefer taking on one mentor at a time due to the amount of involvement and resources required to maintain the relationship. However, larger-size mentors indicated that the three-protégé limit does not make sense. These firms have the capacity to engage more protégés and being limited to only three curbs their ability to serve a large number of government clients. Mid-sized mentors obviously argue that allowing larger-size mentors to engage more protégés would allow these firms to eat up market opportunities from small and mid-sized businesses and would thus not be in line with the goals of the Program. The SBA seems to be willing to hear all sides of the argument and welcomes comment on the limitations of number of protégés and mentors in response to the anticipated proposed rule previously mentioned.

Most Common Pitfalls

The SBA encourages a mentor-protégé team to provide a measurable and detailed timeline of support from the mentor to protégé in its application to the SBA. Even though it may make more sense from a business perspective to keep things broad and general, the SBA requires specifics to ensure protégé benefits and such specifics enable the SBA in its enforcement efforts of whether those targets are met. Moral of the story — be specific, especially for business development activities.

According to the SBA, a small number of MPAs are denied or terminated for a finding of affiliation (as a result of an unsuccessful bidder protesting award based on size determination), or a mentor not providing adequate support (as a result of protégé reporting through annual reporting requirements).

When I asked mentors and protégés what the most common challenges and pitfalls were, the standard answer was setting realistic expectations before the relationship formally begins. Each mentor and protégé needs to ask:

  • What do you want to get out of it?
  • How is each firm going to deal with conflict, financial issues, performance issues, or lack of availability?
  • Can the mentor and protégé rely on one another?

Parnell, of General Dynamics Information Technology, noted that to answer these questions, mentors and protégés must vet one another to ensure that they have common value. They will unavoidably be responsible for the reputation of one another as a team.

Shawn Ralston, the small business liaison officer for AECOM’s National Governments business line, who also serves as a mentor in several other programs, said that not vetting a potential protégé or mentor and not appreciating the fact that there are a limited number of mentors and protégés can have detrimental consequences for a firm. Companies that haven’t worked together and enter into an MPA take on big risks as they have not learned how to get through unpopular decisions and how to resolve differences of opinion, he stressed. Ralston added that protégés need to make sure they have the time and resources to benefit from mentoring and need to make sure that their areas of potential growth are areas where big businesses can help. Ralston, Boenick, and Parnell all agreed that protégés must ensure they have identified someone at the mentor firm to champion the relationship.

Parnell explained that protégés need to avoid over-reliance on the mentor and the idea that the mentor will come in and solve all the protégé’s problems. A mentor may open a door for a protégé but the protégé needs to get up and walk through it. In other words, take ownership of the relationship, take initiative in getting what you want out of the relationship and be prepared to show what value you will bring to the table.

Boenigk of Neutral Posture said that the road to finding and securing a mentor is a difficult and challenging one. Firms need to cultivate personal relationships with leaders and executives within their industries that are willing to take them on as protégé. The biggest challenge is getting to know somebody within the organization and showing them why it would be to their advantage to take you on as a protégé.

Self-Improvement? 

When asked if they could change one thing about the ASMPP, most stakeholders said they would not change much. Perhaps this is because the Program was recently initiated. Firms are waiting to see how it develops.

Gillen, the director of the ASMPP, stated that her predecessors had crafted an incredibly strong program with a lot of thought behind it. If she had to change anything, it would be the consolidation of the 8(a) Business Development program. This is an effort that is currently underway and industry expects the SBA to issue new rules tackling this matter. Gillen added that she is looking forward to receiving data from market participants to see how the ASMPP has fared. She wants data-driven decisions that will ensure the ASMPP meets the purposes for which it was established.

Conclusion

The ASMPP appears to be well received in the government contracting arena and has been growing at a steady pace over the past two years. There is plenty of room for growth, as is evidenced by the April 1, 2019, count of 750 approved agreements versus the 2,000 initially anticipated by the SBA, as well as compared to the overall number of certified small businesses. That being said, the Program is still young, and it may be too early to tell at this point.

Overall, the ASMPP can be a tool providing a great leap for both small and large businesses if done right. That is not to say that it is a walk in the park. SBA administrators and participants in the Program (and in similar mentor-protégé programs administered by the SBA or other federal agencies) agree that before committing to a formal MPA, all parties involved usually have some sort of informal mentorship arrangement and should have worked together on one or more contracts (i.e., one has subcontracted or teamed with the other). Since there is currently no formal mechanism for mentors and protégés to find one another and test the waters of working with one another, interested firms need to engage in organic efforts of working with potential mentors and protégés or through cultivating personal relationships.

Although the Program is a mentor-protégé program, participants should be aware that this is not a “no strings attached” type of engagement. Mentors expend significant resources in the relationship and expect a return on such an investment, namely in the form of ability to compete on set-aside contracts for which such businesses wouldn’t otherwise be eligible, resulting in increased business and development of future partners and partnerships. Additionally, with the limit of three protégés, large prime contractors are very selective in choosing protégés that will maximize that return on investment.

Protégés should also be prepared to invest significant resources and do their part in order to see a benefit from participating in the Program. Protégés should expect to dedicate time, funds, and personnel to focus on training, internal development, and business development opportunities provided by a mentor. 

Whether you are considering entering into a mentor-protégé relationship or are currently negotiating one, all stakeholders agree that one must proceed with caution. After all, wouldn’t you want to date and then get engaged before getting married?

Interested in more information about the ASMPP? Visit www.sba.gov/allsmallmpp. CM

Jeana Mushriqui, Esq.

  • Founding Principal, Corporate Law Solutions
  • Results-oriented entrepreneurial attorney with extensive experience in government contracts, general corporate matters, and commercial agreements
  • Comprehensive background in analysis and interpretation of government contracting and procurement rules and regulations, as well as business startup advisory services, contract review, contract drafting, and negotiations
  • jeana@corplawsolutions.com
  • LinkedIn: in/jmush/

Endnotes

[1] Pub. L. 111-240.

[2] See SBA, “Small Business Jobs Act: Small Business Mentor-Protégé Programs,” 75 Federal Register 79869, December 20, 2010; SBA, “Semiannual Regulatory Agenda, Small Business Jobs Act: Small Business Mentor-Protégé Programs,” 76 Federal Register 40140, July 7, 2011; SBA, “Small Business Jobs Act: Small Business Mentor-Protégé Programs,” 78 Federal Register 1492, January 8, 2013; SBA, “Small Business Mentor-Protégé Programs,” 78 Federal Register 44334, July 23, 2013; and SBA, “Small Business Mentor-Protégé Programs,” 79 Federal Register 1089, January 7, 2014.

[3] Pub. L. 112-239.

[4] H.R. 4310 – National Defense Authorization Act for Fiscal Year 2013, agreed to by the House on December 20, 2012, and by the Senate on December 21, 2012, available at https://www.congress.gov/bill/112th-congress/house-bill/4310.

[5] See SBA, “Small Business Mentor Protégé Program; Small Business Size Regulations; Government Contracting Programs; 8(a) Business Development/Small Disadvantaged Business Status Determinations; HUBZone Program; Women-Owned Small Business Federal Contract Program; Rules of Procedure Governing Cases Before the Office of Hearings and Appeals,” 80 Federal Register 6618, February 5, 2015; and SBA, “Small Business Mentor Protégé Program,” 81 Federal Register 48574, July 25, 2016.

[6] SBA, “Active mentor-protégé agreements,” available at https://www.sba.gov/document/support--active-mentor-protege-agreements.

[7] Available at https://www.sba.gov/sites/default/files/2019-03/SBA%20FY%202020%20Congressional%20Justification_V2_15Mar19_508Statement_0.pdf.

[8] SBA, “FY2020 Congressional Justification” and “FY2018 Annual Performance Report,” available at https://www.sba.gov/document/report--congressional-budget-justification-annual-performance-report.

[9] See 83 Federal Register 24684, May 30, 2018.