Magazine article National Defense

Primes, Subs Reap Financial Benefits in Mentor-Protege Program

Magazine article National Defense

Primes, Subs Reap Financial Benefits in Mentor-Protege Program

Article excerpt

As the nation's largest buyer of goods and services, the Pentagon awards billions of dollars worth of contracts to small businesses.

Nevertheless, the Defense Department and other government agencies are seeking to bolster the role of small business in their markets. Their goal, say officials, is to ensure federal agencies have a robust subcontractor base.

The Pentagon set a goal of 23 percent for the share of overall contracts that should go to small businesses. Currently, the Pentagon falls just short of that number at 22.9 percent, worth $24.5 billion. Subcontracting numbers are larger with 41.4 percent going to small business, which amounts to $22.5 billion.

But those numbers rely heavily on construction contracts, said Bob Neal, director of the Defense Department's Office of Small and Disadvantaged Business Utilization.

"The difference is in the industries and the opportunities that they have," Neal explained in an interview with National Defense. "The industry determines whether there is a large number of small businesses they can pull from.

"In the construction industry they are in the 50-70 percent range subcontracting to small business-carpenters, roofers. The shipbuilding industry is in the teens.

"We have been tracking that for seven years. The numbers are heavily influenced by construction which balances out the high tech end where not as many small businesses are available."

The National Aeronautics and Space Administration (NASA), on the other hand, contracts out 14 percent of its $14 billion budget to small business interests and 70 percent of those contracts goes to high-tech firms, according to Lamont Hames, manager for NASA's mentor-protege program

Evaluating the Bottom Line

To strengthen the role of small business in the government market place, Congress initiated the mentor-protege program in 1985 with the Defense Department. Since then, the Environmental Protection Agency and NASA have opened up similar programs.

The crux of the effort is to encourage large, established companies to incubate small ones and help them develop into viable subcontractors.

Mentor-protege backers claim the project has been a success, especially in the last three years. During that time, the program helped create 3,500 new jobs and increased profits by $300 million at the 226 participating protege firms.

Mentors during the same time period reportedly increased subcontract awards to small disadvantaged business firms by $695 million.

Currently, the Pentagon program operates on an annual budget of $30 million to reimburse mentors for infrastructure development. Approved expenses can include salaries, office space, benefits, and travel. The average mentor-protege agreement costs the Pentagon between $300,000 and $500,000 a year in reimbursable expenses.

The NASA program entices prospective companies with bonus points. A mentor qualifies for extra points if it meets specific socioeconomic requirements stipulated by NASA. The additional points can make up 15 percent of the overall evaluation for contracts. Proteges are guaranteed subcontracts, since they must be included in any proposal by the mentor that seeks a favorable scoring under the program.

The Way It Works

The Pentagon program, designed to provide technical and business assistance to small disadvantaged businesses does not require mentors to subcontract to their proteges. …

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