[Federal Register Volume 65, Number 28 (Thursday, February 10, 2000)]
[Rules and Regulations]
[Pages 6554-6561]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-2946]


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DEPARTMENT OF DEFENSE

48 CFR Part 219 and Appendix I to Chapter 2

[DFARS Case 99-D307]


Defense Federal Acquisition Regulation Supplement; Mentor-Protege 
Program Improvements

AGENCY:  Department of Defense (DoD).

ACTION:  Interim rule with request for comments.

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SUMMARY:  The Acting Director of Defense Procurement has issued an 
interim rule amending the Defense Federal Acquisition Regulation 
Supplement (DFARS) to implement Section 811 of the National Defense 
Authorization Act for Fiscal Year 2000. Section 811 amends statutory 
provisions pertaining to the DoD Pilot Mentor-Protege Program.

DATES:  Effective date: February 10, 2000.
    Comment date: Comments on the interim rule should be submitted in 
writing to the address shown below on or before April 10, 2000, to be 
considered in the formation of the final rule.

ADDRESSES:  Interested parties should submit written comments to: 
Defense Acquisition Regulations Council, Attn: Ms. Susan Schneider, 
PDUSD (AT&L) DP (DAR), IMD 3D139, 3062 Defense Pentagon, Washington, DC 
20301-3062. Telefax (703) 602-0350.
    E-mail comments submitted via the Internet should be addressed to: 
<a href="/cdn-cgi/l/email-protection#91f5f7f0e3e2d1f0f2e0bffee2f5bffcf8fd"><span class="__cf_email__" data-cfemail="86e2e0e7f4f5c6e7e5f7a8e9f5e2a8ebefea">[email protected]</span></a>
    Please cite DFARS Case 99-D307 in all correspondence related to 
this rule. E-mail comments should cite DFARS Case 99-D307 in the 
subject line.

FOR FURTHER INFORMATION CONTACT:  Ms. Susan Schneider, (703) 602-0326.

SUPPLEMENTARY INFORMATION:

A. Background

    This interim rule revises DFARS Subpart 219.71 and Appendix I to 
implement Section 811 of the National Defense Authorization Act for 
Fiscal Year 2000 (Public Law 106-65). Section 811 amends statutory 
provisions pertaining to the DoD Pilot Mentor-Protege Program. The 
amendments revise the procedures for reimbursement

[[Page 6555]]

of costs to mentor firms for assistance provided to protege firms; 
require both mentor and protege firms to submit progress reports; 
require the Defense Contract Management Command to conduct annual 
performance reviews of mentor-protege agreements; extend the period for 
entering into mentor-protege agreements until September 30, 2002; and 
extend the period during which mentor firms may incur costs under the 
Program until September 30, 2005.
    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. The rule changes 
procedures for administering and monitoring the Mentor-Protege Program, 
but maintains the primary objective of providing incentives for major 
DoD contractors to assist small disadvantaged business concerns and 
qualified organizations employing the severely disabled in enhancing 
their capabilities to satisfy Government and commercial contract 
requirements. Therefore, DoD has not performed and 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 99-D307.

C. Paperwork Reduction Act

    The Paperwork Reduction Act (44 U.S.C. 3501, et seq.) applies 
because the interim rule contains new information collection 
requirements. Under the emergency processing provisions of 44 U.S.C. 
3507(j) as implemented at 5 CFR 1320.13, the Office of Management and 
Budget (OMB) has granted emergency approval of the information 
collection requirements through July 31, 2000, under OMB Clearance 
Number 0704-0412. DoD will obtain the OMB approval required by 44 
U.S.C. 3507(a)(2) prior to publication of the final rule.
    1. Comments: Comments are invited. Particular comments are 
solicited on:
    a. Whether the collection of information is necessary for the 
proper performance of the functions of the agency, including whether 
the information will have practical utility;
    b. The accuracy of the agency's estimate of the burden of the 
information collection;
    c. Ways to enhance the quality, utility, and clarity of the 
information to be collected; and
    d. Ways to minimize the burden of the information collection on 
respondents, including the use of automated collection techniques or 
other forms of information technology.
    2. Title, Associated Form, and OMB Number: DoD Pilot Mentor-Protege 
Program, Defense Federal Acquisition Regulation Supplement Appendix I; 
OMB Number 0704-0412.
    3. Needs and Uses: The new information collection required by 
Appendix I, Policy and Procedures for the DoD Pilot Mentor-Protege 
Program, is required by Section 811 of the National Defense 
Authorization Act for Fiscal Year 2000 (Public Law 106-65). DoD will 
use the information to assess whether the purposes of the Pilot Mentor-
Protege Program have been attained and to prepare the reports to 
Congress required by Section 811 of Public Law 106-65.
    4. Affected Public: Businesses or other for-profit entities.
    5. Annual Burden Hours: 435.
    6. Number of Respondents: 145.
    7. Responses Per Respondent: 1.
    8. Number of Responses: 145.
    9. Average Burden Per Response: 3 hours (1 reporting hour; 2 
recordkeeping hours).
    10. Frequency: Annually.
    11. Supplementary Information: DFARS Appendix I requires a protege 
firm to report on its progress under a mentor-protege agreement by 
concurring with or rebutting its mentor firm's year-end report. The 
protege firm also must provide data on its employment, revenues, and 
participation in DoD contracts. The report is required annually during 
the protege firm's Program participation term and for 2 fiscal years 
after the expiration of the Program participation term.

D. Determination to Issue an Interim Rule

    A determination has been made under the authority of the Secretary 
of Defense that urgent and compelling reasons exist to publish this 
interim rule prior to affording the public an opportunity to comment. 
This interim rule implements Section 811 of the National Defense 
Authorization Act for Fiscal Year 2000. Section 811 amends statutory 
provisions pertaining to the DoD Pilot Mentor-Protege Program. Section 
811 became effective on October 5, 1999. DoD will consider comments 
received in response to this interim rule in the formation of the final 
rule.

List of Subjects in 48 CFR Part 219

    Government procurement.

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

    Therefore, 48 CFR part 219 and Appendix I to Chapter 2 are amended 
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. Subpart 219.71 is revised to read as follows:

Subpart 219.71--Pilot Mentor-Protege Program

Sec.
219.7100   Scope.
219.7101   Policy.
219.7102   General.
219.7103   Procedures.
219.7103-1   General.
219.7103-2   Contracting officer responsibilities.
219.7104   Developmental assistance costs eligible for reimbursement 
or credit.
219.7105   Reporting.
219.7106   Performance reviews.


219.7100  Scope.

    This subpart implements the Pilot Mentor-Protege 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). The 
purpose of the Program is to provide incentives for DoD contractors to 
assist small disadvantaged businesses in enhancing their capabilities 
and to increase participation of such firms in Government and 
commercial contracts. Qualified organizations employing the severely 
disabled, as defined in Section 8064A of Pub. L. 102-172, are also 
eligible to participate as protege firms.


219.7101  Policy.

    DoD policy and procedures for implementation of the Program are 
contained in Appendix I, Policy and Procedures for the DoD Pilot 
Mentor-Protege Program.


219.7102  General.

    The Program includes--
    (a) Mentor firms that are prime contractors with at least one 
active subcontracting plan negotiated under FAR Subpart 19.7.

[[Page 6556]]

    (b) Protege firms that are small disadvantaged business (SDB) 
concerns as defined at 219.001(1), or qualified organizations employing 
the severely disabled, eligible for receipt of Federal contracts and 
selected by the mentor firm.
    (c) Mentor-protege agreements that establish a developmental 
assistance program for a protege firm.
    (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 
Director, Small and Disadvantaged Business Utilization, Office of the 
Under Secretary of Defense (Acquisition, Technology, and Logistics) 
SADBU, OUSD (AT&L)), that unusual circumstances justify reimbursement 
using a separate contract; or
    (2) Credit toward SDB subcontracting goals, established under a 
subcontracting plan negotiated under FAR Subpart 19.7, for 
developmental assistance costs that are not reimbursed.


219.7103  Procedures.


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-Protege Program. The Director, SADBU, OUSD (AT&L), approves 
contractors as mentor firms, approves mentor-protege agreements, and 
forwards approved mentor-protege agreements to the contracting officer 
when program funding is available through a DoD program manager.


219.7103-2  Contracting officer responsibilities.

    Contracting officers must--
    (a) Negotiate an advance agreement on the treatment of 
developmental assistance costs for either credit or reimbursement if 
the mentor firm proposes such an agreement, or delegate authority to 
negotiate to the administrative contracting officer (see FAR 31.109).
    (b) Modify (without consideration) applicable contract(s) to 
incorporate the clause at 252.232-7005, Reimbursement of Subcontractor 
Advance Payments--DoD Pilot Mentor-Protege Program, when a mentor firms 
provides advance payments to a protege firm under the Program and the 
mentor firm requests reimbursement of advance payments.
    (c) Modify (without consideration) applicable contract(s) to 
incorporate other than customary progress payments for small 
disadvantaged businesses in accordance with FAR 32.504(c) if a mentor 
firm provides such payments to a protege firm and the mentor firm 
requests reimbursement.
    (d) Modify applicable contract(s) to establish a contract line item 
for reimbursement of developmental assistance costs if--
    (1) A DoD program manager has made funds available for that 
purpose; and
    (2) The contractor has an approved mentor-protege agreement.
    (e) Negotiate and award a separate contract for reimbursement of 
developmental assistance cost if--
    (1) A DoD program manager has made funds available for that 
purpose;
    (2) The contractor has an approved mentor-protege agreement; and
    (3) The Director, SADBU, OUSD (AT&L), has made a determination in 
accordance with 219.7102(d)(1)(ii).
    (f) Authorized reimbursement for costs of assistance furnished to a 
protege firm in excess of $1,000,000 in a fiscal year only after 
receipt of a written determination from the Director, SADBU, OUSD 
(AT&L).
    (g) Advise contractors of reporting requirements in Appendix I.
    (h) Provide a copy of the approved Mentor-Protege agreement to the 
Defense Contract Management Command administrative contracting officer 
responsible for conducting the annual performance review (see Appendix 
I, Section I-112).


219.7104  Developmental assistance costs eligible for reimbursement or 
credit.

    (a) Development assistance provided under an approved mentor-
protege 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. The mentor firm must accumulate and 
charge costs associated with the latter in accordance with its approved 
accounting practices. Mentor firm costs that are eligible for 
reimbursement are set forth in Appendix I.
    (b) Before incurring any costs under the Program, mentor firms must 
establish the accounting treatment of developmental assistance costs 
eligible for reimbursement or credit. Advance agreements are 
encouraged. To be eligible for reimbursement under the Program, the 
mentor firm must incur the costs before October 1, 2005.
    (c) If the mentor firm is suspended or debarred while performing 
under an approved mentor-protege agreement, the mentor firm may not be 
reimbursed or credited for developmental assistance costs incurred more 
than 30 days after the imposition of the suspension or debarment.
    (d) Developmental assistance costs incurred by a mentor firm before 
October 1, 2005, that are eligible for crediting under the Program, may 
be credited toward subcontracting plan goals as set forth in Appendix 
I.


219.7105  Reporting.

    Mentor and protege firms must report on the progress made under 
mentor-protege agreements as indicated in Appendix I, Section I-111.


219.7106  Performance reviews.

    The Defense Contract Management Command will conduct annual 
performance reviews of all mentor-protege agreements as indicated in 
Appendix I, Section I-112.

    3. Appendix I to Chapter 2 is revised to read as follows:

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

I-100  Purpose.
I-101  Definitions.
I-101.1  Emerging SDB concern.
I-101.2  Historically Black college or university.
I-101.3  Minority institution of higher education.
I-102  General procedures.
I-103  Program duration.
I-104  Eligibility requirements for a protege firm.
I-105  Selection of protege firms.
I-106  Approval process for companies to participate in the Program 
as mentor firms.
I-107  Mentor-protege agreements.
I-108  Reimbursement procedures.
I-109  Credit for unreimbursed developmental assistance costs.
I-110  Advance agreements on the treatment of developmental 
assistance costs.
I-111  Reporting requirements.
I-112  Agreement reviews.

I-100  Purpose.

    (a) This Appendix I to 48 CFR Chapter 2 implements the Pilot 
Mentor-Protege Program (hereinafter 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 small disadvantaged 
business (SDB) concerns or qualified organizations employing the 
severely disabled (hereinafter referred to as ``protege firms'') in 
enhancing their capabilities to satisfy DoD and other contract and 
subcontract requirements;
    (2) Increase the overall participation of protege 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 protege firms and such contractors.

[[Page 6557]]

    (b) Under the Program, eligible companies approved as mentor 
firms will enter into mentor-protege agreements with eligible 
protege firms to provide appropriate developmental assistance to 
enhance the capabilities of the protege firms to perform as 
subcontractors and suppliers. According to the law, DoD may provide 
the mentor firm with either cost reimbursement or credit against SDB 
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 subcontracts awarded to 
protege firms by mentor firms under DoD contracts;
    (2) An increase in the dollar value of contract and subcontract 
awards to protege 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;
    (3) An increase in the number and dollar value of subcontracts 
awarded to a protege firm (or former protege firm) by its mentor 
firm (or former mentor firm);
    (4) An increase in subcontracting with SDB concerns in industry 
categories where SDBs traditionally have not participated within the 
mentor firm's vendor base;
    (5) The involvement of emerging SDBs in the Program; and
    (6) An increase in the employment level of protege 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 SDB subcontracting goals for costs incurred 
under the Program.

I-101  Definitions.

I-101.1  Emerging SDB concern.

    A small disadvantaged business whose size is no greater than 50 
percent of the numerical size standard applicable to the standard 
industrial code for the supplies or services that the protege firm 
provides or would provide to the mentor firm.

I-101.2  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-101.3  Minority institution of higher education.

    An institution meeting the definition of ``Minority 
Institution'' at FAR 26.301.

I-102  General procedures.

    (a) At any time between October 1, 1991, and September 30, 2002, 
companies interested in becoming mentor firms that want to take 
credit toward SDB subcontracting goals for costs incurred for 
providing developmental assistance to one or more protege firms must 
apply to DoD for participation in the Program pursuant to the 
application process set forth at I-106(a).
    (b) At any time between October 1, 1991, and September 30, 2002, 
companies interested in becoming mentor firms that are able to 
identify funding from a DoD program manager(s) to provide 
developmental assistance to one or more protege firms must apply to 
DoD for participation in the Program, pursuant to the application 
process set forth at I-106(d).

I-103  Program duration.

    Activities under the Program may occur only during the following 
periods:
    (a) From October 1, 1991, until September 30, 2002, companies 
that have been approved for participation in the Program as mentor 
firms pursuant to I-102, General Procedures, may enter into mentor-
protege agreements, pursuant to I-107, Mentor Protege Agreements.
    (b) From October 1, 1991, until September 30, 2005, DoD may 
reimburse a mentor firm's costs of providing developmental 
assistance to its protege firm only if a DoD program manager has 
identified the funding for such costs and--
    (1)(i) For mentor-protege agreements entered into prior to 
October 1, 1999, the mentor firm incurs such costs after DoD and the 
mentor firm enter into a separate contract, cooperative agreement, 
or other agreement; or
    (ii) For mentor-protege agreements entered into on or after 
October 1, 1999, the mentor firm incurs such costs after DoD and the 
mentor firm enter into a separate contract based upon a 
determination by the Director, Small and Disadvantaged Business 
Utilization, Office of the Under Secretary of Defense (Acquisition, 
Technology, and Logistics) (SADBU, OUSD (AT&L)), that unusual 
circumstances justify using a separate contract; or
    (2) The mentor firm incurs such costs pursuant to the execution 
of a separately priced contract line item added to a DoD 
contract(s).
    (c) From October 1, 1991, until September 30, 2005, a mentor 
firm may receive credit toward the attainment of its goals for 
subcontract awards to SDBs, for unreimbursed costs incurred in 
providing developmental assistance to its protege firms, only it 
such costs are incurred pursuant to an approved mentor-protege 
agreement.

I-104  Eligibility requirements for a protege firm.

    (a) An entity may qualify as a protege firm if it is--
    (1) An SDB concern as defined at 219.001, paragraph (1) of the 
definition of ``small disadvantaged business concern,'' that is--
    (i) Eligible for the award of Federal contracts; and
    (ii) A small business according to the Small Business 
Administration (SBA) size standard for the Standard Industrial 
Classification (SIC) code that represents the contemplated supplies 
or services to be provided by the protege firm to the mentor firm; 
or
    (2) A qualified organization employing the severely disabled as 
defined in Pub. L. 102-172, section 8064A.
    (b) A protege firm may self-certify to a mentor firm that it 
meets the eligibility requirements in paragraph (a)(1) or (2) of 
this section. Mentor firms may rely in good faith on a written 
representation that the entity meets the requirements of paragraph 
(a)(1) or (2) of this section, except for a protege's status as a 
small disadvantaged business concern (see FAR 19.703(b)).
    (c) A protege firm may have only one active DoD mentor-protege 
agreement.

I-105  Selection of protege firms.

    (a) Mentor firms will be solely responsible for selecting 
protege firms. Mentor firms are encouraged to identify and select 
protege firms that are defined as emerging SDB concerns.
    (b) The selection of protege 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 protege firm as 
defined in I-104(a)(1), 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 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 protege firm and its mentor firm on the basis that the 
mentor firm has agreed to furnish (or has furnished) to its protege 
firm, pursuant to a mentor-protege agreement, any form of 
developmental assistance described in I-107(f).
    (e) If at any time pursuant to paragraph (c) of this section, 
the SBA determines that an SDB protege firm is not an SDB concern, 
assistance that the mentor firm furnishes to such a concern after 
the date of the determination may not be considered assistance 
furnished under the Program.

I-106  Approval process for companies to participate in the Program 
as mentor firms.

    (a) On or after October 1, 1991, a company that is interested in 
becoming a mentor firm that is seeking credit toward SDB 
subcontracting goals for costs incurred under the Program must 
submit a request to the Director, SADBU, OUSD (AT&L), for approval 
as a mentor firm under the Program. The Director will evaluate the 
request based on the extent to which the company's proposal 
addresses the items listed in paragraphs (b) and (c) of this 
section. To the maximum extent possible, a company should limit its 
request to not more than 10 pages, single-spaced. A company may 
identify more than one protege in its request for approval under the 
Program. The request must include the information required in 
paragraphs (b) and (c) of this section and may cover one or more 
proposed mentor-protege relationships.
    (b) A company must indicate whether it is interested in 
participating in the Program pursuant to I-100(d)(1) or (2) and must 
submit the following information:
    (1) A statement that the company is currently performing under 
at least one

[[Page 6558]]

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.
    (2) The number of proposed mentor-protege relationships covered 
by the request for approval as a mentor firm.
    (3) A summary of the company's historical and recent activities 
and accomplishments under its SDB program.
    (4) 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.)
    (5) 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.)
    (6) The total dollar amount of subcontracts that the company 
awarded under DoD contracts during the 2 preceding fiscal years.
    (7) The total dollar amount of subcontracts that the company 
awarded under all other Federal agency contracts during the 2 
preceding fiscal years.
    (8) The total dollar amount and percentage of subcontracts that 
the company awarded to all SDB 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.
    (9) The number and total dollar amount of subcontracts that the 
company awarded to the identified protege firm(s) during the 2 
preceding fiscal years (if any). (Show DoD subcontract awards and 
other Federal agency subcontract awards separately.)
    (c) In addition to the information required in paragraph (b) of 
this section, companies must submit the following information for 
each proposed mentor-protege relationship:
    (1) Information on the company's ability to provide 
developmental assistance to the identified protege firm and how that 
assistance will potentially increase subcontracting opportunities in 
industry categories where SDBs are not dominant in the company's 
vendor base.
    (2) A letter of intent indicating that both the mentor firm and 
the protege firm will negotiate a mentor-protege agreement. The 
letter of intent must be signed by both parties and must contain the 
following information:
    (i) The name, address, and telephone number of both parties.
    (ii) The protege firm's business classification, based upon the 
SIC code(s) that represents the contemplated supplies or services to 
be provided by the protege firm to the mentor firm.
    (iii) A statement that the protege firm meets the eligibility 
criteria in I-104(a)(1) or (2).
    (iv) A preliminary assessment of the developmental needs of the 
protege firm, and the proposed developmental assistance the mentor 
firm envisions providing the protege firm to address those needs and 
enhance the protege firm's ability to perform successfully under 
contracts or subcontracts with DoD and other Federal agencies and 
commercial contracts.
    (v) an estimate of the dollar amount and type of subcontracts 
that the mentor firm will award to the protege firm, and the period 
of time over which the mentor firm will make those awards.
    (vi) Information as to whether the protege firm's development 
will be concentrated on a single major system, a service or supply 
program, research and development programs, initial production, or 
mature systems, or in the mentor firm's overall contract base.
    (3) An estimate of the cost of the developmental assistance 
program and the period of time over which the mentor firm will 
provide assistance.
    (4) A statement from the protege 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.
    (d) A company that has identified Program funds to be made 
available through a DoD program manager must provide the information 
in paragraphs (b) and (c) of this section through the appropriate 
program manager and the cognizant Director, SADBU, to the Director, 
SADBU, OUSD(AT&L), with a letter signed by the appropriate program 
manager indicating the amount of funding that has been identified 
for the developmental assistance program. The company must submit a 
justification and endorsement from the cognizant Director, SADBU, 
when requesting--
    (1) Reimbursement of developmental costs in excess of 
$1,000,000;
    (2) Reimbursement through a separate contract; or
    (3) A Program participation term greater than 3, but not more 
than 5, years.
    (e) Companies seeking credit toward SDB subcontracting goals for 
the cost of developmental assistance, or reimbursement with funds 
made available by a DoD program manager, must submit four copies of 
the information specified in paragraphs (b) and (c) of this section 
to the Director, SADBU, OUSD(AT&L), ATTN: Pilot Mentor-Protege 
Program Manager, 1777 North Kent Street, Suite 9100, Arlington, VA 
22209. Upon receipt of this information, the Director, SADBU, 
OUSD(AT&L), will review and evaluate each request and, to the 
maximum extent possible, within 30 days advise each applicant of 
approval or rejection of its request to become a mentor firm.
    (f) A company approved as a mentor firm, either for credit or 
for reimbursement through funds made available by a DoD program 
manager, proceed with the negotiation of the mentor-protege 
agreement with the identified protege firm(s).
    (g) Companies that apply for participation in the Program 
pursuant to paragraph (e) of this section, and are not approved, 
will be provided the reasons and an opportunity to submit additional 
information for reconsideration.
    (h) 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.
    (i) If the mentor firm is suspended or debarred while performing 
under an approved mentor-protege agreement, the mentor firm--
    (1) May continue to provide assistance to its protege firms 
pursuant to approved mentor-protege 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 protege 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 protege firm and the Director, SADBU, OUSD (AT&L).

I-107  Mentor-protege agreements.

    (a) A signed mentor-protege agreement for each mentor-protege 
relationship identified under I-106(b)(2) must be submitted to the 
Director, SADBU, OUSD (AT&L), and approved before developmental 
assistance costs may be incurred. To the maximum extent possible, 
such mentor-protege agreements will be approved within 5 business 
days of receipt.
    (b) Each signed mentor-protege agreement submitted for approval 
under the Program must include--
    (1) The name, address, and telephone number of the mentor firm 
and the protege firm and a point of contact within the mentor firm 
who will administer the developmental assistance program;
    (2) The SIC code that represents the contemplated supplies or 
services to be provided by the protege firm to the mentor firm and a 
statement that, at the time the agreement is submitted for approval, 
the protege firm, if an SDB concern, does not exceed the size 
standard for the appropriate SIC code;
    (3) A developmental program for the protege firm specifying the 
type of assistance identified in paragraph (f) of this section that 
will be provided. The developmental program also must include--
    (i) Factors to assess the protege firm's developmental progress 
under the Program, including milestones for providing the identified 
assistance;
    (ii) The anticipated number, dollar value, and type of 
subcontracts to be awarded the protege firm consistent with the 
extent and nature of the mentor firm's business, and the period of 
time over which the subcontracts will be awarded; and
    (iii) The dollar value of the technical assistance program, 
broken out per year;
    (4) 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 Director, SADBU, OUSD (AT&L), and are contingent 
upon the endorsement and submission of justification for such an 
extension from the cognizant Director, SADBU. The justification must 
detail the unusual circumstances that warrant a term in excess of 3 
years;

[[Page 6559]]

    (5) Procedures for the mentor firm to notify the protege 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-protege 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-protege agreement 
for cause;
    (6) Procedures for a protege firm to notify the mentor firm in 
writing at least 30 days in advance of the protege firm's intent to 
voluntarily terminate the mentor-protege agreement;
    (7) Procedures for the mentor firm to terminate the mentor-
protege agreement for cause which provide that--
    (i) The mentor firm must furnish the protege 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;
    (ii) The protege 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;
    (iii) Upon prompt consideration of the protege firm's response, 
the mentor firm must either withdraw the notice of proposed 
termination and continue the protege firm's participation, or issue 
the notice of termination; and
    (iv) 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; and
    (8) Additional terms and conditions as may be agreed upon by 
both parties.
    (c) Mentor firms must send a copy of any termination notices to 
the Director, SADBU, OUSD (AT&L), and the Defense Contract 
Management Command administrative contracting officer responsible 
for conducting the annual performance review, and, where funding is 
made available through a DoD program manager, must provide a copy to 
the program manager and to the contracting officer.
    (d) Termination of a mentor-protege agreement will not impair 
the obligations of the mentor firm to perform pursuant to its 
contractual obligations under Government contracts and subcontracts. 
Termination of all or part of the mentor-protege agreement will not 
impair the obligations of the protege firm to perform pursuant to 
its contractual obligations under any contract awarded to the 
protege firm by the mentor firm.
    (e) Only developmental assistance provided after DoD approval of 
the mentor-protege agreement may be reimbursed.
    (f) The mentor-protege 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 protege 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 protege 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 protege firm for the 
performance of the subcontract. Provision of progress payments by a 
mentor firm to an SDB protege firm at a rate other than the 
customary rate for SDBs 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 protege firm in exchange for an 
ownership interest in the protege firm, not to exceed 10 percent of 
the total ownership interest. Investment may include, but are not 
limited to, cash, stock, and contribution in kind.
    (7) Assistance that the mentor firm obtains for the protege 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.
    (g) A mentor firm may not require a protege firm to enter into a 
mentor-protege 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.

I-108  Reimbursement procedures.

    (a) DoD will reimburse a mentor firm only for the cost of 
developmental assistance incurred by the mentor firm and provided to 
a protege firm under I-107(f)(1) and (7), and pursuant to an 
approved mentor-protege agreement. For agreements entered into prior 
to October 1, 1999, DoD will provide reimbursement only through a 
separate contract, cooperative agreement, or other agreement entered 
into between DoD and the mentor firm, awarded for the purpose of 
providing developmental assistance to one or more protege firms; a 
separately priced contract line item in a DoD contract; or inclusion 
of program costs in indirect expense pools. For agreements entered 
into on or after October 1, 1999, DoD will provide reimbursement 
only through a separately priced contract line item in a DoD 
contract; or through a separate contract if the Director, SADBU, 
OUSD(AT&L), determines the unusual circumstances justify 
reimbursement using a separate contract. No other means for the 
reimbursement of the costs of developmental assistance provided 
under I-107(f)(1) and (7) are authorized under the Program.
    (b) Costs included in indirect expense pools will be reimbursed 
only to the extent that the costs are otherwise reasonable, 
allocable, and allowable.
    (c) Assistance provided in the form of progress payments to SDB 
protege firms in excess of the customary progress payment rate for 
SDBs, will be reimbursed only if implemented in accordance with FAR 
32.504(c).
    (d) Assistance provided in the form of advance payments will be 
reimbursed only if the payments have been provided to a protege firm 
under subcontract terms and conditions similar to those in the 
clause at FAR 52.232.12, Advance Payments. Reimbursements of any 
advance payments will be made pursuant to the inclusion of the 
clause at FARS 252.232-7005, Reimbursement of Subcontractor Advance 
Payments--DoD Pilot Mentor-Protege 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 
protege firm to repay any unliquidated advance payments will be the 
sole responsibility of the mentor firm.
    (e) No other forms of developmental assistance are authorized 
for reimbursement under the Program.
    (f) The total amount reimbursed to a mentor firm for costs of 
assistance furnished to a protege firm in a fiscal year may not 
exceed $1,000,000 unless the Director, SADBU, OUSD(AT&L), 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 and the cognizant 
Director, SADBU.

I-109 Credit for unreimbursed developmental assistance costs.

    (a) Developmental assistance costs incurred by a mentor firm for 
providing assistance to a protege firm pursuant to an approved 
mentor-protege agreement, that have not been reimbursed through a 
separate contract, cooperative agreement, or other agreement entered 
into between DoD and the mentor firm, or through a separately priced 
contract line item added to a DoD contract, may be credited as if it 
were a subcontract award for determining the performance of the 
mentor firm in attaining an SDB subcontracting goal established 
under any contract containing a subcontracting plan pursuant to the 
clause at FAR 52.219-9, Small Business Subcontracting Plan.
    (b) For crediting purposes only, 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 SDB subcontracting goal established under any 
contract containing a subcontracting plan pursuant to the clause at 
FAR 52.219-9. However, costs that have not

[[Page 6560]]

been reimbursed because they are not reasonable, allocable, or 
allowable under I-108(b), will not be recognized for crediting 
purposes.
    (c) Other costs that are not eligible for reimbursement pursuant 
to I-108(a) may be recognized for credit only if requested, 
identified, and incorporated in an approved mentor-protege 
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.
    (e) A mentor firm may receive credit toward the attainment of an 
SDB subcontracting goal for each subcontract awarded for a product 
or a service by the mentor firm to an entity that qualifies as a 
protege firm pursuant to I-104(a). With respect to a former SDB 
protege firm(s), a mentor may take credit for awards to such 
concern(s) that, except for its size would be a small business 
concern owned and controlled by socially and economically 
disadvantaged individuals, but only if--
    (1) The size of such business concern is not more than two time 
the appropriate size standard;
    (2) The business concern formerly had a mentor-protege agreement 
with such mentor firm that was not terminated for cause; and
    (3) The credit is taken not later than October 1, 2005.
    (f) Amounts credited toward the SDB goal(s) for unreimbursed 
costs under the Program must be separately identified from the 
amounts credited toward the goal resulting from the award of actual 
subcontracts to protege firms. The combination of the two must equal 
the mentor firm's overall accomplishment toward the SDB goal(s).
    (g) Adjustments may be made to the amount of credit claimed 
under paragraphs (a) and (b) of this section if the Director, SADBU, 
OUSD(AT&L), determines that--
    (1) A mentor firm's performance in the attainment of its SDB 
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.
    (h) The mentor firm must be afforded the opportunity to explain 
the decline in SDB participation 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 SDB 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.
    (i) The decision of the Director, SADBU, OUSD (AT&L), regarding 
the imposition of a limitation on credit will be final.
    (j) Any prospective limitation on credit imposed by the 
Director, SADBU, OUSD (AT&L), must be expressed as a percentage of 
otherwise eligible credit, will apply beginning on a specific date 
in the future, and will continue until a date certain during the 
current fiscal year.
    (k) Any retroactive limitation on credit imposed by the 
Director, SADBU, OUSD (AT&L), must reflect the actual costs incurred 
for developmental assistance (not exceeding the maximum amount 
reimbursed).
    (l) For purposes of calculating any incentives to be paid to be 
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 
under paragraphs (a), (b), and (c) of this section).
    (m) Developmental assistance costs that are incurred pursuant to 
an approved mentor-protege agreement, and have been charged to, but 
not reimbursed through, a separate contract, cooperative agreement, 
or other agreement entered into between DoD and the mentor firm, 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 SDB subcontracting 
goals.
    (n) Developmental assistance provided under an approved mentor-
protege 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-110  Advance agreements on the treatment of developmental 
assistance costs.

    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-
protege 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 address the need for any 
changes to their cost accounting practices that may result from the 
implementation of a mentor-protege agreement, prior to incurring any 
costs, and irrespective of whether costs will be reimbursed or 
credited.

I-111  Reporting requirements.

    (a) Mentor firms must report on the progress made under active 
mentor-protege agreements semiannually for the periods ending March 
31st and September 30th. The September 30th report must address the 
entire fiscal year. Reports are due 30 days after the close of each 
reporting period. The report must include--
    (1) Data on performance under the mentor-protege agreement, 
including dollars obligated, expenditures, credit taken under the 
Program, SDB subcontract awards under DoD contracts, developmental 
assistance provided, impact of the agreement, and progress of the 
agreement (A recommended format and guidance for this submission are 
available via the Internet at http://www.acq.osd.mil/sadbu/
mentor__protege); and
    (2) A copy of the SF 294, Subcontracting Report for Individual 
Contracts, for each contract where developmental assistance was 
credited, with a statement in Block 15 identifying--
    (i) The amount of dollars credited to the SDB subcontract goal 
as a result of developmental assistance provided to protege firms 
under the Program; and
    (ii) The number and dollar value of subcontracts awarded to the 
protege firm(s), broken out per protege.
    (3) In addition to the reporting requirements of paragraph 
(a)(1) of this section, for commercial companies and companies 
participating in the DoD Test Program for Negotiation of 
Comprehensive Small Business Subcontracting Plans, indicate in Block 
15 of the SF 295--
    (i) The total dollars credited to the SDB goal as a result of 
developmental assistances provided to a protege firm(s) under the 
Program; and
    (ii) The total dollar amount of subcontracts awarded to the 
protege firm(s), broken out per protege.
    (b) The protege firm must report on progress made under the 
mentor-protege agreement annually by October 31st. The protege firm 
must concur with or rebut its mentor's report that covers the period 
ending September 30th and must provide data on the firm's 
employment, annual revenue, and annual participation in DoD 
contracts. The report is required annually during the protege firm's 
Program participation term and for 2 fiscal years after the 
expiration of the Program participation term.
    (c) Progress reports must be submitted as follows:

[[Page 6561]]

    (1) For agreements that provide credit toward SDB subcontracting 
goals for costs incurred under the Program, to the Director, SADBU, 
OUSD (AT&L), and the Defense Contract Management Command (DCMC) 
administrative contracting officer.
    (2) For agreements that provide for reimbursement of costs 
incurred under the Program, to the Director, SADBU, OUSD (AT&L), the 
contracting officer, the DCMC administrative contracting officer, 
the program office, and the cognizant Director, SADBU.

I-112  Agreement reviews.

    The Defense Contract Management Command will conduct annual 
performance reviews of the progress and accomplishments realized 
under approved mentor-protege agreements. These reviews must verify 
data provided on the semiannual reports and must provide information 
as to--
    (a) Whether all costs reimbursed to the mentor firm under the 
agreement were reasonably incurred to furnish assistance to the 
protege firm in accordance with the mentor-protege agreement and 
applicable regulations and procedures;
    (b) Whether the mentor firm and protege firm accurately reported 
progress made by the protege firm in employment, revenues, and 
participation in DoD contracts during the Program participation term 
and for 2 fiscal years following the expiration of the agreement; 
and
    (c) The amount of reimbursement, if any, that the mentor firm is 
eligible to receive in the remaining Program participation term of 
the agreement.

[FR Doc. 00-2946 Filed 2-9-00; 8:45 am]
BILLING CODE 5000-04-M


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