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DoD is issuing a final rule amending the Defense Federal Acquisition Regulation Supplement to implement section 861 of the National Defense Authorization Act for FY 2016, which provides the following amendments to the DoD Pilot Mentor-Protégé Program ("the Program"):

• Requires mentor firms to report assistance provided to or obtained for protégé firms; new subcontracts awarded to protégé firms; any extensions, increases in the scope of work, or additional, unreported payments to protégé firms; all Federal contracts awarded to the mentor and protégé firms as a joint venture; whether the terms of the mentor-protégé agreement have changed; and a narrative describing the success assistance provided under the Program has had in addressing the protégé firm's developmental needs, the impact on DoD contracts, and addressing any problems encountered.
• Requires mentor firms and protégé firms to meet new eligibility criteria.
• Limits the number of mentor-protégé agreements to which a protégé firm may be a party to one at a time.
• Limits the period of time during which a protégé firm may participate in mentor-protégé agreements under the Program to five years.
• Requires mentor-protégé agreements to address the benefits of the agreement to DoD and goals for additional awards for which the protégé firm can compete outside the Program.
• Removes business development assistance using mentor firm personnel and cash in exchange for an ownership interest in the protégé firm from the types of assistance that a mentor firm may provide to a protégé firm.
• Prohibits reimbursement of any fee assessed by the mentor firm for certain services provided to the protégé firm while participating in a joint venture with the protégé firm.

One respondent submitted a public comment on the proposed rule.  This rule will slightly increase the costs for contractors participating in the program by introducing new reporting requirements, as required by the statute; however, these costs are offset by benefits offered by the Program.  For example, the Program provides incentives to both mentor and protégé firms.  Mentor firms may receive credit toward the goals in their small business subcontracting plan for the funds they spend on developmental assistance for their protégé firms.  The Program offers protégé firms the opportunity to learn about contracting with DoD and to receive subcontracts from an established, successful DoD contractor.

Statement of Need:

This final rule amends the DFARS to implement section 861 of the National Defense Authorization Act (NDAA) for Fiscal Year 2016, which provides amendments to the DoD Pilot Mentor-Protégé Program (the Program). These amendments include new reporting requirements that will provide information to DoD’s Office of Small Business Programs to support decisions regarding continuation of particular mentor-protégé agreements; a three-year extension of the Program; and changes to the requirements for business development assistance provided by a mentor firm and for the reimbursement of fees assessed by the mentor firm. This rule is needed to implement these statutory requirements.

Summary of the Legal Basis:

This rule is proposed under the authority at 41 U.S.C. 1303, Functions and authority, which provides the authority to issue and maintain the Federal Acquisition Regulation and executive agency implementing regulations.  In addition, this rule is necessary to implement the statutory amendments made to the mentor protege program by section 861 of the NDAA for FY 2016.

Alternatives:

There are no viable alternatives that are consistent with the stated objectives of the statute.

Anticipated Costs and Benefits:

The annualized cost to the public is anticipated to be approximately $20,000 over the next four years, after which the Program is scheduled to end. Nearly all of these costs are borne by mentor firms. The anticipated cost is based on the number of firms currently participating in the Program, the number of new mentor applications DoD receives each year, and the number of new mentor-protégé agreements submitted for DoD approval each year under the Program. The Government estimated the cost of various activities mentor and protégé firms must perform to comply with the rule, including submission of reports.

The anticipated costs are offset by benefits offered by the Program. For mentor firms, these benefits include credit toward the goals in their small business subcontracting plans for the developmental assistance they provide to their protégé firms. Participation in the Program as a mentor is one way for mentors to demonstrate a good-faith effort to comply with their subcontracting plans. For protégé firms, the benefits of the Program include an opportunity to gain assistance from a successful mentor that will enable them to grow and develop as a business. Such assistance will help them obtain subcontracts with DoD contractors and eventually contracts with DoD.

Risks:

If this rule is not finalized, all developmental assistance provided under the Program will end on September 30, 2018. As of that date, mentor firms will no longer be able to receive credit toward the goals in their small business subcontracting plans for developmental assistance provided to protégé firms. Protégé firms will no longer have the opportunity to learn about contracting with DoD from a mentor who is a successful DoD contractor. In addition, the Government will lose access to a pool of potential new contractors and subcontractors, therefore losing an opportunity to strengthen and diversify the defense industrial base.