The Department of Defense’s (DoD) Mentor-Protégé program (MPP) was designed to strengthen the capabilities of small businesses, increase their participation in the DoD contract pool, and contribute to “the diversity and vitality of the U.S. Defense Industrial Base (DIB).” Like the Small Business Administration’s MPP, the program pairs small businesses with larger contractors to develop mutually beneficial relationships. Established on November 5, 1990, the DoD’s MPP has been consistently reauthorized over the last 30 years, but only as a pilot. That could quickly change, as new recommendations from the Defense Business Board (DBB) seek to bring permanency and increase participation, understanding, and oversight.

Following the COVID-19 pandemic and its negative effects on the small business community and  Government Accountability Office findings suggesting the number of small business suppliers dropped by over 40% since 2011, the DBB released a study finding that the MPP has had a positive impact on supporting small businesses and has driven innovation. For instance, the MPP has aided in an increase in protégé revenues, contract awards, and employment, with 1,200 protégés having participated in the MPP since its inception. In FY2021 alone, the program amounted to $4.16 billion in contract value. Additionally, protégé firms have contributed to various significant defense programs, including the F-35 Lightning II, KC-130J Hercules, and Standard Missile 3 (SM-3).

Farooq Mitha, the Director of DoD’s Office of Small Business Programs, told the DBB on August 9 that contracting with the small business community is crucial as the United States competes with China and Russia. Small businesses infuse new technologies, techniques, and approaches into the industry, which the DoD could not otherwise benefit from if it only procured goods and services from large businesses. Unfortunately, new government security requirements, like the updated Cybersecurity Maturity Model Certification program and additional oversight, make it hard for small businesses to pursue – and win – opportunities across the DoD.

Mitha argues the MPP is one tool that can promote the small business community and allow the military to continue to reap the innovative approaches. The outlook is not entirely bright, however. The program faces notable headwinds with various challenges impeding growth. Thankfully, the report offers solutions to those problems.

Addressing Declining Participation

Currently, the number of small businesses serving the DoD is declining. The DBB report argues there are not enough mentors to go around as only 0.2% of the 15,000 total DoD suppliers serve as MPP mentors. The shortfall makes finding the right relationship difficult for many prospective protégés. Currently, the program primarily incentivizes mentors to participate through direct cost reimbursements, but the shortage of mentors suggests that isn’t enough.

The MPP recommends implementing additional incentive structures to pull potential mentors off the sidelines including the following:

  • Awarding points on RFPs for participation.
  • Allowing MPP participants to create joint ventures with an affiliation exemption.
  • Giving preferential contracting status to graduated protégés.

Lengthening the Mentor-Protégé Agreement Duration

The standard DoD Mentor-Protégé Agreement (MPA) lasts two years. This duration can be problematic as small businesses fail at disproportionately high rates – about 33% fail within the first two years, and over 50% don’t last five years. With the DoD sales cycle being approximately two years – longer in some cases – a two-year MPA is insufficient to allow small businesses to appropriately develop and gain the skills required to become a direct DoD supplier, independent from the mentor.

“Consider extending the standard MPA agreement duration to a three-year period, with further extension options if appropriate,” the DBB argues. The vast majority of MPP stakeholders agree that the MPA duration is too short, and a longer window would provide a better opportunity to benefit from the mentor-protégé relationship and better position the protégé to succeed long term.

Measuring Effectiveness

Currently, antiquated tools and unclear success metrics make capturing and interpreting data necessary to determine the program’s effectiveness almost impossible. With the MPP tracking the program through a mishmash of emails, PDFs, and paper forms, critical insights are hard to glean, and progress is difficult to track. The lack of reliable information makes it difficult to adjust programming to maximize its benefits.

The DBB recommends the DoD assess current data collection and interpretation protocols and implement the best tool to assess program effectiveness. The DBB also recommends expanding what data is tracked to include data that allows the DoD to understand interest levels and the program’s implications.

Optimizing Oversight

No single person or office in the DoD is in charge of remedying the decline of small business participation in federal contracting or who can serve as a singular point of contact for small businesses. The DBB report calls the DoD small business programs “disparate and spread throughout the department,” while the “DoD’s Small Business Strategy stresses the importance of a unified management strategic direction.”

The DBB recommends establishing a single office and integrator responsible for all DoD small business programs within the Office of the Secretary of Defense (OSD). This consolidation would simplify the process and provide accountability while increasing collaboration. A single point of contact would also aid industry, streamlining the administrative process.

Instituting Mentor-Protégé Program Permanency

Even after 30 years, the MPP is still only a pilot. The government’s reluctance to formally commit to the program long term has prompted industry concern and confusion. Uncertainty is not exactly an economic driver and may result in mentors and protégés opting not to pursue an MPA as significant time, effort and commitment are required.

The DBB argues this uncertainty can be reduced – if not eliminated — if the program is codified in a Title 10 section, making it a permanent program. With it comes congressional oversight, including mandatory hearings, and permanent funding as a designated line item in spending bills. Further, to ensure uncertainty doesn’t creep back in with shifting funding priorities, the DBB recommends that “the MPP funding be specifically appropriated for use only by the DoD.”

Conclusion

“Small businesses are critically important to the DoD. The Department has a strategic interest in leveraging small business innovation and capabilities to address our global challenges and ensure mission success,” DoD Secretary Lloyd Austin claimed. “Increasing opportunities for small business is one of my key priorities.”

The MPP represents one of DoD’s most essential tools to impede the hemorrhaging of contracts awarded to small businesses, promote the small business community, and compete with our near-peer adversaries. The DBB report showcases the program’s positive impact on the small business community as well as prime contractors and the DoD but effectively points out significant headwinds preventing it from achieving its full potential. The recommendations represent well-researched, concrete steps to increase participation, understanding, oversight, and certainty. While their implementation is far from an actuality, it is refreshing to hear the program may be getting a facelift and the small business community – a helping hand.

For more information on the firm’s Government Contracts practice, and specifically, assistance on mentor-protégé relationships, contact the author at toverman@bassberry.com. The author would like to thank our law clerk Stephen Finan for his contributions to this article.