Mentor-Protégé Joint Venturing: Friend or Foe?

December 16, 2016

By Kathryn V. Flood

With the arrival of the All Small Mentor-Protégé Program, the question of how to structure teaming relationships has come to the forefront of many contractors’ minds. This is especially true because companies in approved mentor-protégé relationships may form joint ventures to pursue set-aside work, even if not all the joint venture partners are small businesses or otherwise qualify for the socioeconomic status of the set-aside. Still, recently our clients have questioned why they should form a joint venture when they can pursue the work in a more typical prime/sub relationship. The answer really comes down to the specific opportunity, and what relationship works best for the firms.    

The merits of a joint venture may be more apparent in the case where a solicitation requires the prime contractor to have specific past performance history or experience, and does not give as much credit for the experience of subcontractors. In these instances, contractors may choose to form a joint venture to pursue the opportunity with the joint venture as the prime contractor, because then the joint venture is able to attribute the past performance and experience of both the mentor and the protégé as the prime contractor. Indeed, SBA has recently enacted regulations which prohibit agencies from requiring the joint venture entity itself to have the past performance experience for small business and socioeconomic set-asides, instead of crediting the experience of the partner venturers. See, e.g., 13 C.F.R. § 125.8(e) (“When evaluating the past performance and experience of an entity submitting an offer for a contract set aside or reserved for small business as a joint venture established pursuant to this section, a procuring activity must consider work done individually by each partner to the joint venture as well as any work done by the joint venture itself previously.”).  

Still, there are some instances where it makes sense to pursue an opportunity structured in the more tradition prime/sub relationship. For mentors and protégés, this relationship can flow either way, with the mentor as the prime contractor or the protégé in the prime position. One of the benefits of having the protégé perform the work in the role of the prime is that the protégé will accrue experience performing contracts as the prime contractor. Moreover, the exception to a finding of affiliation will apply to the prime/sub relationship regardless of which entity (mentor or protégé) serves as the prime, absent other indications of affiliation. For example, firms must still be mindful of ostensible subcontractor affiliation when the protégé is the prime contractor, as SBA’s Office of Hearings and Appeals has found such affiliation when the protégé prime is unduly reliant on its mentor subcontractor, despite the fact that a mentor-protégé relationship exists.    

Ultimately, the purpose of the mentor-protégé program is to bring business development assistance to the protégé. The opportunities the mentor and protégé pursue together should be done with an eye towards fulfilling the development assistance promised to the protégé in the mentor-protégé agreement, and to address any specific solicitation or contractual requirements. Please let us know if we can assist you in structuring your mentor-protégé teaming relationships. 

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