Key takeaways
- The Federal Acquisition Regulation (FAR) Council recently issued a proposed rule to add Puerto Rico, as well as the U.S. Virgin Islands, American Samoa, Guam, and the Commonwealth of the Northern Mariana Islands (CNMI), to the list of territories from which small businesses are eligible for preferential treatment under the U.S. Small Business Administration (SBA) mentor-protégé program.
- Consistent with SBA rules adopted in recent years, the proposed rule would provide incentives to large mentor companies that subcontract with small business protégés, including positive consideration in their past performance evaluations and the ability to apply protégé training costs toward their small business subcontracting plan goals.
- Prime contractors and small businesses with a principal office in Puerto Rico or other covered territories should become familiar with the incentives found in the proposed rule and consider how the SBA mentor-protégé program could be leveraged for increased access to federal government contracting and subcontracting opportunities.
Overview of proposed rule
On June 7, 2024, the FAR Council issued a proposed rule to implement regulatory changes adopted by the U.S. Small Business Administration (SBA) in 2020, to add Puerto Rico to the list of territories from which small businesses are eligible for preferential treatment under the SBA mentor-protégé program. The proposed rule would also add the U.S. Virgin Islands, American Samoa, Guam, and the Commonwealth of the Northern Mariana Islands (CNMI) to the list of eligible territories, consistent with another SBA regulatory change made in 2022.
Under the SBA’s mentor-protégé program, large mentor companies and small protégé companies can partner to form joint ventures that can compete for contracts set aside for small businesses. Both benefit from this arrangement. Large mentor companies gain access to often lucrative small business set-aside contracting opportunities, and the small protégé companies receive valuable technical assistance and other resources from their mentors that might not otherwise be available to them.
The SBA’s regulatory changes in 2020 and 2022 created two specific incentives for mentor-protégé pairs in which the protégé either has its principal office located in Puerto Rico or is a “covered territory business” (statutorily defined as a small business with a principal office located in the U.S. Virgin Islands, American Samoa, Guam, or CNMI). Under the SBA’s rules, a mentor that subcontracts to its protégé: (1) will receive positive consideration for its past performance evaluations and (2) may apply protégé training costs toward its subcontracting plan goals. The FAR Council’s proposed rule intends to provide these same incentives.