On December 15, the U.S. Senate passed the National Defense Authorization Act (NDAA) for the Fiscal Year 2023 by an 83-11 vote. The annual legislation changes U.S. defense agencies’ policies and regulations and provides necessary guidance for how appropriations can be spent. It is frequently used to implement changes to federal procurement policy, and one of those changes this year is that Section 856 codifies the Department of Defense’s (DOD) Mentor-Protégé Program (MPP) – with some tweaks. 

Lower Threshold for Mentor Eligibility

The number of small businesses serving the DOD has declined significantly. In 2019, the Senate Committee on Small Business and Entrepreneurship found the number of small prime awardees decreased by 32% between 2009 and 2018. The MPP was implemented to stem the loss of small business primes, however, a lack of mentors is frustrating the MPP’s purpose. 

Section 856 significantly changes the eligibility requirements for mentors by lowering the value of awarded contracts necessary to demonstrate the mentor can impart value to a protégé firm. Under previous regulations, one way to demonstrate that a potential mentor can impart value to a protégé firm is by showing the mentor was awarded $100,000,000 or more in DOD contracts. Section 856 would significantly lower that threshold to $25,000,000, allowing a broader swath of previously ineligible firms to become mentors. The change should help protégés easily find mentors and enable more mentors to participate and benefit from the MPP. 

Increased Duration for MPP Relationships

Currently, MPP relationships may only last two years unless the Secretary of Defense determines unusual circumstances justify a term of up to five years. The participation period was a nagging issue as many, including the Defense Business Board, argued the period was too short for protégés to adequately develop the tools and build the necessary understanding to compete for DOD contracts independently. Additionally, the DOD sales cycle is roughly two years, so protégés who bid and win awards will likely not receive the money until after the MPP relationship has ended. Fortunately, the NDAA adds a year to the participation period allowing MPP relationships to last three years. 

Enhanced Data Collection

Another frequently highlighted challenge with the MPP is the lack of systems to capture data making it difficult to assess the program’s effectiveness and make changes to better realize its goal. Section 856 requires the Director of the Office of Small Business programs to “maintain outcome-based performance goals and annually collect data through an automated information system (if practicable) assessing such goals” and undertake an independent review of the MPP every three years. 

Pilot Program to Incentivize Protégé Participation

Section 856 also establishes a pilot program that allows protégés to receive up to 25% of the reimbursement their mentor is eligible for when implementing “an engineering, software development, or manufacturing customization…in order to ensure that a technology developed by the protégé firm will be ready for integration with a program or system of the Department of Defense.” The pilot program will end in five years. 

Going Forward

The new legislation reflects an attentiveness to industry concerns related to the MPP and a broader commitment to the program’s overall mission. The new regulations should allow for a larger pool of eligible mentors, a longer participation period to allow more robust protégé development, better data to underlie informed decisions, and a pilot program seeking to incentivize protégé participation. As we move forward, we will likely see similar improvements based on participation, impact, and data availability, but what is more certain – its codification means the MPP is here to stay. 

If you have questions about what to do in light of these Mentor-Protégé developments, please contact Richard Arnholt at rarnholt@bassberry.com or 202-827-2971.