As previously reported, on July 22, 2016, the Small Business Administration (SBA) issued a final rule establishing a government-wide mentor-protégé program encompassing all small business concerns. Though effective as of August 24th, the SBA didn’t fully transition into the new system until November 2016. And as with any new program, in an effort to eliminate confusion and provide clarity for the program’s participants, the SBA has issued corrections to the rule.
On December 27, 2016, the SBA published technical modifications to the mentor-protégé regulations in addition to minor revisions previously issued in October 2016. Under the corrected version of the rule, the SBA has removed ambiguity in the profits allocated to a joint venture participating in the 8(a) program. Under the original rule, the protégé could perform only 40% of the total work of the joint venture, but was required to receive at least 51% of the profit. To eliminate the anomaly, rather than requiring strict percentages, the rule now requires 8(a) Participant(s) in a joint venture to receive profits from the joint venture that is commensurate with the work performed.
To ensure that SBA’s intent is properly conveyed throughout the mentor-protégé regulations, joint venture profit requirements have been changed for the rest of the small business programs as well. Rather than receiving profits based on ownership interests, Service-Disabled Veteran-Owned, Women-Owned, and HUBZone small business program participating in joint ventures must now receive profits commensurate with the work they perform. This change is effective as of December 27, 2016.