8(a) regulations effective March 14, 2011:
Joint Ventures – SBA must approve agreement prior to award of 8(a) contract
JV may not be awarded more than 3 contracts over a 2 year period without a finding of general affiliation
Mentor-Protege Program changes – mentor can have as many as 3 proteges at once, protege can have another mentor for a secondary NAICS code, mentor must demonstrate financial health, non-profit mentor is okay, cannot be a mentor and a protege at the same time, assistance must be tied to protege’s approved business plan.
Mentor and protege may JV as a small business provided the protege qualifies as small for the procurement.
The SBA must approve the Mentor Protege Agreement before the two firms submit an offer as a JV in order to receive exclusion from affiliation.
Once protege leaves the M/P program, only ongoing contracts are protected by affiliation exclusion
Consequences to mentor for failure to provide assistance agreed to in plan – termination of agreement, ineligible to be Mentor, possible substitution of Protege firm for JV on the contract.
Economic disadvantage rules – total personal assets cannot exceed $4 million initially/$6 million for continuing eligibility. IRAs the only excluded asset, residence and business are included.
Economic disadvantages rules – net worth $250k initially; $750k continuing eligibility. Excludes IRAs (new exclusion); excludes FMV of primary residence, excludes value of business. Personal income – $250k initially, $350k continuing. Averaged over previous 3 years. Income received from S Corp, LLC or partnership excluded from net worth where used by owner to pay taxes or funds reinvested into company.
SBA can consider spouse financial condition if spouse has a role in the busines, or has loaned money or provided credit support to, or guaranteed a loan to business. Must submit separate financial information for spouse unless legally separated.
Excessive withdrawals – withdrawal excludes officer salaries (unless firm circumventing regulations by payment of salaries). Firms with sales up to $1 million – $250,000; firms with sales of $1 million – $2 million – $300,000; firms with sales over $2 million – $400,000
8(a) Joint Ventures – “populated” or “unpopulated”:
- If a populated JV, JV must demonstrate how performance of the contract is controlled by the 8(a) managing venturer, and the non-8(a) JV partner may not act as subcontractor
- If an unpopulated JV (or has only administrative personnel) – project manager must be employee of 8(a) managing venturer, 8(a) partner must perform at least 40% of the work performed by the joint venture (compare “significant portion” prior language). 8(a) must receive profits commensurate with work performed
NAICS Code and Size Standard – 8(a): if participant exceeds size standard for its primary NAICS for 3 successive program years, SBA may graduate the firm from the 8(a) program.
Can avoid graduation by changing to a secondary NAICS code in adjusted business plan if the firm demonstrates that through growth its primary industry is changing.
Military call-up of 8(a) owner: owner can elect suspension if called to active duty to preserve full 9-year program term
Review/audit rules – new thresholds