![]() In effect, the new regulation means that, when a large business prime contractor issues a subcontract to its own MPJV, work performed by the small business protégé is considered a small business subcontract. ![]() Subcontracts by first-tier affiliates, and subcontracts by a joint venture in which the prime contractor is one of the joint venturers, shall be treated as subcontracts of the prime.” § 125.3(a)(1)(i)(B) to state that “Purchases from a corporation, company, or subdivision that is an affiliate of the prime contractor or subcontractor, or a joint venture in which the contractor is one of the joint venturers, are not included in the subcontracting base. Until May 2023, SBA’s regulations stated that “purchases from a corporation, company, or subdivision that is an affiliate of the prime contractor or subcontractor are not included in the subcontracting base. Subcontracts by first-tier affiliates shall be treated as subcontracts of the prime.” Under this prior version of the regulation, affiliates of the prime contractor were excluded from the subcontracting base. Because mentors are, by definition, not affiliates of their own MPJVs, the previous version of the regulation suggested large business prime contractors that are mentors in an MPJV were not prohibited from counting subcontracting dollars from subcontracts to their own MPJVs towards their small business goals. Large businesses with federal prime contracts exceeding $650,000 are required to develop a small business subcontracting plan. Under the plan, the large businesses are required to “make a good-faith effort to meet their subcontracting plan goals.” This will have a notable effect on how large businesses calculate and meet their subcontracting plan goals when their MPJVs are in the subcontracting pool. Small Business Administration (SBA) regulations affect how large businesses can take small business credit for subcontracting to their own mentor-protégé joint ventures (MPJVs). SBA’s final rule directs that, when a large federal prime contractor issues subcontracts to its own MPJV, it may only count the protégé’s work (under the JV) towards its small business subcontracting goals.
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