The long-anticipated, much applauded, expanded SBA All Small Mentor Protege Program is here…not to be confused with the SBA 8(a) Mentor Protege Program … or the Department of Defense Mentor Protege Program*
So what? What does it mean to your small business? How do you take advantage of it?
The mechanics: Mentor Protégé Program (MPP) is an agreement between typically a large business (mentor) and a smaller business (protégé) whereby the mentor provides:
- Management and Technical Assistance
- Financial Assistance
- Contracting Assistance
- Trade Education
- Business Development Assistance
- General and/or Administrative Assistance
to the protégé, essentially investing resources into the company’s growth and infrastructure. It’s not a direct government-to-small-biz program: there’s no application that small businesses fill out to ‘get in’ – but there is a checklist. It’s an agreement between two businesses that is regulated and approved by either the SBA (for civilian agencies) or the DOD.
A few reasons large businesses are incentivized to become mentors:
- Agencies will apply subcontracting “Credit” to mentors when under consideration for awards. This can also help mitigate gaps in subcontracting requirements Mentors can get credit for their protege’s accomplishments because the implication is that the mentor’s help was instrumental in getting the company ready. For example, the protege’s wins as a prime at the same or different agency, the protege’s win as a subcontractor for other prime contracts at the same or different agencies – if the mentor protege agreement was instrumental in building capacity / ability of the protege company to win the additional work.
- Dept of Defense also administers reimbursement agreements (as well as credit agreements) but some DOD agencies will award dollars directly to the mentor to invest in the protégé. The financial benefit is obvious to both – the mentor isn’t spending internal resources helping the protégé, but rather the DOD’s money.
- Ability to form Mentor Protege Joint Ventures that enable access to set-aside contracts without triggering affiliation rule. Win-win:
- Protege can pursue set-aside contracts that would’ve been otherwise out of reach of the protege due to capacity, past performance, clearances, or other requirements that they don’t have
- Mentor is able to participate in set-aside awards – and retain 60% of at least 50% of total contract amount. Here’s the math: the “prime” contractor in a set-aside award has to do 50%+ of the work… the joint venture is the prime contractor. The mentor company can do 60% of the work because it’s a mentor.
- Investment / Merger & Acquisition strategy (great explanation here with many more finance details, thanks Elvis Oxley!) – mentors can take up to a 40% stake in the protege company — and the ability to reap the benefits of that investment as they develop that protege’s capabilities. In the event of a future M&A, that 40% stake of a much more substantial business makes for a decent profit margin.
There are risks and considerations, to be sure. A meeting of the minds is essential – to ensure both parties set expectations and have a plan to meet them. Proteges are limited to 3 MPP agreements per program in their lifetime (that’s 3 SBA AllSmall and also 3 DOD); Mentors can only have 3 Mentor Protege Agreements per program concurrently. A MPP agreement is thus never formed by strangers – the companies have to have solid business reasons for entering into the arrangement; most often, there’s a prior relationship of subcontracting or other business relationships that forms the baseline of mutual interest and sets the ground for pursuing a more strategic joining of forces.
For small businesses seeking to become proteges, the essential question is: What do you bring to the table? What would be an incentive for another entity to invest their time, resources, and dollars into developing your company’s capabilities? If you can answer those questions, you probably have a good idea of who to approach for mentorship.