[Federal Register Volume 69, Number 93 (Thursday, May 13, 2004)]
[Proposed Rules]
[Pages 26533-26538]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-10883]


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DEPARTMENT OF DEFENSE

48 CFR Part 219 and Appendix I to Chapter 2

[DFARS Case 2003-D013]


Defense Federal Acquisition Regulation Supplement; DoD Pilot 
Mentor-Prot[eacute]g[eacute] Program

AGENCY: Department of Defense (DoD).

ACTION: Proposed rule with request for comments.

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SUMMARY: DoD is proposing to amend the Defense Federal Acquisition 
Regulation Supplement (DFARS) to update policy pertaining to the DoD 
Pilot Mentor-Prot[eacute]g[eacute] Program. The proposed changes 
authorize the Director, Small and Disadvantaged Business Utilization, 
of each military department or defense agency to approve mentor firms 
and mentor-prot[eacute]g[eacute] agreements.

DATES: Comments on the proposed rule should be submitted to the address 
shown below on or before July 12, 2004, to be considered in the 
formation of the final rule.

ADDRESSES: Respondents may submit comments directly on the World Wide 
Web at http://emissary.acq.osd.mil/dar/dfars.nsf/pubcomm. As an 
alternative,

[[Page 26534]]

respondents may e-mail comments to: [email protected]. Please cite DFARS 
Case 2003-D013 in the subject line of e-mailed comments.
    Respondents that cannot submit comments using either of the above 
methods may submit comments to: Defense Acquisition Regulations 
Council, Attn: Mr. Thaddeus Godlewski, OUSD(AT&L)DPAP(DAR), IMD 3C132, 
3062 Defense Pentagon, Washington, DC 20301-3062; facsimile (703) 602-
0350. Please cite DFARS Case 2003-D013.
    At the end of the comment period, interested parties may view 
public comments on the World Wide Web at http://emissary.acq.osd.mil/dar/dfars.nsf.

FOR FURTHER INFORMATION CONTACT: Mr. Thaddeus Godlewski, (703) 602-
2022.

SUPPLEMENTARY INFORMATION:

A. Background

    This rule proposes changes to the DoD Pilot Mentor-
Prot[eacute]g[eacute] Program to authorize the Director, Small and 
Disadvantaged Business Utilization (SADBU), of each military department 
or defense agency to approve contractors as mentor firms and to approve 
mentor-prot[eacute]g[eacute] agreements. The Director, Office of the 
Secretary of Defense, SADBU, will retain policy and oversight 
responsibility for the offices participating in the Program and will 
remain the principal budget authority for the Program. This rule also 
updates procedures for implementation of the Program to reflect current 
Program requirements.
    This rule was not subject to Office of Management and Budget review 
under Executive Order 12866, dated September 30, 1993.

B. Regulatory Flexibility Act

    DoD does not expect this rule to have a significant economic impact 
on a substantial number of small entities within the meaning of the 
Regulatory Flexibility Act, 5 U.S.C. 601, et seq., because the changes 
in the rule relate primarily to administrative aspects of the DoD Pilot 
Mentor-Prot[eacute]g[eacute] Program. The basic principles of the 
Program have not changed. Therefore, DoD has not performed an initial 
regulatory flexibility analysis. DoD invites comments from small 
businesses and other interested parties. DoD also will consider 
comments from small entities concerning the affected DFARS subparts in 
accordance with 5 U.S.C. 610. Such comments should be submitted 
separately and should cite DFARS Case 2003-D013.

C. Paperwork Reduction Act

    The information collection requirements of the DoD Pilot Mentor 
Prot[eacute]g[eacute] Program have been approved by the Office of 
Management and Budget under Control Number 0704-0332.

List of Subjects in 48 CFR Part 219

    Government procurement.

Michele P. Peterson,
 Executive Editor, Defense Acquisition Regulations Council.

    Therefore, DoD proposes to amend 48 CFR Part 219 and Appendix I to 
Chapter 2 as follows:
    1. The authority citation for 48 CFR Part 219 and Appendix I to 
subchapter I continues to read as follows:

    Authority: 41 U.S.C. 421 and 48 CFR Chapter 1.

PART 219--SMALL BUSINESS PROGRAMS

    2. Section 219.7100 is amended by revising the first sentence to 
read as follows:


Sec.  219.7100  Scope.

    This subpart implements the Pilot Mentor-Prot[eacute]g[eacute] 
Program (hereafter referred to as the ``Program'') established under 
Section 831 of the National Defense Authorization Act for Fiscal Year 
1991 (Pub. L. 101-510; 10 U.S.C. 2302 note). * * *
    3. Section 219.7102 is amended by revising paragraphs (a) and (d) 
to read as follows:


Sec.  219.7102  General.

* * * * *
    (a) Mentor firms that are prime contractors with at least one 
active subcontracting plan negotiated under FAR Subpart 19.7 or under 
the DoD Comprehensive Subcontracting Test Program.
* * * * *
    (d) Incentives that DoD may provide to mentor firms, including--
    (1) Reimbursement for developmental assistance costs through--
    (i) A separately priced contract line item on a DoD contract; or
    (ii) A separate contract, upon written determination by the 
cognizant Component Director, Small and Disadvantaged Business 
Utilization (SADBU), that unusual circumstances justify reimbursement 
using a separate contract; or
    (2) Credit toward applicable subcontracting goals, established 
under a subcontracting plan negotiated under FAR Subpart 19.7, or under 
the DoD Comprehensive Subcontracting Test Program for developmental 
assistance costs that are not reimbursed.
    4. Section 219.7103-1 is revised to read as follows:


219.7103-1   General.

    The procedures for application, acceptance, and participation in 
the Program are in Appendix I, Policy and Procedures for the DoD Pilot 
Mentor-Prot[eacute]g[eacute] Program. The Director, SADBU, of each 
military department or defense agency has the authority to approve 
contractors as mentor firms, approve mentor-prot[eacute]g[eacute] 
agreements, and forward approved mentor-prot[eacute]g[eacute] 
agreements to the contracting officer when funding is available.
    5. Section 219.7103-2 is amended as follows:
    a. By revising paragraphs (d), (e), and (f); and
    b. In paragraph (h), in the parenthetical, by removing ``I-112'' 
and adding in its place ``I-113''. The revised text reads as follows:


219.7103-2  Contracting officer responsibilities.

* * * * *
    (d) Modify applicable contract(s) to establish a contract line item 
for reimbursement of developmental assistance costs if--
    (1) A DoD program manager or the cognizant Component Director, 
SADBU, has made funds available for that purpose; and
    (2) The contractor has an approved mentor-prot[eacute]g[eacute] 
agreement.
    (e) Negotiate and award a separate contract for reimbursement of 
developmental assistance costs only if--
    (1) Funds are available for that purpose;
    (2) The contractor has an approved mentor-prot[eacute]g[eacute] 
agreement; and
    (3) The cognizant Component Director, SADBU, has made a 
determination in accordance with 219.7102(d)(1)(ii).
    (f) Not authorize reimbursement for costs of assistance furnished 
to a prot[eacute]g[eacute] firm in excess of $1,000,000 in a fiscal 
year unless a written determination from the cognizant Component 
Director, SADBU, is obtained.
* * * * *


219.7105  [Amended]

    6. Section 219.7105 is amended by removing ``I-111'' and adding in 
its place ``I-112''.


219.7106  [Amended]

    7. Section 219.7106 is amended in the first sentence by removing 
``I-112'' and adding in its place ``I-113''.
    8. Appendix I to Chapter 2 is revised to read as follows:

[[Page 26535]]

Appendix I--Policy and Procedures for the DOD Pilot Mentor-Protege 
Program

I-100 Purpose.

    (a) This Appendix I to 48 CFR Chapter 2 implements the Pilot 
Mentor-Prot[eacute]g[eacute] Program (hereafter referred to as the 
``Program'') established under Section 831 of Pub. L. 101-510, the 
National Defense Authorization Act for Fiscal Year 1991 (10 U.S.C. 
2302 note). The purpose of the Program is to--
    (1) Provide incentives to major DoD contractors, performing 
under at least one active approved subcontracting plan negotiated 
with DoD or another Federal agency, to assist prot[eacute]g[eacute] 
firms in enhancing their capabilities to satisfy DoD and other 
contract and subcontract requirements;
    (2) Increase the overall participation of prot[eacute]g[eacute] 
firms as subcontractors and suppliers under DoD contracts, other 
Federal agency contracts, and commercial contracts; and
    (3) Foster the establishment of long-term business relationships 
between prot[eacute]g[eacute] firms and such contractors.
    (b) Under the Program, eligible companies approved as mentor 
firms will enter into mentor-prot[eacute]g[eacute] agreements with 
eligible prot[eacute]g[eacute] firms to provide appropriate 
developmental assistance to enhance the capabilities of the 
prot[eacute]g[eacute] firms to perform as subcontractors and 
suppliers. DoD may provide the mentor firm with either cost 
reimbursement or credit against applicable subcontracting goals 
established under contracts with DoD or other Federal agencies.
    (c) DoD will measure the overall success of the Program by the 
extent to which the Program results in--
    (1) An increase in the dollar value of contract and subcontract 
awards to prot[eacute]g[eacute] firms (under DoD contracts, 
contracts awarded by other Federal agencies, and commercial 
contracts) from the date of their entry into the Program until 2 
years after the conclusion of the agreement;
    (2) An increase in the number and dollar value of subcontracts 
awarded to a prot[eacute]g[eacute] firm (or former 
prot[eacute]g[eacute] firm) by its mentor firm (or former mentor 
firm);
    (3) An increase in the employment level of prot[eacute]g[eacute] 
firms from the date of entry into the Program until 2 years after 
the completion of the agreement.
    (d) This policy sets forth the procedures for participation in 
the Program applicable to companies that are interested in 
receiving--
    (1) Reimbursement through a separate contract line item in a DoD 
contract or a separate contract with DoD; or
    (2) Credit toward applicable subcontracting goals for costs 
incurred under the Program.

I-101 Definitions

I-101.1 Historically Black College or University

    An institution determined by the Secretary of Education to meet 
the requirements of 34 CFR 608.2. The term also means any nonprofit 
research institution that was an integral part of such a college or 
university before November 14, 1986.

I-101.2 Minority Institution of Higher Education

    An institution of higher education with a student body that 
reflects the composition specified in section 312(b)(3), (4), and 
(5) of the Higher Education Act of 1965 (20 U.S.C. 1058(b)(3), (4), 
and (5)).

I-101.3 Eligible Entity Employing the Severely Disabled

    A business entity operated on a for-profit or nonprofit basis 
that--
    (a) Uses rehabilitative engineering to provide employment 
opportunities for severely disabled individuals and integrates 
severely disabled individuals into its workforce;
    (b) Employs severely disabled individuals at a rate that 
averages not less than 20 percent of its total workforce;
    (c) Employs each severely disabled individual in its workforce 
generally on the basis of 40 hours per week; and
    (d) Pays not less than the minimum wage prescribed pursuant to 
section 6 of the Fair Labor Standards Act (29 U.S.C. 206) to those 
employees who are severely disabled individuals.

I-101.4 Severely Disabled Individual

    An individual who has a physical or mental disability which 
constitutes a substantial handicap to employment and which, in 
accordance with criteria prescribed by the Committee for the 
Purchase from the Blind and Other Severely Handicapped established 
by the first section of the Act of June 25, 1938 (41 U.S.C. 46; 
popularly known as the ``Javits-Wagner-O'Day Act'') is of such a 
nature that the individual is otherwise prevented from engaging in 
normal competitive employment.

I-101.5 Small Disadvantaged Business (SDB)

    A small business concern that is--
    (a) An SDB concern as defined at 219.001, paragraph (1) of the 
definition of ``small disadvantaged business concern'';
    (b) A business entity owned and controlled by an Indian tribe as 
defined in Section 8(a)(13) of the Small Business Act (15 U.S.C. 
637(a)(13)); or
    (c) A business entity owned and controlled by a Native Hawaiian 
Organization as defined in Section 8(a)(15) of the Small Business 
Act.

I.101.6 Women-Owned Small Business (WOSB)

    A small business concern owned and controlled by women as 
defined in Section 8(d)(3)(D) of the Small Business Act (15 U.S.C. 
637(d)(3)(D)).

I-102 Participant Eligibility

    (a) To be eligible to participate as a mentor, an entity must 
be--
    (1) An entity other than small business, unless a waiver to the 
small business exception has been obtained from the Director, Small 
and Disadvantaged Business Utilization (SADBU), OUSD (AT&L), that is 
a prime contractor to DoD with an active subcontracting plan; or
    (2) A graduated 8(a) firm that provides documentation of its 
ability to serve as a mentor; and
    (3) Approved to participate as a mentor in accordance with I-
105.
    (b) To be eligible to participate as a prot[eacute]g[eacute], an 
entity must be--
    (1) An SDB, a WOSB, or an eligible entity employing the severely 
disabled;
    (2) Eligible for the award of Federal contracts; and
    (3) A small business according to the Small Business 
Administration (SBA) size standard for the North American Industry 
Classification System (NAICS) code that represents the contemplated 
supplies or services to be provided by the prot[eacute]g[eacute] 
firm to the mentor firm if the firm is representing itself as a 
qualifying entity under the definition at I-101.5(a) or I-101.6.
    (c) Mentor firms may rely in good faith on a written 
representation that the entity meets the requirements of paragraph 
(a) of this section, except for a prot[eacute]g[eacute]'s status as 
a small disadvantaged business concern (see FAR 19.703(b)).
    (d) If at any time the SBA (or DoD in the case of entities 
employing the severely disabled) determines that a 
prot[eacute]g[eacute] is ineligible, assistance that the mentor firm 
furnishes to the prot[eacute]g[eacute] after the date of the 
determination may not be considered assistance furnished under the 
Program.
    (e) A company may not be approved for participation in the 
Program as a mentor firm if, at the time of requesting participation 
in the Program, it is currently debarred or suspended from 
contracting with the Federal Government pursuant to FAR Subpart 9.4.
    (f) If the mentor firm is suspended or debarred while performing 
under an approved mentor-prot[eacute]g[eacute] agreement, the mentor 
firm--
    (1) May continue to provide assistance to its 
prot[eacute]g[eacute] firms pursuant to approved mentor-
prot[eacute]g[eacute] agreements entered into prior to the 
imposition of such suspension or debarment;
    (2) May not be reimbursed or take credit for any costs of 
providing developmental assistance to its prot[eacute]g[eacute] 
firm, incurred more than 30 days after the imposition of such 
suspension or debarment; and
    (3) Must promptly give notice of its suspension or debarment to 
its prot[eacute]g[eacute] firm and the cognizant Component Director, 
SADBU.

I-103 Program Duration

    (a) New mentor-prot[eacute]g[eacute] agreements may be submitted 
and approved through September 30, 2005.
    (b) Mentors incurring costs prior to September 30, 2008, 
pursuant to an approved mentor-prot[eacute]g[eacute] agreement may 
be eligible for--
    (1) Credit toward the attainment of its applicable 
subcontracting goals for unreimbursed costs incurred in providing 
developmental assistance to its prot[eacute]g[eacute] firm(s);
    (2) Reimbursement pursuant to the execution of a separately 
priced contract line item added to a DoD contract; or
    (3) Reimbursement pursuant to entering into a separate DoD 
contract upon

[[Page 26536]]

determination by the cognizant Component Director, SADBU, that 
unusual circumstances justify using a separate contract.

I-104 Selection of Prot[eacute]g[eacute] Firms

    (a) Mentor firms will be solely responsible for selecting 
prot[eacute]g[eacute] firms. Mentor firms are encouraged to identify 
and select concerns that are defined as emerging SDB 
prot[eacute]g[eacute] firms.
    (b) The selection of prot[eacute]g[eacute] firms by mentor firms 
may not be protested, except as in paragraph (c) of this section.
    (c) In the event of a protest regarding the size or 
disadvantaged status of an entity selected to be a 
prot[eacute]g[eacute] firm as defined in I-101.5, the mentor firm 
must refer the protest to the SBA to resolve in accordance with 13 
CFR Part 121 (with respect to size) or 13 CFR Part 124 (with respect 
to disadvantaged status).
    (d) For purposes of the Small Business Act, no determination of 
affiliation or control (either direct or indirect) may be found 
between a prot[eacute]g[eacute] firm and its mentor firm on the 
basis that the mentor firm has agreed to furnish (or has furnished) 
to its prot[eacute]g[eacute] firm, pursuant to a mentor-
prot[eacute]g[eacute] agreement, any form of developmental 
assistance described in I-107(f).
    (e) A prot[eacute]g[eacute] firm may have only one active DoD 
mentor-prot[eacute]g[eacute] agreement.

I-105 Mentor Approval Process

    (a) An entity seeking to participate as a mentor must apply to 
the cognizant Component Director, SADBU, to establish its initial 
eligibility as a mentor. This application may accompany its initial 
mentor-prot[eacute]g[eacute] agreement.
    (b) The application must provide the following information:
    (1) A statement that the company is currently performing under 
at least one active approved subcontracting plan negotiated with DoD 
or another Federal agency pursuant to FAR 19.702, and that the 
company is currently eligible for the award of Federal contracts or 
a statement that the entity is a graduated 8(a) firm.
    (2) A summary of the company's historical and recent activities 
and accomplishments under its small and disadvantaged business 
utilization program.
    (3) The total dollar amount of DoD contracts and subcontracts 
that the company received during the 2 preceding fiscal years. (Show 
prime contracts and subcontracts separately per year.)
    (4) The total dollar amount of all other Federal agency 
contracts and subcontracts that the company received during the 2 
preceding fiscal years. (Show prime contracts and subcontracts 
separately per year.)
    (5) The total dollar amount of subcontracts that the company 
awarded under DoD contracts during the 2 preceding fiscal years.
    (6) The total dollar amount of subcontracts that the company 
awarded under all other Federal agency contracts during the 2 
preceding fiscal years.
    (7) The total dollar amount and percentage of subcontracts that 
the company awarded to all SDB and WOSB firms under DoD contracts 
and other Federal agency contracts during the 2 preceding fiscal 
years. (Show DoD subcontract awards separately.) If the company 
presently is required to submit a Standard Form (SF) 295, Summary 
Subcontract Report, the request must include copies of the final 
reports for the 2 preceding fiscal years.
    (8) Information on the company's ability to provide 
developmental assistance to eligible prot[eacute]g[eacute]s.
    (c) A template of the mentor application is available at: http://www.acq.osd.mil/sadbu/mentor_protege.
    (d) Companies that apply for participation and are not approved 
will be provided the reasons and an opportunity to submit additional 
information for reconsideration.

I-106 Development of Mentor-Prot[eacute]g[eacute] Agreements

    (a) Prospective mentors and their prot[eacute]g[eacute]s may 
choose to execute letters of intent prior to negotiation of mentor-
prot[eacute]g[eacute] agreements.
    (b) The agreements should be structured after completion of a 
preliminary assessment of the developmental needs of the 
prot[eacute]g[eacute] firm and mutual agreement regarding the 
developmental assistance to be provided to address those needs and 
enhance the prot[eacute]g[eacute]'s ability to perform successfully 
under contracts or subcontracts.
    (c) A mentor firm may not require a prot[eacute]g[eacute] firm 
to enter into a mentor-prot[eacute]g[eacute] agreement as a 
condition for award of a contract by the mentor firm, including a 
subcontract under a DoD contract awarded to the mentor firm.
    (d) The mentor-prot[eacute]g[eacute] agreement may provide for 
the mentor firm to furnish any or all of the following types of 
developmental assistance:
    (1) Assistance by mentor firm personnel in--
    (i) General business management, including organizational 
management, financial management, and personnel management, 
marketing, business development, and overall business planning;
    (ii) Engineering and technical matters such as production 
inventory control and quality assurance; and
    (iii) Any other assistance designed to develop the capabilities 
of the prot[eacute]g[eacute] firm under the developmental program.
    (2) Award of subcontracts under DoD contracts or other contracts 
on a noncompetitive basis.
    (3) Payment of progress payments for the performance of 
subcontracts by a prot[eacute]g[eacute] firm in amounts as provided 
for in the subcontract; but in no event may any such progress 
payment exceed 100 percent of the costs incurred by the 
prot[eacute]g[eacute] firm for the performance of the subcontract. 
Provision of progress payments by a mentor firm to a 
prot[eacute]g[eacute] firm at a rate other than the customary rate 
for the firm must be implemented in accordance with FAR 32.504(c).
    (4) Advance payments under such subcontracts. The mentor firm 
must administer advance payments in accordance with FAR Subpart 
32.4.
    (5) Loans.
    (6) Investment(s) in the prot[eacute]g[eacute] firm in exchange 
for an ownership interest in the prot[eacute]g[eacute] firm, not to 
exceed 10 percent of the total ownership interest. Investments may 
include, but are not limited to, cash, stock, and contributions in 
kind.
    (7) Assistance that the mentor firm obtains for the 
prot[eacute]g[eacute] firm from one or more of the following:
    (i) Small Business Development Centers established pursuant to 
Section 21 of the Small Business Act (15 U.S.C. 648).
    (ii) Entities providing procurement technical assistance 
pursuant to 10 U.S.C. Chapter 142 (Procurement Technical Assistance 
Centers).
    (iii) Historically Black colleges and universities.
    (iv) Minority institutions of higher education.
    (e) Pursuant to FAR 31.109, approved mentor firms seeking either 
reimbursement or credit are strongly encouraged to enter into an 
advance agreement with the contracting officer responsible for 
determining final indirect cost rates under FAR 42.705. The purpose 
of the advance agreement is to establish the accounting treatment of 
the costs of the developmental assistance pursuant to the mentor-
prot[eacute]g[eacute] agreement prior to the incurring of any costs 
by the mentor firm. An advance agreement is an attempt by both the 
Government and the mentor firm to avoid possible subsequent dispute 
based on questions related to reasonableness, allocability, or 
allowability of the costs of developmental assistance under the 
Program. Absent an advance agreement, mentor firms are advised to 
establish the accounting treatment of such costs and to address the 
need for any changes to their cost accounting practices that may 
result from the implementation of a mentor-prot[eacute]g[eacute] 
agreement, prior to incurring any costs, and irrespective of whether 
costs will be reimbursed or credited.
    (f) Developmental assistance provided under an approved mentor-
prot[eacute]g[eacute] agreement is distinct from, and must not 
duplicate, any effort that is the normal and expected product of the 
award and administration of the mentor firm's subcontracts. Costs 
associated with the latter must be accumulated and charged in 
accordance with the contractor's approved accounting practices; they 
are not considered developmental assistance costs eligible for 
either credit or reimbursement under the Program.

I-107 Elements of a mentor-prot[eacute]g[eacute] agreement.

    Each mentor-prot[eacute]g[eacute] agreement will contain the 
following elements:
    (a) The name, address, e-mail address, and telephone number of 
the mentor and prot[eacute]g[eacute] points of contact;
    (b) The NAICS code(s) that represent the contemplated supplies 
or services to be provided by the prot[eacute]g[eacute] firm to the 
mentor firm and a statement that, at the time the agreement is 
submitted for approval, the prot[eacute]g[eacute] firm, if an SDB or 
WOSB concern, does not exceed the size standard for the appropriate 
NAICS code;
    (c) A statement that the prot[eacute]g[eacute] firm is eligible 
to participate in accordance with I-102(b);
    (d) A statement that the mentor is eligible to participate in 
accordance with I-102;

[[Page 26537]]

    (e) A preliminary assessment of the developmental needs of the 
prot[eacute]g[eacute] firm;
    (f) A developmental program for the prot[eacute]g[eacute] firm 
specifying the type of assistance the mentor will provide to the 
prot[eacute]g[eacute] and how that assistance will--
    (1) Increase the prot[eacute]g[eacute]'s ability to participate 
in DoD, Federal, and/or commercial contracts and subcontracts; and
    (2) Increase small business subcontracting opportunities in 
industry categories where eligible prot[eacute]g[eacute]'s or other 
small business firms are not dominant in the company's vendor base;
    (g) Factors to assess the prot[eacute]g[eacute] firm's 
developmental progress under the Program, including specific 
milestones for providing each element of the identified assistance;
    (h) An estimate of the dollar value and type of subcontracts 
that the mentor firm will award to the prot[eacute]g[eacute] firm, 
and the period of time over which the subcontracts will be awarded;
    (i) A statement from the prot[eacute]g[eacute] firm indicating 
its commitment to comply with the requirements for reporting and for 
review of the agreement during the duration of the agreement and for 
2 years thereafter;
    (j) A program participation term for the agreement that does not 
exceed 3 years. Requests for an extension of the agreement for a 
period not to exceed an additional 2 years are subject to the 
approval of the cognizant Component Director, SADBU. The 
justification must detail the unusual circumstances that warrant a 
term in excess of 3 years;
    (k) Procedures for the mentor firm to notify the 
prot[eacute]g[eacute] firm in writing at least 30 days in advance of 
the mentor firm's intent to voluntarily withdraw its participation 
in the Program. A mentor firm may voluntarily terminate its mentor-
prot[eacute]g[eacute] agreement(s) only if it no longer wants to be 
a participant in the Program as a mentor firm. Otherwise, a mentor 
firm must terminate a mentor-prot[eacute]g[eacute] agreement for 
cause;
    (l) Procedures for the mentor firm to terminate the mentor-
prot[eacute]g[eacute] agreement for cause which provide that--
    (1) The mentor firm must furnish the prot[eacute]g[eacute] firm 
a written notice of the proposed termination, stating the specific 
reasons for such action, at least 30 days in advance of the 
effective date of such proposed termination;
    (2) The prot[eacute]g[eacute] firm must have 30 days to respond 
to such notice of proposed termination, and may rebut any findings 
believed to be erroneous and offer a remedial program;
    (3) Upon prompt consideration of the prot[eacute]g[eacute] 
firm's response, the mentor firm must either withdraw the notice of 
proposed termination and continue the prot[eacute]g[eacute] firm's 
participation, or issue the notice of termination; and
    (4) The decision of the mentor firm regarding termination for 
cause, conforming with the requirements of this section, will be 
final and is not reviewable by DoD;
    (m) Procedures for a prot[eacute]g[eacute] firm to notify the 
mentor firm in writing at least 30 days in advance of the 
prot[eacute]g[eacute] firm's intent to voluntarily terminate the 
mentor-prot[eacute]g[eacute] agreement;
    (n) Additional terms and conditions as may be agreed upon by 
both parties; and
    (o) Signatures and dates for both parties to the mentor-
prot[eacute]g[eacute] agreement.

I-108 Submission and approval of mentor-prot[eacute]g[eacute] 
agreements

    (a) Upon solicitation or as determined by the cognizant DoD 
component, mentors will submit--
    (1) A mentor application pursuant to I-105, if the mentor has 
not been previously approved to participate;
    (2) A signed mentor-prot[eacute]g[eacute] agreement pursuant to 
I-107;
    (3) A statement as to whether the mentor is seeking credit or 
reimbursement of costs incurred;
    (4) The estimated cost of the technical assistance to be 
provided, broken out per year;
    (5) A justification if program participation term is greater 
than 3 years (Term of agreements may not exceed 5 years); and
    (6) For reimbursable agreements, a specific justification for 
developmental costs in excess of $1,000,000 per year.
    (b) When seeking reimbursement of costs, cognizant DoD 
components may require additional information.
    (c) The mentor-prot[eacute]g[eacute] agreement must be approved 
by the cognizant Component Director, SADBU, prior to incurring costs 
eligible for credit.
    (d) The cognizant DoD component will execute a contract 
modification or a separate contract, if justified pursuant to I-
103(b)(3), prior to the mentor's incurring costs eligible for 
reimbursement.
    (e) Credit agreements that are not associated with an existing 
DoD program and/or component will be submitted for approval to 
Director, SADBU, Defense Contract Management Agency (DCMA), via the 
mentor's cognizant administrative contracting officer.
    (f) A prospective mentor that has identified Program funds to be 
made available from a DoD program manager must provide the 
information in paragraph (a) of this section through the program 
manager to the cognizant Component Director, SADBU, with a letter 
signed by the program manager indicating the amount of funding that 
has been identified for the developmental assistance program.

I-109 Reimbursable agreements

    The following program provisions apply to all reimbursable 
mentor-prot[eacute]g[eacute] agreements:
    (a) Assistance provided in the form of progress payments to a 
prot[eacute]g[eacute] firm in excess of the customary progress 
payment rate for the firm will be reimbursed only if implemented in 
accordance with FAR 32.504(c).
    (b) Assistance provided in the form of advance payments will be 
reimbursed only if the payments have been provided to a 
prot[eacute]g[eacute] firm under subcontract terms and conditions 
similar to those in the clause at FAR 52.232-12, Advance Payments. 
Reimbursement of any advance payments will be made pursuant to the 
inclusion of the clause at DFARS 252.232-7005, Reimbursement of 
Subcontractor Advance Payments--DoD Pilot Mentor-
Prot[eacute]g[eacute] Program, in appropriate contracts. In 
requesting reimbursement, the mentor firm agrees that the risk of 
any financial loss due to the failure or inability of a 
prot[eacute]g[eacute] firm to repay any unliquidated advance 
payments will be the sole responsibility of the mentor firm.
    (c) The primary forms of developmental assistance authorized for 
reimbursement under the Program are identified in I-106(d). On a 
case-by-case basis, Component Directors, SADBU, at their discretion, 
may approve additional incidental expenses for reimbursement, 
provided these expenses do not exceed 10 percent of the total 
estimated cost of the agreement.
    (d) The total amount reimbursed to a mentor firm for costs of 
assistance furnished to a prot[eacute]g[eacute] firm in a fiscal 
year may not exceed $1,000,000 unless the cognizant Component 
Director, SADBU, determines in writing that unusual circumstances 
justify reimbursement at a higher amount. Request for authority to 
reimburse in excess of $1,000,000 must detail the unusual 
circumstances and must be endorsed and submitted by the program 
manager to the cognizant Component Director, SADBU.
    (e) Developmental assistance costs that are incurred pursuant to 
an approved reimbursable mentor-prot[eacute]g[eacute] agreement, and 
have been charged to, but not reimbursed through, a separate 
contract, or through a separately priced contract line item added to 
a DoD contract, will not be otherwise reimbursed, as either a direct 
or indirect cost, under any other DoD contract, irrespective of 
whether the costs have been recognized for credit against applicable 
subcontracting goals.

I-110 Credit Agreements

I-110.1 Program Provisions Applicable to Credit Agreements

    (a) Developmental assistance costs incurred by a mentor firm for 
providing assistance to a prot[eacute]g[eacute] firm pursuant to an 
approved credit mentor-prot[eacute]g[eacute] agreement may be 
credited as if the costs were incurred under a subcontract award to 
that prot[eacute]g[eacute], for the purpose of determining the 
performance of the mentor firm in attaining an applicable 
subcontracting goal established under any contract containing a 
subcontracting plan pursuant to the clause at FAR 52.219-9, Small 
Business Subcontracting Plan, or the provisions of the DoD 
Comprehensive Subcontracting Plan Test Program. Unreimbursed 
developmental assistance costs incurred for a prot[eacute]g[eacute] 
firm that is an eligible entity employing the severely disabled may 
be credited toward the mentor firm's small disadvantaged business 
subcontracting goal, even if the prot[eacute]g[eacute] firm is not a 
small disadvantaged business concern.
    (b) Costs that have been reimbursed through inclusion in 
indirect expense pools may also be credited as subcontract awards 
for determining the performance of the mentor firm in attaining an 
applicable subcontracting goal established under any contract 
containing a subcontracting plan. However, costs that have not been 
reimbursed because they are not reasonable,

[[Page 26538]]

allocable, or allowable will not be recognized for crediting 
purposes.
    (c) Other costs that are not eligible for reimbursement pursuant 
to I-106(d) may be recognized for credit only if requested, 
identified, and incorporated in an approved mentor-
prot[eacute]g[eacute] agreement.
    (d) The amount of credit a mentor firm may receive for any such 
unreimbursed developmental assistance costs must be equal to--
    (1) Four times the total amount of such costs attributable to 
assistance provided by small business development centers, 
historically Black colleges and universities, minority institutions, 
and procurement technical assistance centers.
    (2) Three times the total amount of such costs attributable to 
assistance furnished by the mentor's employees.
    (3) Two times the total amount of other such costs incurred by 
the mentor in carrying out the developmental assistance program.

I-110.2 Credit Adjustments

    (a) Adjustments may be made to the amount of credit claimed if 
the Director, SADBU, OUSD(AT&L), determines that--
    (1) A mentor firm's performance in the attainment of its 
subcontracting goals through actual subcontract awards declined from 
the prior fiscal year without justifiable cause; and
    (2) Imposition of such a limitation on credit appears to be 
warranted to prevent abuse of this incentive for the mentor firm's 
participation in the Program.
    (b) The mentor firm must be afforded the opportunity to explain 
the decline in small business subcontract awards before imposition 
of any such limitation on credit. In making the final decision to 
impose a limitation on credit, the Director, SADBU, OUSD(AT&L), must 
consider--
    (1) The mentor firm's overall small business participation rates 
(in terms of percentages of subcontract awards and dollars awarded) 
as compared to the participation rates existing during the 2 fiscal 
years prior to the firm's admission to the Program;
    (2) The mentor firm's aggregate prime contract awards during the 
prior 2 fiscal years and the total amount of subcontract awards 
under such contracts; and
    (3) Such other information the mentor firm may wish to submit.
    (c) The decision of the Director, SADBU, OUSD(AT&L), regarding 
the imposition of a limitation on credit will be final.

I-111 Agreement Terminations

    (a) Mentors and/or prot[eacute]g[eacute]s must send a copy of 
any termination notices to the cognizant Component Director, SADBU, 
that approved the agreement, and the DCMA administrative contracting 
officer responsible for conducting the annual review pursuant to I-
113.
    (b) For reimbursable agreements, mentors must also send copies 
of any termination to the program manager and to the contracting 
officer.
    (c) Termination of a mentor-prot[eacute]g[eacute] agreement will 
not impair the obligations of the mentor firm to perform pursuant to 
its contractual obligations under Government contracts and 
subcontracts.
    (d) Termination of all or part of the mentor-
prot[eacute]g[eacute] agreement will not impair the obligations of 
the prot[eacute]g[eacute] firm to perform pursuant to its 
contractual obligations under any contract awarded to the 
prot[eacute]g[eacute] firm by the mentor firm.
    (e) Mentors and prot[eacute]g[eacute]s will follow provisions of 
the mentor-prot[eacute]g[eacute] agreement developed in compliance 
with I-107(k) through (m).

I-112 Reporting Requirements.

I-112.1 Reporting Requirements applicable to SF294/295 Reports.

    (a) Amounts credited toward applicable subcontracting goal(s) 
for unreimbursed costs under the Program must be separately 
identified on the appropriate SF294/SF295 reports from the amounts 
credited toward the goal(s) resulting from the award of actual 
subcontracts to prot[eacute]g[eacute] firms. The combination of the 
two must equal the mentor firm's overall accomplishment toward the 
applicable goal(s).
    (b) A mentor firm may receive credit toward the attainment of an 
SDB subcontracting goal for each subcontract awarded by the mentor 
firm to an entity that qualifies as a prot[eacute]g[eacute] firm 
pursuant to I-101.3 or I-101.5.
    (c) For purposes of calculating any incentives to be paid to a 
mentor firm for exceeding an SDB subcontracting goal pursuant to the 
clause at FAR 52.219-26, Small Disadvantaged Business Participation 
Program--Incentive Subcontracting, incentives will be paid only if 
an SDB subcontracting goal has been exceeded as a result of actual 
subcontract awards to SDBs (i.e., excluding credit).

I-112.2 Program Specific Reporting Requirements.

    (a) Mentors must report on the progress made under active 
mentor-prot[eacute]g[eacute] agreements semiannually for the periods 
ending March 31st and September 30th throughout the Program 
participation term of the agreement. The September 30th report must 
address the entire fiscal year.
    (b) Reports are due 30 days after the close of each reporting 
period.
    (c) Each report must include the following data on performance 
under the mentor-prot[eacute]g[eacute] agreement:
    (1) Dollars obligated (for reimbursable agreements).
    (2) Expenditures.
    (3) Dollars credited, if any, toward applicable subcontracting 
goals as a result of developmental assistance provided to the 
prot[eacute]g[eacute] and a copy of the SF294 and/or SF295 for each 
contract where developmental assistance was credited.
    (4) The number and dollar value of subcontracts awarded to the 
prot[eacute]g[eacute] firm.
    (5) Description of developmental assistance provided, including 
milestones achieved.
    (6) Impact of the agreement in terms of capabilities enhanced, 
certifications received, and/or technology transferred.
    (d) A recommended reporting format and guidance for its 
submission are available at: http://www.acq.osd.mil/sadbu/mentor_protege.
    (e) The prot[eacute]g[eacute] must provide data, annually by 
October 31st, on the progress made during the prior fiscal year by 
the prot[eacute]g[eacute] in employment, revenues, and participation 
in DoD contracts during--
    (1) Each fiscal year of the Program participation term; and
    (2) Each of the 2 fiscal years following the expiration of the 
Program participation term.
    (f) The prot[eacute]g[eacute] report required by paragraph (e) 
of this section may be provided as part of the mentor report for the 
period ending September 30th required by paragraph (a) of this 
section.
    (g) Progress reports must be submitted--
    (1) For credit agreements, to the cognizant Component Director, 
SADBU, that approved the agreement, and the mentor's cognizant DCMA 
administrative contracting officer; and
    (2) For reimbursable agreements, to the cognizant Component 
Director, SADBU, the contracting officer, the DCMA administrative 
contracting officer, and the program manager.

I-113 Performance reviews.

    (a) DCMA will conduct annual performance reviews of the progress 
and accomplishments realized under approved mentor-
prot[eacute]g[eacute] agreements. These reviews must verify data 
provided on the semiannual reports and must provide information as 
to--
    (1) Whether all costs reimbursed to the mentor firm under the 
agreement were reasonably incurred to furnish assistance to the 
prot[eacute]g[eacute] in accordance with the mentor-
prot[eacute]g[eacute] agreement and applicable regulations and 
procedures; and
    (2) Whether the mentor and prot[eacute]g[eacute] accurately 
reported progress made by the prot[eacute]g[eacute] in employment, 
revenues, and participation in DoD contracts during the Program 
participation term and for 2 fiscal years following the expiration 
of the Program participation term.
    (b) A checklist for annual performance reviews is available at 
http://www.acq.osd.mil/sadbu/mentor_protege.

[FR Doc. 04-10883 Filed 5-12-04; 8:45 am]
BILLING CODE 5001-08-P