Veterans in Business Conference Mentor-Protégé Programs Thursday, March 22, 2018

Transcription

1 Veterans in Business Conference Mentor-Protégé Programs Thursday, March 22, 2018 Kathleen Kelley Bean, Kinney & Korman, P.C Wilson Boulevard, 7th Floor Arlington, VA (703)

2 Overview Founded in 1959 in Arlington, Virginia One of Northern Virginia s largest and most established law firms 40 lawyers; comprehensive array of practice areas Represent clients throughout Virginia, Maryland and D.C. Regularly appear in all Federal and State Courts in the D.C. metro area

3 Business & Corporate Practice Areas Appellate Practice Business Services Construction Law Copyright/Trademark Creditors Rights/Bankruptcy Criminal Defense E-Commerce Employment Law Government Contracts Land-Use, Zoning & Local Government Landlord/Tenant Lending Services Litigation Mergers and Acquisitions Nonprofit Organizations Real Estate Services Tax Services Title Insurance

4 Partnering Basics Why do federal contractors form teams? How does this help small businesses? What type of partnering is best for this situation and my business? What am I eligible to participate in?

5 Mentor-Protégé Program SBA s program The Small Business Administration s Mentor- Protégé program is designed to enable successful firms (the mentors) to provide business development assistance to small business program participants (the protégés) Began with 8(a) firms Expanded fall of 2016 to include all-smalls, SDVOSB, WOSB, HUBZone.

6 Presentation covers: o SBA Mentor-Protégé relationships and their joint ventures 8(a) and All small o Rules are *generally* the same

7 Benefits of Mentor-Protégé Mentor provides assistance relating to the performance of contracts set aside or reserved for small businesses so that Protégés can develop their capabilities Presumption of affiliation between large business mentor and small business Protégé is excepted (based upon the assistance provided, but they can still be affiliated for other reasons) Ability to enter into all small joint venture program where JV may qualify as a small business for any federal government contract where the Protégé qualifies as small

8 Affiliation Why does it Matter? Affiliates is defined in FAR 2.101(b)(2) Business concerns or individuals are affiliated if, directly or indirectly: o One controls the other; or o A Third party controls both If two business are affiliated their receipts will be counted together or aggregated and the small business can end up as a large

9 Affiliation Because the Mentor and Protégé are so closely connected (particularly when they form a JV or contract with each other), they will be presumed to be affiliated BUT there is an exception for this presumption if: o Each member is small under the NAICS code; or o Both businesses are in an SBA-approved Mentor Protégé Agreement and Protégé is small under the NAICS code

10 How to become Mentor-Protégé? Eligibility requirements for Mentor o Mentors must be able to demonstrate that they can fulfill their obligations under the MPA May require financial statements or tax returns o Federal contractor in good standing - not debarred or suspended o Cannot own more than 40% of Protégé firm o Generally no more than 1 protégé at a time, however they can have two if they can demonstrate that the additional relationship will not adversely affect the development of either firm (and then only up to three protégés at any time)

11 How to become Mentor-Protégé? Eligibility requirements for Protégé o Size Qualify as small under their primary NAICS code, or Qualify as small under secondary NAICS code if Protégé has experience in secondary code and M-P relationship will further develop or expand current capabilities o Must be registered in SAM o Typically only one Mentor Unless have a second NAICS code or Specific expertise initial Mentor cannot provide o Protégés can also be Mentors

12 How to Apply All documents go online o Certify.sba.gov Must be registered in SAM prior to creating profile in certify.sba.gov Written Mentor-Protégé Agreement SBA must approve the Mentor Protégé Agreement

13 Mentor-Protégé Agreement Must be in writing Detailed description of assistance protégé is seeking from mentor o What are Protégé s needs? o What will Mentor do to support those needs? o What is the timeline? o How to you measure that the needs are being supported? Agreement term is three years, with possibility of another three years (total 6 years)

14 Mentor-Protégé Agreement Describe how the Mentor will assist in six key areas: o Management and Technical Assistance o Financial Assistance o Contracting o International Trade Education o Business Development o General Administrative

15 Mentor-Protégé Agreement Mentor-Protégé Agreement must be approved by SBA o Also any amendments or changes to the agreement must be pre-approved by SBA There are templates on SBA website Either party can terminate relationship with thirty (30) days advance notice to the other party and SBA

16 M-P Program Once approved LOTS of Evaluation and Reporting back to SBA o Annually, protégé must report: All technical and/or management assistance provided by Mentor All loans and/or equity investments made by Mentor to Protégé All subcontracts between Mentor and Protégé and their values All joint venture contracts and their value A narrative describing the success the assistance has had in meeting the Protégé s needs

17 If SBA Declines M-P Agreement Protégé may request reconsideration within 45 days of notice of decline If reconsideration is final, Protégé cannot enter into another mentor-protégé relationship with the same prospective mentor for 60 days

18 What if it doesn t work out? If Mentor isn t providing the assistance described in MPA, after notice asking for Mentor s clarification o SBA can terminate the MPA o SBA can bar Mentor from further mentor-protégé relationship for two years o SBA can recommend a stop work order on joint venture contracts o SBA can determine failure to comply as a basis for debarment

19 Joint-Venturing with Mentor-Protégé Let s assume everything works out Mentor finds Protégé Mentor and Protégé are eligible and execute Mentor- Protégé Agreement SBA approves the MPA NOW

20 Joint-Venturing with Mentor-Protégé Within the SBA s Mentor-Protégé Program, Mentors and Protégés may form a joint venture together and the joint venture (the JV) can qualify as a small business and be awarded small business set aside contracts What does that mean? o The JV controlled by the small business - can prime work and obtain work even if small business doesn t have all the experience and capability to win the awards o Small business can obtain past performance for the contract o Mentor can get more work (and thus more revenue) from the Contract than through Subcontract

21 Want to see that again?

22 Mentor-Protégé Joint Ventures Mentors and Protégés can form joint ventures or business combinations and go after work together as a JV The JV will be exempt from affiliation (for this relationship, but other affiliation may apply) Small businesses can prime work and get past performance based upon the joint venture s work Mentors (perhaps large businesses) can perform work set aside for small businesses

23 Step back - What is a joint venture? Separate Legal Entity o Formed under state law (Virginia/Maryland/Delaware LLC) o Will have its own SAM registration Two or more firms are ownership or members in the JV Has a special purpose (to bid on and perform a contract) Will have two key agreements o Joint Venture Agreement which talks about the contract and how the contract will be performed and who will do what o Joint Venture Operating Agreement which governs the separate legal entity and discusses management and profits from the JV

24 Who can use these special Mentor-protégé Joint Ventures? Must have Mentor-Protégé relationship Small business is: o 8(a) Program Participants have been able to use Joint Ventures for some time. See 13 CFR o All Small Joint ventures (for SDVOSB, HUBZone, WOSB, small business) came out 2016

25 What else to know? Small business or 8(a) will be in charge of JV o Managing Member o Project Manager will be employee of small business (or 8(a)) o Mentor cannot exert negative control over the JV o Small business (or 8(a)) must own at least 51% of JV o Owners will receive profits from JV commensurate with the work they perform under the contract o Need special bank account with two signatures o Additional reporting requirements Need written Joint Venture Agreement Need written Joint Venture Operating Agreement

26 Joint Venture Agreement SBA provides a kind of form Follow the statute (13 CFR [8(a)] [all small]) Include o Purpose o Who will the people involved with the contract performance be Project manager (must be an employee of small business or have commitment letter) (cannot be employee of large business who moves over because of JV contract) o Who will provide what equipment o Who will provide what essential (and not just administrative) work Both parties ensure performance of the contract

27 Joint Venture Operating Agreement Operating Agreement for the separate legal entity Discuss Management Discuss distributions from entity o Distributions done by performance under the contract, not ownership each participant (the owners) must receive profits from the joint venture commensurate with the work performed by the concern (JV) Include language that notwithstanding the provisions of this Agreement, the SBA rules/regulations will always apply

28 Joint Venture Workshare? The JV (or another similarly situated entity) must receive at least 50% of the amount the Government paid the JV pursuant to the Contract (13 CFR 125.6/ the general limitations on subcontracting rules) Small business (or 8(a)) member must perform at least 40% of the total work under the contract (13 CFR 125.8(c)/ ) o Conversely - Mentor may perform up to 60% of the total work under the contract if the JV does all the work

29 Joint Venture Workshare Still confusing? The JV must perform at least 50% of the amount the Government pays under the contract o JV can t subcontract more than 49% The small business member (Protégé) must perform at least 40% of the total work performed by the JV

30 Joint Venture Concerns Very difficult to get out of JV if a contract has been awarded Both parties are joint and severally liable to perform the work even if one of the member withdraws from the joint venture Just like a marriage know your partner

31 What else should I know? SDVOSB joint ventures must go through CVE process on their own Must have a written JV Agreement (usually need to have it when you submit the proposal) Lots of records and reporting requirements Anticipate easy revisions from SBA/CVE Get good counsel

32 Questions? Kathleen Kelley, Esq. Bean, Kinney & Korman, P.C Wilson Boulevard, 7 th Floor Arlington, Va kkelley@beankinney.com