[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]
MAXIMIZING MENTORING: HOW ARE THE SBA
AND DOD MENTOR-PROTEGE PROGRAMS
SERVING SMALL BUSINESSES?
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON CONTRACTING AND WORKFORCE
OF THE
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTEENTH CONGRESS
FIRST SESSION
__________
HEARING HELD
OCTOBER 27, 2015
__________
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Small Business Committee Document Number 114-027
Available via the GPO Website: www.fdsys.gov
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HOUSE COMMITTEE ON SMALL BUSINESS
STEVE CHABOT, Ohio, Chairman
STEVE KING, Iowa
BLAINE LUETKEMEYER, Missouri
RICHARD HANNA, New York
TIM HUELSKAMP, Kansas
TOM RICE, South Carolina
CHRIS GIBSON, New York
DAVE BRAT, Virginia
AUMUA AMATA COLEMAN RADEWAGEN, American Samoa
STEVE KNIGHT, California
CARLOS CURBELO, Florida
MIKE BOST, Illinois
CRESENT HARDY, Nevada
NYDIA VELAZQUEZ, New York, Ranking Member
YVETTE CLARK, New York
JUDY CHU, California
JANICE HAHN, California
DONALD PAYNE, JR., New Jersey
GRACE MENG, New York
BRENDA LAWRENCE, Michigan
ALMA ADAMS, North Carolina
SETH MOULTON, Massachusetts
MARK TAKAI, Hawaii
Kevin Fitzpatrick, Staff Director
Stephen Denis, Deputy Staff Director for Policy
Jan Oliver, Deputy Staff Director for Operation
Barry Pineles, Chief Counsel
Michael Day, Minority Staff Director
C O N T E N T S
OPENING STATEMENTS
Page
Hon. Richard Hanna............................................... 1
Hon. Judy Chu.................................................... 2
WITNESSES
Mr. A. John Shoraka, Associate Administrator of Government
Contracting and Business Development, Small Business
Administration, Washington, DC................................. 4
Mr. Kenyatta Wesley, Acting Director, Office of Small Business
Programs, United States Department of Defense, Alexandria, VA.. 6
APPENDIX
Prepared Statements:
Mr. A. John Shoraka, Associate Administrator of Government
Contracting and Business Development, Small Business
Administration, Washington, DC............................. 18
Mr. Kenyatta Wesley, Acting Director, Office of Small
Business Programs, United States Department of Defense,
Alexandria, VA............................................. 21
Questions for the Record:
None.
Answers for the Record:
None.
Additional Material for the Record:
None.
MAXIMIZING MENTORING: HOW ARE THE SBA AND DOD MENTOR-PROTEGE PROGRAMS
SERVING SMALL BUSINESSES?
----------
TUESDAY, OCTOBER 27, 2015
House of Representatives,
Committee on Small Business,
Subcommittee on Contracting and Workforce,
Washington, DC.
The Subcommittee met, pursuant to call, at 10:00 a.m., in
Room 2360, Rayburn House Office Building. Hon. Richard Hanna
[chairman of the subcommittee] presiding.
Present: Representatives Hanna, Knight, Hardy, Chu,
Lawrence, Clarke, and Bridenstine.
Chairman HANNA. The memorandum from members of the DOD
testimony, members of our Committee, it references information
which supposedly was provided to the Committee. Unfortunately,
even though both Minority and Majority staff requested this
information several weeks ago, it was not provided.
DOD did provide it to the Senate Committee on Small
Business and Entrepreneurship, who were kind enough to share it
with us. Last night after DOD told staff they could not get the
information--I would like to say that is not right, it is not
fair to waste our time, and generally there is no excuse for
it. It hindered the ability of this Committee to provide
thorough and thoughtful oversight.
I would remind our witnesses that what happens in this room
is for the public good, and we are here for their benefit, and
they deserve better than this. That is directed to you, Mr.
Wesley, with all due respect. I think it is only fair if I give
you a minute to respond.
Mr. WESLEY. It was provided to both the HAS and SAS in
previous requests for information. When we went to provide it
to you, it was held up because it had not been cleared a second
time. That is the process of the Department to get items
cleared before we can release it. Now, we are going through
that process to get it re-cleared for you, and it will be
provided. It was not our intention to hide it or keep it from
you, I want to make that clear.
Chairman HANNA. I believe you because I know it is out
there. The problem is we might not have had this hearing at
this date had we known there was information that was not
provided that should have been provided.
Mr. WESLEY. Just for the record----
Chairman HANNA. It makes our hearing incomplete.
Mr. WESLEY. Just for the record, that was not requested of
me weeks ago. It was requested of me in a phone call last
Friday. I did agree to submit it, but I had to go through the
proper clearance to do so. It will be provided as requested.
Chairman HANNA. Well, I suggest to you that your staff,
whoever told you Friday, is culpable.
Mr. WESLEY. No, that was on a phone call with your staff,
sir.
Chairman HANNA. Is that right?
Mr. WESLEY. Yes, sir.
Chairman HANNA. Apparently we talked to you two weeks ago.
We all know where we are on this. Would you like to say
anything about this before we move on?
Ms. CHU. No.
Chairman HANNA. Get to the point, right. Thank you very
much. Thank you for being here.
The Federal Government has long seen the value of having
successful businesses mentor small and emerging businesses, 13
Federal programs have sprung up to encourage mentor-protege
relationships. However, a 2011 Government Accountability Office
report questioned the long term effectiveness of these
programs.
At that time, the Subcommittee examined these programs and
examined whether some inadvertently led small businesses to
make decisions that would ultimately disqualify them from
Federal contracting. In other words, in its effort to help
small businesses, the Federal Government may have harmed those
small businesses.
As a result, this Committee included improvements to the
civilian agency and Small Business Administration mentor-
protege programs as part of the National Defense
Reauthorization Act for 2013.
I would like to say Ranking Member Chu was part of that at
the time. She actually led that.
As SBA is beginning to implement these changes, now is the
right time to ask three questions. The first question is
obvious. Are the changes the SBA is making improving the
operation of civilian agency and Government-wide mentor-protege
programs? The second question goes to the heart of the problem,
how are SBA and the Department of Defense, DOD, defining
success under the various programs, and are we able to see if
any program deliver on its promises. The third question,
duplication. While there may be a need for separation of DOD
mentorship programs, are there better ways to harmonize all the
mentor-protege programs.
Mentor-protege programs require both parties to invest
significant time and resources. Federal agencies provide
incentives for mentors to make these commitments and must also
approve and oversee the programs.
We owe it to the taxpayer and program participants alike to
ensure that Federal mentor-protege1 programs ultimately
increase the competitive viability of small contractors, so we
can all reap the benefits of a healthier industrial base.
I look forward to hearing your testimony today, and I turn
to the ranking member for her opening comments.
Ms. CHU. Thank you, Mr. Chairman, for holding this
important hearing. I am happy to be here today to fill in for
Congress Member Takai, the ranking member of the Contracting
and Workforce Subcommittee.
With over $400 billion spent for goods and supplies, the
Federal procurement marketplace provides an important customer
base for small business. However, the total volume and value of
contracts has declined over the last several years, largely due
to budget constraints and sequestration. This has led to
greater competition between firms as fewer contracting dollars
are available.
Given these challenges, the tools and programs available to
small businesses play a vital role in enabling small businesses
to break into the Federal marketplace. Today's hearing will
allow us to focus on the mentor-protege program and what it
means for small firms.
Through mentor-protege programs, small businesses are able
to receive a broad array of business development assistance
through various methods, including training, obtaining
certifications, and in some cases, receiving loans or non-
competitive subcontract awards.
These benefits not only help protege firms contract with
the Government, but also assists them in building up their
capacity. Doing so enables them to successfully compete in the
marketplace at the conclusion of their mentor-protege
agreement.
Small businesses are not only the beneficiaries of these
programs, they also incentivize large companies to match with a
protege firm. However, there are concerns that mentor-protege
programs have become too focused on providing incentives to
mentors rather than ensuring proteges actually receive their
designated benefits.
In fact, GAO previously found that while certain programs
had policies in place to ensure that participants benefitted
from the various mentor-protege programs, the information
regarding the ability of the protege to compete for contracts
without the mentors was not available because agencies did not
collect the data on proteges after the conclusion of the
agreement.
While some programs have policies to ensure participants
benefit from the mentor-protege programs, GAO found that
conclusory data collection was inadequate. In fact, we do not
know if protege companies are able to successfully compete for
contracts without their mentors because agencies neglect to
collect that type of information.
Furthermore, several groups have expressed frustration
regarding the lack of parity between small business eligibility
rules in the various mentor-protege programs.
As a result of these findings, many changes have been made
or proposed to the existing mentor-protege programs. Congress
passed legislation that would require SBA to approve mentor-
protege programs at civilian agencies to ensure that proper
controls were put in place.
In fact, in the 112th Congress when I served as ranking
member of the Contracting and Workforce Subcommittee, I worked
with Congress Member Schilling to introduce the Building Better
Partnerships Act. This bill, which was incorporated into the
2013 NDAA, and eventually passed into law, required SBA to
expand their program to include other small business subgroups
that had previously been excluded.
Earlier this year, SBA finally released the proposed rule
for these changes, and the final rules are expected to be
released early next year. However, changes to mentor-protege
programs have not been limited to civilian programs.
Despite metrics showing growth in its small business
participants, many changes were made to the DOD's mentor-
protege program. These changes reflect growing doubt that the
program is effectively executing its mandated goal, and others
worry that the program cost/reimbursement tool is not being
properly utilized at some mentor firms.
Because the program is not permanent and requires
reauthorization, these concerns may never be addressed. In
order to do so, Congress must reach a compromise on a fair NDAA
that protects the future of this program.
We know these programs make a difference to small
businesses. We have seen many instances of their success. It is
my hope that today's hearing will shed light on how the various
mentor-protege programs are aiding small businesses that
compete in the Federal marketplace.
I look forward to hearing about the steps that DOD and SBA
are taking to ensure these small firms are in fact benefitting
from their mentor-protege agreements. With that, I thank the
witnesses for testifying, and I yield back.
Chairman HANNA. Thank you. If members have opening
statements prepared, I ask they submit them for the record.
You have five minutes. When the light goes yellow, you have
another minute. We will be lenient. We have a small panel
today. I think we will have time. We do want to hear what you
have to say.
Before we get started, I would like to welcome Congressman
Bridenstine, who is joining us today for purposes of this
hearing. Thank you for being here, sir.
We have one panel today. Our first witness is John Shoraka,
the Associate Administrator for Government Contracting and
Business Development at the Small Business Administration. His
office has jurisdiction over size standards, small business
goals, and contracting regulation, as well as Government
contracting and business development programs.
Our second witness today is Mr. Kenyata Wesley, the Acting
Director of Small Business Programs at the Department of
Defense. Mr. Wesley is responsible for the small business
program and policy, including the SBIR and STTR, and mentor-
protege programs.
Thank you both for being here. Mr. Shoraka, you can begin.
STATEMENTS OF A. JOHN SHORAKA, ASSOCIATE ADMINISTRATOR FOR
GOVERNMENT CONTRACTING AND BUSINESS DEVELOPMENT, SMALL BUSINESS
ADMINISTRATION; KENYATA WESLEY, ACTING DIRECTOR OF SMALL
BUSINESS PROGRAMS, DEPARTMENT OF DEFENSE
STATEMENT OF A. JOHN SHORAKA
Mr. SHORAKA. Thank you, Chairman Hanna and Ranking Member
Chu, and members of the Subcommittee. I am honored to be here
today to discuss how my agency is implementing changes to the
mentor-protege program and the mentor-protege programs of other
agencies, as mandated by Section 1347 of the Small Business
JOBS Act of 2010, and Section 1641 of the National Defense
Authorization Act of 2013.
The Small Business Administration has a long established
8(a) mentor-protege program, which is designed to enable
approved mentors to provide various forms of business
development assistance to eligible 8(a) program participants.
This can range from technical and/or managerial assistance,
financial assistance in the form of equity investments and/or
loans, subcontracts, and/or assistance in performing Federal
prime contracts through joint venture arrangements.
The goal of the 8(a) mentor-protege relationship is to
enhance the overall capability of eligible proteges, improve
the protege's ability to successfully compete for both prime
and commercial contract opportunities, and increase their
chances for entrepreneurial success upon completion of the nine
year 8(a) business development program.
Success is different for each 8(a) participant because each
mentor-protege agreement uniquely describes the protege's
specific needs and provides a detailed timeline for delivery of
the assistance the mentor commits to provide to address those
needs.
Proteges receive assistance in developing their
infrastructure, building technical experience in past
performance, and developing quality management systems. They
also receive assistance with obtaining security clearances for
their employees and facilities, developing prime contract
proposal writing skills, and strengthening their ability to
manage finances and general administrative business operations.
The 8(a) mentor-protege relationship can also enhance the
protege's competitiveness, with both 8(a) and non-8(a) contract
awards, as larger, more established mentors can enter into
joint venture agreements with proteges to compete for certain
Federal Government contracts and subcontracts.
Currently, there are 389 active 8(a) mentor-protege
agreements in SBA's portfolio, and 141 SBA approved 8(a)
mentor-protege joint ventures. In fiscal year 2015, 8(a) joint
venture obligations were valued at $1.42 billion. This includes
both 8(a) and non-8(a) procurements.
One of SBA's top priorities is to ensure that the benefits
of its contracting programs flow to the intended recipients,
and oversight of the agency's 8(a) mentor-protege program is
conducted annually by SBA District business opportunities
specialists and the headquarter offices of continuing
eligibility review.
Each year, mentor-protege relationships are reviewed to
ensure that teams continue to meet the objectives of the
program, and to monitor activities to mitigate any potential
risks associated with fraud, waste, and abuse.
At least annually, the SBA evaluates the success of the
mentor-protege relationship to ensure that each protege
received the business development assistance promised under its
agreement, and that the relationship continues to be of benefit
to the protege firms.
Over the past several years, Congress has significantly
broadened the scope of SBA's mentor-protege authority. The JOBS
Act of 2010 enabled the agency to expand the mentor-protege
program to include all other socioeconomic category
participants. Subsequently, in the NDAA of 2013, Congress
authorized the SBA to create a mentor-protege program to
include all small businesses. On February 5, 2015, the SBA
issued a proposed rule to establish a Government-wide small
business mentor-protege program, and the comment period for
that proposed rule has since closed.
We are currently drafting a final rule that will then be
sent for interagency review. SBA has begun planning for
implementation and has established a working group to oversee
the expansion of the program. NDAA 2013 also required the SBA
to review the mentor-protege program of other agencies within
one year of implementing the final rule to determine whether
they should continue. The Department of Defense's program was
specifically excluded.
SBA is committed to the full expansion of the mentor-
protege program, and across the Administration, we are
committed to ensuring that more small businesses have access to
programs that will enable them to compete for more contracting
opportunities, grow their businesses, and create jobs in our
communities.
As Administrator Contreas-Sweet highlighted in her
priorities' speech, the SBA will be a market maker for small
companies by opening new business channels within the Federal
Government.
I want to thank you for your continued leadership and
support, and I look forward to your questions.
Chairman HANNA. Thank you. Mr. Wesley?
STATEMENT OF KENYATA WESLEY
Mr. WESLEY. Thank you for the opportunity to speak today
about the Department of Defense's mentor-protege program and
how we serve small businesses.
I would like to take the time to explain to you that the
mentor-protege program is not just a tool for us but it is one
of the most important tools for us in the Department to
control, grow, and mentor our industrial base.
The actual mentor-protege program for us, unlike our
partners at the SBA, is not just about job growth. It is truly
about actually having companies around that can actually ramp
up in a time of any war or contingency environment that may
arise.
The mentor-protege program allows us to actually get new
ideas into the Department and teach small businesses how to
actually perform and function within the role of DOD.
Without that, small businesses have an impasse often when
it comes down to doing business with the Department, not just
with security regulations and policies, but also with
accounting regulations and policies, being able to perform cost
type contracting and receive those endorsements and
certifications. Safety requirements that DOD often requires to
work on installations when it comes to manufacturing.
Having a mentor that has already gone through that process,
that understands that process, this becomes a valuable tool to
remove barriers to entry into the Department.
DOD was the first agency to have a Federal mentor-protege
program and become fully operational, and is the only Federal
agency currently required by statute to collect information on
proteges after they exist the program, of which we do.
Ranking Member Chu, we are one of those agencies who
actually do track that information and actually provide it back
to our sister agency, the SBA, of how they perform up to two
years after the program. We actually provide those metrics.
We actually also collect information on proteges while they
are in the program, and I will discuss that later during the
question and answer period. They also have insights eligible to
how we measure success.
One of the first things I did upon arrival 17 months ago
into the Department was to set up a metric program to measure
return on investment for the Department. One of the things we
have done to improve the long term utilization of these
companies is we have tied the mentor-protege agreements
beginning this year, this fiscal year, to the top 10 challenges
within the Department Commander's top 10 issues. That way, they
are tied specifically to a program system of record or work.
That way, when they actually get to subcontract out with a
large prime, to get experience, we actually are now trying to
combat their number one issue during source selection, which is
past performance.
One of the most rigorous challenges a small business has
when they go up and compete against established corporations or
established companies is they are often given a neutral rating
when it comes to source selection. A neutral rating does not
harm them, but when you are competing against someone who has
had decades of successful performance, it does not help you
either.
What we are doing is trying to establish where you can
actually receive a rating as a subcontractor. Therefore, that
would then eliminate their being behind the eight ball--that is
my own phrase--going after a prime contract opportunity.
We are trying to not just build our industrial base, but we
want to maintain the industrial base. The mentor-protege
program is one of those tools where we can keep companies
afloat when it is not a time of war or contingency operation,
because now they can receive subcontract opportunities, maybe
at lower values, but it keeps the doors open, so that way when
we need them, they are around to ramp up in the future.
In closing, I would like to just state that I would thank
you all for this opportunity. I look forward to the remainder
of our dialogue, and I will be free to answer any questions
that you have. Thank you.
Chairman HANNA. Thank you, Mr. Wesley. I am going to ask
Ranking Member Chu to ask the first question. Her knowledge in
this subject is much greater than anyone else on this panel, I
am guessing.
Ms. CHU. Thank you, Mr. Chair. Mr. Wesley, thank you for
collecting that data during and after the proteges do leave.
Mr. Shoraka, the mentor-protege programs are very important
to me. In the 112th Congress, as you heard, I helped introduce
the Building Better Business Partnerships Act, which was
incorporated into the 2013 NDAA. I also introduced an amendment
which passed into law which allowed for mentor-protege
agreements to be grandfathered into the new program until the
expiration date of their agreements.
I would like to follow up on the implementation of this
amendment. Have you seen these preexisting agreements fitting
into the program, and what steps is SBA taking to ensure that
these existing mentor-protege programs are still honored?
Mr. SHORAKA. Thank you for that question. We have done an
inventory of the existing mentor-protege programs at various
agencies, and there are a number of agencies that currently
have mentor-protege programs that are very different and unique
from the Small Business Administration's mentor-protege
program.
At an agency, typically, you look at a prime-sub
relationship, where the mentor is the prime and the protege is
the sub. We have had long discussions with the agencies that
have current plans about how those get implemented into ours,
as well as potentially continue on under our umbrella, because
they are unique and different from the joint venture mentor-
protege program that the SBA has.
I think both in the sense of other agencies' programs as
well as the Department of Defense's program, they are different
and provide a different tool for the development of proteges.
Ms. CHU. My amendment also clarified that program
regulations must protect proteges against actions that
negatively impact them or provide disproportionate benefits to
the mentor.
I introduced this amendment to ensure that mentors do not
receive more benefits from the programs than their proteges.
How is SBA working to make sure that this safeguard is being
implemented?
Mr. SHORAKA. Thank you. One of the major points that we
want to address in implementing this, because there is fraud,
waste, and abuse, is protecting the protege. In the 8(a)
program, the business opportunities specialist has an annual
review which looks at implementation of the joint ventures, and
making sure that the protege is receiving their fair share of
the contract.
We want to make sure as we expand this exponentially to
include all small businesses, that we implement some checks and
balances to make sure there is a review process, there is a
reporting structure, where at least on an annual basis, a joint
venture reports the division of contracts between the protege
and the mentor.
I think one of the issues that we have is that we have
limited resources within the SBA. The BOSs service the 8(a)
companies. As this gets expanded exponentially, how do we make
sure we have checks and balances so that a reporting structure
is in place to address just the concerns you raised.
Ms. CHU. Are those reports available to us?
Mr. SHORAKA. The reports with respect to?
Ms. CHU. Checks and balances.
Mr. SHORAKA. We are in the process of establishing a pilot
program to expand the mentor-protege program across the Federal
agency, so once there are reports, we are certainly happy to
share them.
Ms. CHU. Let me ask about funding. When Congress mandated
the mentor-protege programs for the small business subgroups,
there were no funds available for their implementation. SBA has
estimated that at least 2,000 firms could become active in the
proposed mentor-protege program. Does SBA currently have the
resources necessarily to handle such a large number of first
time new applicants?
Mr. SHORAKA. I think that is a very important question. As
you pointed out, certainly this is a tool for development for
the proteges, but one of our main concerns is making sure the
protege is benefitting and receiving its fair share, both of
the contracts under a joint venture, but also in receiving the
benefits that the mentor-protege plan outlines for the protege
to receive.
Certainly, if the program is expanded, as you mentioned,
from the 389 that are in an 8(a) program now, to over 2,000
potentially, it could have a significant impact on our
resources. As you mentioned, there were not additional
resources provided to the SBA.
We intend to launch this next summer as a pilot program to
determine what the impact is, and from there, decide how it is
implemented fully, making sure the benefits flow to the
intended recipients.
Ms. CHU. Thank you. My time is up and I yield back.
Chairman HANNA. Thank you. The fiscal year 2016 NDAA would
have required DOD to assess affiliations between potential
mentors and proteges prior to admitting them to the program.
This raises three questions, and they go to both of you.
First, is there reason to believe there is an affiliation
between perspective mentors and proteges before they enter the
program. Second, does DOD have the capability to perform this
assessment. Third, does SBA have any concerns allowing another
agency to make these determinations.
Mr. SHORAKA. I am happy to start off. I think under our
rules, any statutory mentor-protege program when it comes to
affiliation, any assistance that is received from the mentor to
the protege in determining the potential affiliation is
exempted.
In other words, if you have a mentor-protege relationship
under the DOD program, which is a statutory program----
Chairman HANNA. We are asking about before they enter the
program.
Mr. SHORAKA. Beforehand. We do not currently look at
affiliation in the Department of Defense with respect to a
mentor-protege agreement. Where we would address that is in
case of a protest. If there is a protest based on the
relationship previously from the mentor to the protege, that is
where we would review that and determine if affiliation exists,
but we do not currently as a matter of practice----
Chairman HANNA. It would be after the fact brought on by a
third party.
Mr. SHORAKA. Or an interested party, including a
contracting officer.
Mr. WESLEY. From a DOD perspective, we actually do
currently review and make sure that there were no previous
relationships prior to the agreement being signed. All
companies can come in and apply, but we actually do a thorough
review, and in fact, just last year, I implemented a review at
the OSD level of all agreements from the Services.
The Services still have the ability to approve their
agreements, but they do not approve them until a gentleman by
the name of Robert Stewart, who I actually assigned as the
program manager, has reviewed that, and one of the things he
checks for is whether or not there is an agreement in place
before, where they have a prior relationship beforehand. We do
validate that prior.
The last question I believe you asked was do we have the
ability--I think I have answered that by saying we are already
doing it.
Chairman HANNA. Let me ask you something. Part of this is
to create a bank, if you will, of companies that are ready to
go. That makes sense, on its face, but you mentioned in your
opening statement that part of what you want to do is keep
these companies in business, doing business, after they leave.
How do you do that and maintain the integrity of the
bidding process in terms of competitiveness, being the low
bidder? It sounds as though you just would have to find a way
to keep these companies going. I hope that is not the case.
Mr. WESLEY. No. The competition process tends to work
itself out, but what we do is during the source selection or
during the creating of contract language, if a contracting
officer wants to give credit for a company being in the mentor-
protege program, they advertise that up front. That way, it is
in the competitive documents prior to----
Chairman HANNA. Are there rules around the points that can
be given?
Mr. WESLEY. No, we do not give bonus points to that, but
what we do is we say highly encourage to utilize a mentor-
protege firm, and in that way, they are entitled or allowed to
go out and utilize them prior to going out and signing a new--
--
Chairman HANNA. What standard do you use to establish that
recommendation?
Mr. WESLEY. As far as what, sir?
Chairman HANNA. If you are going to say that, you must have
a reason.
Mr. WESLEY. Yes. What we are trying to do is encourage the
use of the program at a higher level and actually make it a
focused use. What we are wanting to do--when I came on board,
one of the things I looked at is how many companies were around
after they graduated the program, but how many were actually
receiving work on a continuous basis. To me, that is a monitor
of success for the program.
Chairman HANNA. Do you use a subjective method to say maybe
for this company, there is not as much need for what they do,
as opposed to there is enough in the marketplace?
Mr. WESLEY. No, so what----
Chairman HANNA. Or is everybody just treated----
Mr. WESLEY. No. Everyone is treated fairly on this. What
happens is it is based on the type of work that is going out
for contract. That is where the synergies are leveraged. If I
am going out for an engineering support contract and I am going
out for communications or electronics, any large business that
has a mentor-protege agreement with a specific small business
that specializes in electronic chip making or circuit boards or
things like that, they would then be able to use their mentor-
protege agreement in accordance with that contract.
It would then allow them to actually feed work into their
small business that they had been working with, partnering
with, that they understand, that they already are doing
business with on a continuous basis.
Obviously, that is not a large $20 or $30 million prime
contract, but it is enough to keep that company around, because
we are encouraging them to continue to be around.
Chairman HANNA. Congressman Bridenstine? I am sorry. Mrs.
Lawrence? Forgive me.
Ms. LAWRENCE. Thank you. Mr. Wesley, I appreciate the fact
that you are collecting information and data on the trends in
the Department of Defense. We are on the same page there.
I wanted to know that when you are looking at these trends
and you are actually monitoring these firms after they leave,
what is the data showing? What is the data telling you?
Mr. WESLEY. What we found is over 90 percent of our
applicants believe that the mentor-protege program was
successful for them. That is the first thing. Then we found out
that over 80 percent of them found out their mentors actually
did provide some valuable training and/or information to them
that they would not have been able to get on their own. That is
a key piece.
The entire point of the mentor-protege program, as you well
know, ma'am, is to actually set up and give these companies
information that would have been more difficult for them to
achieve on their own and become a viable tool more quickly to
our industrial base as well as to the overall Department.
Ms. LAWRENCE. It sounds like it is working. Why do we not
have more currently participating? We have the ability for
2,000 firms; correct? We currently have 389?
Mr. WESLEY. Actually, I believe we have less active
agreements than that, ma'am. I can give you the exact number.
Ms. LAWRENCE. What do you think--that is our buzzer.
Mr. WESLEY. We have 88 total active agreements currently.
Ms. LAWRENCE. Eighty-eight. How do we grow that?
Mr. WESLEY. One of the things I wanted to do was focus on
getting the right agreements in place before we focused on
growth. There is a reason for that. The mentor-protege program,
as you all are aware because you have taken such a great
interest in this program, which I thank you for, by the way, it
actually to me can be misused if you are not careful.
I genuinely want to make sure that the small businesses or
the proteges that are actually in there are getting what they
specifically need. We are taking the time to set up the
counseling sessions with a tiered review approach where we now
actually make sure they are married up with the right company,
that they have a good understanding of what the mentor is
supposed to give them, and their relationship is actually clear
up front.
What we found out through our living and learning process
here is sometimes the disputes between a mentor and a protege
happen just because there was not a clear understanding of what
was going to be delivered by the mentor.
What we wanted to do was actually put training programs in
place before a company actually began the agreement, then we
start to grow it as more people understand it.
Ms. LAWRENCE. What is your projection of when we will get
to the growth phase?
Mr. WESLEY. I would anticipate, ma'am, you will see steady
growth over the next three years. What I mean by ``steady
growth,'' I am looking at trying to make sure this year we
continue the growth pattern, which will add another 30 to 40
agreements this year, and then even higher the following year,
and then get up into a couple of hundred the next year. I mean
new agreements, let me be clear on that.
The reason I am putting that out there is because it is not
just about the growth of the program. It is about the
effectiveness of the program.
Ms. LAWRENCE. Exactly.
Mr. WESLEY. When you talk about the effectiveness of the
program, I am also talking about the residual usage of the
small business firms because although my job is not to actually
generate job growth, it is a second, third, and fourth order
effect of our program if we do it right.
Ms. LAWRENCE. Mr. Wesley and Mr. Shoraka, one of the
frustrations I hear in the field from small businesses is that
opportunities like this are available, but they cannot seem to
get access to it. My job is to make sure small businesses are
aware of programs. When we say it is available, if someone
meets the criteria today, they will have access.
One last question to Mr. Shoraka. I am very concerned about
opportunities for women owned businesses and veteran owned
businesses. Specifically, how can they take advantage, and will
this program be an advantage for them?
Mr. SHORAKA. Yes. First of all, thank you for focusing on
the women owned small business program, as well as the Service
disabled veteran program.
Over the years, because of significant focus, both with the
support from the Hill as well as the Administration, we have
been successful in getting more business to both of those
categories, and expanding the mentor-protege program to include
women owned small businesses, to include Service disabled
veteran owned small businesses, will certain create additional
opportunities for them to participate in the Federal
procurement process.
I, too, want to make sure that businesses are aware of
these opportunities. We consistently engage our field staff,
our District offices, to make sure all categories and all small
businesses are aware of the opportunities and are trained on
how to take advantage of those opportunities.
We certainly partner with the Department of Defense in that
instance. We work with the procurement technical assistance
centers. We work with our SBDCs, our small business development
centers, et cetera.
I think there can always be additional work to make sure
the word is out there, and the training, quite frankly, is out
there to take advantage of the programs.
Ms. LAWRENCE. Thank you, and I yield back my time.
Chairman HANNA. Congressman Bridenstine?
Mr. BRIDENSTINE. Thank you, Chairman Hanna and Ranking
Member Chu for allowing me to attend this hearing and to ask
questions. As a member of the House Armed Services Committee, I
am well aware of the importance of the mentor-protege program.
In fact, the 1st District of Oklahoma, from whence I come,
is home to many contractors who participate in the mentor-
protege program, especially in the design build firms.
My questions are directed to both witnesses. The way the
mentor-protege program is now, if a mentor assists a protege
through a subcontract, in other words the mentor is the
subcontractor, the protege can be penalized as it runs the risk
of being considered affiliated and losing its small business
status.
If approved by the relevant small business program
component director, would not allowing the mentor to
subcontract to the protege in certain circumstances strengthen
the mentor-protege program, provided there is no reimbursement
for any performance by the mentor related to the subcontract or
provided the mentor is not the only or the largest
subcontractor under the protege's prime contract.
Often assistance is needed from the mentor in performing
complex and unusual aspects of the protege's contract. Would
not allowing the mentor to demonstrate means of performance
through a subcontract potentially serve to strengthen the
successful development of the protege? That is for both of you.
Mr. SHORAKA. Thank you for that question. Under our
program, the relationship that ensues with respect to pursuing
contract opportunities is not a prime/sub relationship, but it
is a joint venture relationship, where the protege receives or
is to receive a good portion of that contract opportunity, so
as to learn from the mentor with respect to how to implement a
larger sized contract.
In those instances, the protege is to receive--this gets a
little bit complicated, but the joint venture is to receive 50
percent, at least 50 percent of the contract. The protege is to
receive 40 percent of that 50 percent.
The mentor, in other words, can do 60 percent of that 50
percent. I know that gets a little bit complicated.
That relationship provides for exactly what you explained,
in the sense that the mentor is providing assistance, being
able to participate in the contract to a large degree, to make
sure the contract is successful, but within that relationship,
help the protege grow.
That scenario unfolds under the current 8(a) mentor-protege
program. That is the scenario that we are working to unfold for
all small businesses as our rule gets finalized and the program
is implemented.
I understand that in the Department of Defense world, it is
a prime/sub relationship. The prime contractor is the mentor
and the subcontractor is usually the protege. Under any of
those statutory programs, as the Department of Defense exists,
the benefits or the assistance that goes from the mentor to the
protege cannot be used against the protege or it cannot
determine affiliation. That assistance will be excluded if we
are looking at a potential affiliation issue.
However, the scenario that you pointed out is a scenario
where outside of this relationship an affiliation can be found,
and certainly if our area offices, which do the size
determinations, find an affiliation and find that protege to be
other than small, that protege then has an opportunity to
appeal that decision to our Office of Hearing and Appeals, and
that really provides----
Mr. BRIDENSTINE. How long does that process generally take,
the appeal?
Mr. SHORAKA. The appeal process? The Office of Hearing and
Appeals is an independent third body that reviews our
determinations. I do not know. I do not want to say the exact
time frame. I believe it is 15 days that they have to determine
on that appeal.
That appeal has to be filed within a short period of time,
if that firm is going to file that appeal.
Mr. BRIDENSTINE. I am running out of time here. I want to
get to my second question, and certainly, we can follow up on
the record with maybe comments afterward.
My second question is the DOD mentor-protege program allows
the mentor to receive credit toward their subcontracting goals
for their assistance to the protege, while the Small Business
Administration's mentor-protege program currently does not.
The DOD allows the mentor to receive credit towards their
subcontracting goals for their assistance, but the SBA does
not. This is a significant issue that establishes a strong
incentive for a mentor to provide developmental assistance.
What if anything is the SBA doing to be in line with the
DOD MPP on this issue?
Mr. SHORAKA. On our part, as we look--as I had mentioned
earlier, the agency programs, in fact, there are other civilian
agencies that have programs that are different and unique than
the SBA program. As we look to harmonize those programs as a
result of the National Defense Authorization Act of 2013, we
are looking to see what are some of the benefits that are
provided to the mentors and proteges in that unique world, and
how can we harmonize that across the Federal Government.
Those are aspects we are looking at. You are absolutely
right, as it stands under our mentor-protege program, there is
no additional subcontracting credit for assistance provided.
In trying to harmonize that across the Federal Government,
that may be something we look at as we implement it Federal-
wide.
Mr. BRIDENSTINE. I am about a minute and a half over my
time, so I will yield back.
Chairman HANNA. Thank you. Ms. Clarke?
Ms. CLARKE. Thank you, Mr. Chairman. I thank our ranking
member. I thank our witnesses for being here this morning.
Mr. Shoraka, in your testimony, you discussed the SBA's
expansion of its mentor-protege program to include Service
disabled veteran owned small businesses, small businesses
located in historically under utilized business zones, and
women owned small businesses as directed by the JOBS Act of
2010.
In the five years, has the SBA implemented mentor-protege
programs for these small businesses, and if so, can you update
us as to the progress of these programs.
Mr. SHORAKA. Thank you. The Small Business JOBS Act of 2010
did direct us to expand to the other socio categories, as you
mentioned, and we were in the process of drafting the rule to
do just that.
The National Defense Authorization Act of 2013 authorized
us to go well beyond that. It authorized us to go and expand
the program to all small businesses. In effect, we pulled back
that rule. We went through the rulemaking process again to
expand the program to all small businesses.
The rule was put out for public comment last February and
has since closed, and we are in the process of taking into
account all the comments we received. We received quite a few
comments. We should have a final rule published in the first
quarter of 2015.
At the same time, as I mentioned in the testimony, we have
a working group established that includes all of our field
personnel or representation from our field personnel, from our
General Counsel's Office, from the Government Contracting
Office, to make sure we implement it in a smart way, but also
within the resources that we have at the agency.
We are looking to launch at least on a pilot basis the
program in the latter part of the summer of 2016.
Ms. CLARKE. Since the JOBS Act five years ago, we are still
in the planning phase is essentially what you are saying, and
the expansion of the groups is for all small businesses under
the National Defense Act?
Mr. SHORAKA. That is correct; yes.
Ms. CLARKE. My concern is there was a reason why these
particular businesses were targeted in the spectrum of small
businesses out there. The concern is that these businesses
continue to be under invested in, under supported. Do you
believe or feel as though once this rule is completed, there
will be sufficient resources to pay attention to these
businesses?
Mr. SHORAKA. Thank you for that question. I think that is
one of the issues we are grappling with with respect to
resources, right. As we expand this program exponentially to
all small businesses, we need to make sure we have the
resources not only to implement it in a way that benefits the
proteges and benefits the women owned small businesses and
Service disabled community as well as the HUBZone community,
but in a way that we make sure any potential risk is addressed
as well.
In the 8(a) program, we have the benefit and the
opportunity to do annual reviews on the 8(a) firms, and those
with mentor-protege programs and joint ventures get a review
and make sure the benefits are indeed flowing as planned.
Outside of that 8(a) world, we need to develop mechanisms
to make sure we have similar oversight.
Ms. CLARKE. If you could give us a sense at some point in
time of what you believe or the agency believes will be
sufficient in terms of resources, I really get concerned when
we expand given the fact that there was a specific concern
around these particular businesses and where they are located
under the JOBS Act. It is sort of brush aside to look at a more
expansive program. Would you please try to give us a sense of
that?
Mr. SHORAKA. Yes.
Ms. CLARKE. Mr. Wesley, in your testimony, you referred to
a GAO report which concluded that 93 percent of protege firms
reported their participation in the mentor-protege program
enhanced their firms' overall capabilities.
To what would you attribute that high rate of success, and
what could we learn from these successes that we can apply to
other Government mentor-protege programs?
Mr. WESLEY. I think the first thing that we do is we
actually sit down and have a pre-meeting with the firms up
front. We make sure they understand exactly what is expected
out of each of them. The protege agreements have clear
guidelines as well as deliverables. It tells you on the
reimbursement side of it, you will not be paid until you have
delivered these items. If it is a subcontract credit, you will
not receive that subcontract credit until these deliverables
have been met.
We give clear delineation. Therefore, we make sure each
party knows exactly what is expected of them. We sit down and
make sure they have a good understanding. That pre-meeting--I
kind of equate it as marriage counseling, if you will. They get
that ahead of time so they can understand, they are on the same
page both on a financial basis, but also from an actual
business perspective. Sometimes, business visions are
different. We also try to make sure they marry up to whatever
the protege needs is what the mentor is truly going to provide,
and do they have the capability of providing it.
There is no need for you to have a mentor go after, guiding
a protege for a Top Secret SEI clearance when they do not have
one themselves. They do not know how to go through and get one.
We are trying to make sure that they actually have the
skills to deliver on what they are promising to deliver. I
think that is one of the biggest items I can attribute that to,
the pre-discussions ahead of time.
Ms. CLARKE. Have you had an opportunity to sort of look at
how these mentor-protege relationships are jelling, if you
will, and whether in fact we have models that could be used by
SBA to expand the program?
Mr. WESLEY. The one thing I will tell the entire Committee
and go on record with is myself and the Small Business
Administration are communicating regularly. I have bi-weekly
meetings with John Shoraka and his team. We are sharing
information.
To answer your question specifically, I do believe that we
will be sharing not just our metrics and how we track
information, but the tools we use. I believe we do have some
working models that we can share with them at any given time
going forward. Yes, ma'am. I do believe we can do that.
Ms. CLARKE. Thank you. Mr. Chairman, I have gone over my
time, and I yield back.
Chairman HANNA. Thank you. I appreciate your testimony. You
were both well prepared and clearly know your subject matter.
If there are no further questions for these witnesses, I
want to thank you again for your testimony. Given the
President's veto of fiscal year 2016 NDAA, and we hope to work
through that, the future of the DOD mentor-protege program is
in limbo. Congress must act to reauthorize the program, and as
we do, I hope we will consider making the appropriate reforms.
Likewise, as the SBA moves to finalize its rules on
Government-wide and civilian agency specific mentor-protege
agreements, I hope it will do so and trust it will do so
thoughtfully.
I also hope that we are all agreed that the mentor-protege
program must successfully demonstrate benefits to the companies
and taxpayers by ensuring that the small businesses are better
able to compete for contracts when they exit the program.
I look forward to working with my colleagues on these
issues, and thank you all for your participation today.
Everyone has five legislative days to amend. I should know
that by now. I ask unanimous consent that members have five
legislative days to submit statements and supporting materials
for the record. Without objection, so ordered.
This hearing is now adjourned.
[Whereupon, at 10:58 a.m., the Subcommittee was adjourned.]
A P P E N D I X
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Chairman Hanna, Ranking Member Takai, and members of the
Subcommittee, I am honored to be here today to discuss how my
agency is implementing changes to its mentor-protege program
and the mentor-protege programs of other agencies, as mandated
by section 1347 of the Small Business Jobs Act (Jobs Act) of
2010 and section 1641 of the National Defense Authorization Act
(NDAA) for Fiscal Year 2013.
The Small Business Administration has a long established
8(a) mentor-protege program, which is designed to enable
approved mentors to provide various forms of business
development assistance to eligible 8(a) Program Participants.
This can range from technical and/or managerial assistance,
financial assistance in the form of equity investments and/or
loans; subcontracts; and/or assistance in performing Federal
prime contracts through joint venture arrangements.
The goal of the 8(a) mentor-protege relationship is to
enhance the overall capability of eligible proteges, improve
the protege's ability to successfully compete for both prime
and commercial contract opportunities, and increase their
chances for entrepreneurial success upon completion of the nine
(9) year 8(a) Business Development program. Success is
different for each 8(a) Participant because each mentor-protege
agreement uniquely describes the protege's specific needs and
provides a detailed timeline for delivery of the assistance the
mentor commits to provide to address those needs. Many of our
proteges receive assistance in developing their infrastructure,
building technical experience and past performance, developing
quality management systems to earn International Organization
for Standardization 9000 certification (often referred to as
ISO 9000), and developing process improvement standards to earn
Capability Maturity Model Integration certifications (often
referred to as CMMI). Proteges also receive assistance with
obtaining security clearances for their employees and
facilities, developing prime contract proposal writing skills,
and strengthening their ability to manage finances and general
administrative business operations.
The 8(a) mentor-protege relationship can also enhance the
protege's competitiveness with both 8(a) and non-8(a) contract
awards, as larger, more established mentors can enter into
Joint-Venture (JV) agreements with proteges to compete for
certain federal government contracts and subcontracts.
Currently, there are 389 active 8(a) Mentor-Protege agreements
in SBA's portfolio, and 141 SBA-approved 8(a) Mentor-Protege
Joint Ventures. According to the most recent FPDS data, in
Fiscal Year 2015 Agencies awarded 8(a) Joint Ventures
approximately $1.42 billion in 8(a) and non-8(a) contracts.
One of SBA's top priorities is to ensure the benefits of
its contracting programs flow to the intended recipients and
oversight of the agency's 8(a) mentor-protege program is
conducted annually by SBA District Business Opportunity
Specialists and the Headquarters Office of Continuing
Eligibility Review team. Each year, mentor-protege
relationships are reviewed to ensure that teams continue to
meet the objectives of the program and to monitor activities to
mitigate potential risks associated with fraud, waste and
abuse. At least annually, the SBA evaluates the success of the
mentor-protege relationships to ensure that each protege
received the business development assistance promised to it
under its mentor-protege agreement and that the relationship
continues to be a benefit to the protege firm.
Over the past several years, Congress has significantly
broadened the scope of SBA's mentor-protege authority. The Jobs
Act of 2010 enabled the agency to expand the mentor-protege
program to include Service-Disabled Veteran-Owned Small
Businesses (SDVOSBs), Women Owned Small Businesses (WOSBs) and
small businesses located in Historically Underutilized Business
Zones (HUBZones). Subsequently, in the NDAA of FY 2013,
Congress authorized SBA to create a mentor-protege program to
include all small businesses, consistent with the agency's
mentor-protege program for Participants in the 8(a) Business
Development program.
On February 5, 2015, SBA issued a proposed rule to
establish a Government-wide small business mentor-protege
program, and the comment period for that proposed rule has
officially closed. We are currently drafting a final rule that
will then be sent to the Office of Information and Regulatory
Affairs (OIRA) for interagency review. SBA has begun planning
for implementation and stood up a Mentor-Protege Program
Expansion (MPP) Project Team to oversee the expansion and
implementation of its new Government-wide mentor-protege
program. NDAA 2013 also required SBA to review the mentor-
protege programs of other agencies within one year of
implementing the final mentor-protege rule to determine whether
they should continue. The Department of Defense's mentor-
protege program was specifically excluded.
SBA is committed to the successful expansion of the mentor-
protege program, and across the Administration, we are
committed to ensuring that more small businesses have access to
programs that will enable them to compete for more contracting
opportunities, grow their businesses and create jobs in our
communities. As Administrator Contreras-Sweet highlighted in
her priorities speech, ``The SBA will be a `market maker' for
small companies by opening new business channels within the
federal government.''
Thank you for your continued leadership and support, and I
look forward to your questions.
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Introduction
Chairman Hanna, Ranking Member Takai and distinguished
members of the Committee, thank you for the opportunity to
speak with you today about the Department of Defense Mentor-
Protege Program and how we serve small businesses. My name is
Kenyata L. Wesley and I am the Acting Director of the
Department of Defense, Office of Small Business Programs (DoD
OSBP) and I report to the Under Secretary of Defense for
Acquisition, Technology and Logistics. The Office of the Under
Secretary of Defense for Acquisition, Technology, and Logistics
(OUSD(AT&L)) is the principal staff element of the Office of
the Secretary of Defense for all matters relating to DoD
acquisition. As the Acting Director of the Office of Small
Business Programs, it has been my honor to support the world's
finest military for the past year by helping to sustain the
strongest and most innovative defense industrial base. As the
former Chairman of the Joint Chiefs of Staff, General Dempsey,
pointed out in his testimony before the House Armed Services
Committee in March of 2015, ``An enduring source of strategic
advantage, we count on the defense industry to be able to
research, develop, produce, deliver, and maintain the world-
class weapons systems on which our military has long relied.''
\1\
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\1\ U.S. House Committee on Armed Services, Hearing on The
President's Proposed Authorization for the Use of Military Force
against ISIL and the Fiscal Year 2016 National Defense Authorization
Budget Request from the Department of Defense, March 18, 2015. 114th
Congress, 1st Session. Washington: 2005 (Posture Statement of Gen.
Martin E. Dempsey, Chairman of the Joint Chiefs of Staff), p. 11.
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Background
As a standard practice, the military always seeks to
establish decentralized supply chains fed by multi0ple sources,
and small businesses are essential components of that. As you
know, small businesses are some of the greatest assets of our
country that drive our economy and provide technological
innovation. To that end, the Department of Defense's Mentor-
Protege Program is the only program with an active role in the
growth and development of small businesses while playing a
vital role in maintaining the strength and diversity of our
defense industrial base. The Mentor-Protege Program enables
small businesses to meet emerging requirements by
simultaneously setting them up for today's needs while
posturing them for tomorrow's threats, challenges, and
opportunities.
In the midst of the First Gulf War, the Department of
Defense was the first agency to have a Federal Mentor-Protege
Program become fully operational. The Department of Defense
Mentor-Protege Program was established in response to section
831 of the National Defense Authorization Act for Fiscal Year
1991. Since 1991, the program has offered substantial
assistance to small disadvantaged businesses by helping them to
expand the overall base of their marketplace participation,
which in return produces more jobs and increased national
income. The DoD Mentor-Protege Program assists eligible small
businesses (prote!Eges) to compete successfully for prime
contract and subcontract awards by partnering with eligible
large companies (mentors) under mentor-protege agreements.
Over the years, the program has established a proven
success record. In 2007, the Government Accountability Office
concluded that most former protege firms valued their
experience--with 93% of them reporting that their participation
enhanced their firm's overall capabilities; 87% of them
reporting that mentors helped with their business development,
and 84% reporting that mentor support helped their engineering
or technical expertise.\2\
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\2\ U.S. Government Accountability Office, Contract Management:
Proteges Value DOD's Mentor-Protege Program, but Annual Reporting to
Congress Needs Improvement, GAO-07-151, January 31, 2007, p. 6.
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Improvements and new Initiatives
Over the past couple of years, the Mentor-Protege Program
has begun to undergo a transition. For example, we formed
government-led working groups to cultivate new relationships
with DoD acquisition professionals and thereby facilitate the
exchange of information and ideas with industry. These
government working groups will yield greater continuity among
all agencies and components and share the best practices and
lessons learned to all DoD participants. I have also directed
my team to undertake the revision of Department of Defense's
regulations to incorporate this feedback into the program. The
first drafts of those revisions are expected to be released for
comment by the end of this year. In the upcoming months, we
will also engage with the Small Business Administration and
other Federal agencies to harmonize4 efforts to promote
continuous improvement within the program.
We would also like to implement a tiered developmental
plan--in which potential proteges undergo an initial assessment
to determine what characteristics are necessary to become
successful small business partners for large defense
contractors.
Congressional Inquiries
While undergoing these transitions, the DoD Office of Small
Business Programs has also made note of Congressional to the
Mentor Protege Program. Congress expressed concern about
whether the program's developmental assistance was being
employed in the most effective and efficient manner.\3\
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\3\ Conference Report to accompany H.R. 1735, National Defense
Authorization Act for Fiscal Year 2016.'' H.R. Rep. No. 114-270, pp
711-712.
To address effectiveness and efficiency, the focus of all
future Mentor-Protege agreements under the program will be
narrowly focused and prioritized on developmental assistance
for entities that directly support: (1) department/component/
agency missions; (2) the Secretary of Defense's top ten
challenges; (3) major acquisition programs of record; and (4)
challenges/threats facing the department across the entire
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enterprise.
As the Government Accountability Office has previously
noted, the Department of Defense is the only Federal agency
currently required by statute to collect information on protege
firms after they exit the program.\4\ The Defense Contract
Management Agency collects extensive data on the number and
type of agreements in place, the locations and socio-economic
categories of participating firms, and the forms of
developmental assistance provided under those agreements. We
collect information on the trends in employment, revenue, and
Federal contract and subcontract awards to protege firms while
they are in the program and for a period of up to two years
after they leave the program. These insights enable the
Department to make adjustments to program management to become
more effective and efficient.
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\4\ U.S. Government Accountability Office, Small Business
Contracting: Opportunities to Improve the Effectiveness of Agency and
SBA Advocates and Mentor-Protege Programs, GAO-11-844T, September 15,
2011, p. 12.
For your awareness, I have provided the committee with a
breakout of the mentor-protege agreements currently in place.
One-third of these agreements relate to contracts supporting
the intelligence community and many others also relate to
classified work. One of the responsibilities of the DoD Office
of Small Business Program's includes collecting and sanitizing
this classified data through internal DoD security with the
Small Business Administration. This is an effective and
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efficient use of federal resources.
I have also directed my staff to develop programmatic
metrics that clearly demonstrate the return on investment for
the Mentor-Protege Program. These metrics will capture the
effect of our initiatives for Fiscal Year 2016, My staff will
categorize each mentor-protege agreement according to the
Department's needs, challenges, and major defense acquisition
programs to which it relates. This will illustrate not only the
developmental assistance being performed, but also the
capability and impact each agreement provides.
I have directed my staff to work in conjunction with the
Defense Contract Management Agency and develop for
consideration proposed contract guidance that would provide
contract incentives to prospective proteges have previously
received significant prime contract awards from the Department
of Defense or from any other Federal agencies--to determine
whether developmental assistance is really warranted.
I have also directed my staff to develop specific
requirements for a more concrete developmental plan that would:
(1) factors to assess the protege firm's developmental progress
under the program; (2) a description of the quantitative and
qualitative benefits to the Department of Defense from the
Mentor-Protege agreements; and (3) goals for additional prime
contract awards that protege firm can compete for outside the
Mentor-Protege Program.
Congress also would clarify the program's eligibility to
include those firms which ``currently provide goods or services
in the private sector that are critical to enhancing the
capabilities of the defense supplier base and fulfilling key
Department of Defense needs.'' \5\ The DoD Office of Small
Business Programs is in the process of development more
specific criteria to implement this provision. My approach is
to support Small Business Innovation Research/Small Business
Technology Transfer projects moving directly to Phase II which
currently support a major defense acquisition program or
department challenge or threat.
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\5\ Conference Report to accompany H.R. 1735 Sec. 861 H.R. Rep. No.
114-270.
I also understand there has been some discussion on whether
to incorporate all federal mentor-protege programs under the
Small Business Administration. It is important to note that
some national security interests are best served by maintaining
a separate program specifically focused on developing the
defense industrial base, which was the original intent of this
program.\6\
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\6\ Sen. Levin (MI). ``Amendment No. 2541 to S. 2884, National
Defense Authorization Act for Fiscal Year 1991.'' Congressional Record
136:16 (Aug. 3, 1990) p. S12026.
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Conclusion
As you can see each of the initiatives I have discussed
provides greater opportunities for small businesses, promotes
rapid innovation, and expands the defense industrial base--
while capitalizing on the entrepreneurial spirit which makes
this national great. I would like to thank you again for
allowing me to speak today and I look forward to answering any
questions you may have.
[all]