Section 872 of the 2020 NDAA makes many notable changes to the Department of Defense’s (DoD) Mentor-Protégé Program. Besides permanently authorizing the program, Section 872 required DoD’s Office of Small Business Programs to establish performance goals and periodic reviews to be submitted to the congressional defense committees by February 1, 2020. This serves to improve outcomes, define expectations, and set measurable goals for the DoD Mentor-Protégé Program going forward.
Notably, Section 872 changes the definition of a “disadvantaged small business concern” to align with how small businesses are defined in other programs. To be considered small, the original definition required a business to have “less than half the size standard corresponding to its primary North American Industry Classification System code.” The new definition states that a disadvantaged small business concern must not exceed the size standard corresponding to its primary NAICS code.
Note that this change has already been approved and signed by the President, and applies to fiscal year 2020, ending in September 2020.
In spite of the fact that this seems like a trivial matter, it is important to understand that unlike mentor-protégé programs in other departments, the DOD program has a healthy budget (typical agreements of $750,000 to $1M or $2M) that can in fact get passed through the mentor for the benefit of the mentor-protégé partnership, i.e., mostly the protégé.
The important thing to understand is that this allows the DOD to pay the mentor for money that is used by the mentor-protégé agreement in ways that benefit the protégé in the future. Because this is a money granting program, it’s authorized not in annual increments (though it’s still budgeted annually), but in multiple-year increments.
As noted above one of the changes with reauthorization was an alignment of the definition of small businesses with other definitions in other classification systems like NAICS codes. If those definitions are different you could be small in one place and not small in another.
One of the interesting things about this legislation is that the new definition says you cannot exceed the size standard of the primary NAICS code but doesn’t say how much work must be in that code.
Why is that important? At TAPE, for example, we have work in three or four different NAICS codes. We do a lot of work in 541611 (administrative), which is a size standard of $16.5M, and we’re larger than that. On the other hand, we have a lot of work in in 541512 and 541513 (IT), which have a size standard of $30.5M, which we’re within so we’re considered small, and 541330 (engineering), which has a size standard of $41.5M, where we’re also small.
So we do some of our work in a NAICS code for which we are large, which is perfectly okay. It just means if it was recompeted we’d have to compete as a large business, or find a small business partner.