Federal council proposes preferential treatment for territories under SBA program

Visitors on a beach in the Condado neighborhood of San Juan, on March 28, 2024. Earlier this month, the Federal Acquisition Regulatory Council issued a proposed rule to implement regulatory changes adopted by the U.S. Small Business Administration in 2020, to add U.S. territories to the list of eligible for preferential treatment under the SBA mentor-protégé program. (Scott McIntyre/The New York Times)

By The Star Staff

The Federal Acquisition Regulatory (FAR) Council recently issued a proposed rule to add Puerto Rico, the U.S. Virgin Islands, American Samoa, Guam, and the Commonwealth of the Northern Mariana Islands (CNMI), to the list of territories from which small businesses are eligible for preferential treatment under the U.S. Small Business Administration (SBA) mentor-protégé program.

The information was provided in a client alert issued by the law firm ReedSmith. Comments on the proposed rule are due on Aug. 6.

The proposed rule would provide incentives to large mentor companies that subcontract with small business protégés, including positive consideration in their past performance evaluations and the ability to apply protégé training costs toward their small business subcontracting plan goals, the law firm said.

On June 7, the FAR Council issued a proposed rule to implement regulatory changes adopted by the SBA in 2020, to add U.S. territories to the list of eligible for preferential treatment under the SBA mentor-protégé program.

The SBA’s regulatory changes in 2020 and 2022 created two specific incentives for mentor-protégé pairs in which the protégé either has its principal office located in Puerto Rico or is a “‘covered territory business,’ statutorily defined as a small business with a principal office located in the U.S. Virgin Islands, American Samoa, Guam, or CNMI,” ReedSmith wrote.

The proposed rule would benefit both large companies and small businesses principally located in covered territories that join forces under the SBA mentor-protégé program. The mentor incentives detailed in the proposed rule could motivate large companies to explore mentor-protégé agreements with small businesses in Puerto Rico and the other included territories, opening the door to more federal contracting opportunities for both mentors and protégés. Covered small businesses would also benefit from enhanced capabilities gained through mentor-provided training and other assistance, according to ReedSmith.

The proposed rule highlights that, according to the System for Award Management (SAM), there are 4,483 small businesses in Puerto Rico that are currently doing business with the federal government. The proposed rule notes that 219 small businesses across the covered territories contracted with the federal government in 2021 and currently, according to the SAM, there are more than 400 small businesses across the covered territories with active SAM registrations.

Having such a significant number of already established small government contractors in place provides fertile ground for large businesses interested in entering or expanding their footprint in the federal marketplace through SBA-approved mentor-protégé agreements. It also provides opportunities for small business protégés to build capacity with the resources provided by their mentors.