[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

                               __________

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                Small Business Committee Document Number 114-027
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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

[GRAPHIC NOT AVAILABLE IN TIFF FORMAT] 

    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.
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]


    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\
---------------------------------------------------------------------------
    \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.

---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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\
---------------------------------------------------------------------------
    \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 
---------------------------------------------------------------------------
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]