September 2016

"A Law Firm for the Present and Future"

SBA’s New Rules on Joint Ventures and Mentor-Protégé Program 


 The U.S. Small Business Administration (SBA) amended its regulations pertaining to Small Business Joint Ventures and the Mentor-Protégé Programs on July 25, 2016. These amendments became effective on August 24, 2016.  Below are a few of the major changes:

 SBA has amended its regulations to implement provisions of the Small Business Jobs Act of 2010, and the National Defense Authorization Act for Fiscal Year 2013. The amended regulations establish a Government-wide mentor-protégé program for all small business concerns, consistent with SBA's mentor-protégé program for Participants in SBA's 8(a) Business Development (BD) program. The amendment also changes the current joint venture provisions to clarify the conditions for creating and operating joint venture partnerships, including the effect of such partnerships on any mentor-protégé relationships. The new rule additionally makes changes to current size, 8(a) Office of Hearings and Appeals and HUBZone regulations, concerning among other things, ownership and control, changes in primary industry, standards of review and interested party status for some appeals.


Universal Mentor-Protégé Program

The SBA has established a single “universal” mentor-protégé program for use by all small businesses, as opposed to having separate programs for the SDVOSB, HUBZone, WOSB and small business firms.  The SBA’s goal was to make the small business mentor-protégé program as identical as possible to the 8(a) mentor-protégé program.  To achieve this goal, one major change in the regulations is to disallow non-profit organizations from serving as mentors under the mentor-protégé program.  The current law governing 8(a) contracts allows non-profit entities to serve as mentors, however, effective August 24, 2016, non-profit entities will no longer be permitted to serve as mentors under the 8(a) mentor-protégé program.


Other important rule changes under the “universal” mentor-protégé program are as follows:


“Populated” JVs Eliminated

One major change in the SBA’s new regulations is the elimination of populated joint ventures.  Under prior law, a joint venture could be either populated or unpopulated.  A populated joint venture will hire its own employees and operate as a separate independent entity performing contracts using its own employees, as opposed to an unpopulated joint venture which uses each of the joint venture member’s employees performing contracts.  The new rule states that if a joint venture is a formal separate legal entity, such joint venture is prohibited from populating with its own hires to perform contracts awarded to the joint venture.  The new rule allows a joint venture to have its own separate employees for administrative functions only. It may not have its own separate employee hires to perform contracts awarded to the joint venture.



The regulations applicable to the HUBZone program have also been amended to allow a joint venture between a qualified HUBZone small business and one or more other small businesses, or with an approved mentor under 13 CFR 124.520 or 13 CFR 125.9.  Under previous law, joint ventures for HUBZone contracts were permitted only in those cases where all parties to the joint venture were HUBZone certified.

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