Mentor Protege Regulations Do Not Always Protect From Affiliation

By: Christine V. Williams on 03/09/2017

SIZE APPEAL OF: SAGE ACQUISITIONS, LLC, APPELLANT

SBA No. SIZ-5783, 20162016 WL 6

October 2016

In a recently published decision, the SBA’s Office of Hearings and Appeals (“OHA”) held that when the 8(a) partner to a Joint Venture protected from affiliation by the Mentor Protégé exception performs only the “administrative and ministerial” functions of a contract, the Joint Venture rules are not followed.  Thus, affiliation will be found, and, in this case, the firm found “other than small.”  Other factors in this determination included:

  • One member of the joint venture was affiliated with another firm (bringing those revenues into play for size determination;
  • The 8(a) partner in the joint venture did not have the power to control the joint venture;
  • The other than small partner could exercise negative control over the joint venture; and
  • The 8(a)partner’s work was administrative and ministerial, the 8(a) firm failed to gain the substantive experience required in the regulations.
  • Thus, the joint venture did not follow the requirements of the regulations, affiliation was found, and the joint venture was deemed other than small.