Update Your 8(a) Joint Venture Agreements Now: SBA Issues New Rule

The Small Business Administration (“SBA”) published a final rule on Oct. 16, which became effective on Nov. 16, consolidating the 8(a) Business Development Mentor-Protégé Program and the All Small Mentor-Protégé Program. The SBA made several key changes that immediately affect joint ventures seeking small business set aside contracts. Specifically, the SBA made two significant changes to two of the mandatory reporting provisions required in each small business joint venture agreement: (1) transitioning financial reporting from quarterly financial statements to annual performance-of-work statements and (2) replacing profit and loss statements with project-end performance-of-work statements. Mentor and Protégé businesses are already required to submit project end reports for every contract set aside or reserved for small businesses and the revision consolidates the requirement by eliminating the project end profit and loss statement. The project end reports must be submitted to the SBA within 90 days of contract completion. The SBA did not make these changes applicable to socio-economic small business programs (8(a) BD, SDVOSB/VOSB, HUBZone, EDWOSB/WOSB programs). This distinction is crucial. Joint ventures seeking to win awards for both small-business set-aside and socio-economic set-aside contracts will have to address each type of contract requirement in the joint venture agreement or form separate joint ventures for each type of contract.

The final rule made several other important changes:

1. An 8(a) BD Program joint venture is no longer required to submit its joint venture agreement for SBA review and approval prior to contract award.
2. 8(a) BD Program participants are no longer prohibited from receiving contract awards prior to SBA approval of a business plan. 8(a) participants may now immediately receive contract awards upon admission to the program. Business plans must be submitted to the SBA for approval within 60 days of admission.
3. Multi-level review is no longer required prior to allowing an 8(a) participant to voluntarily withdraw or graduate early from the program; and
4. The SBA is no longer required to simultaneously initiate termination proceedings and suspension proceedings for 8(a) BD Program participants. The SBA may now immediately suspend an 8(a) BD Program participant.

The SBA appears to be listening to complaints and comments received in enacting reforms to its small business programs. If you are an SBA Small Business program participant or considering applying and have questions or would like assistance drafting or reviewing a compliant joint venture agreement, Clark Hill’s Government Contracts and Regulation team is standing by to answer your questions.

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