SBA Expands Past Performance Universe for Small Businesses

The U.S. Small Business Administration (SBA) recently issued a final rule that provides two new methods for small business government contractors to obtain past performance ratings to be used in support of offers on prime contracts with the federal government. The purpose of the rule is to address a common problem faced by small businesses when competing for government contracts, which is the lack of a record of qualifying past performance. Now, however, to implement recent changes to the law from the FY-2021 National Defense Authorization Act, a small business contractor may use a past performance rating (1) for work performed as a member of a joint venture and (2) for work performed as a first-tier subcontractor. Key provisions of this noteworthy final rule — which is effective August 22, 2022 — are discussed below.

Key Provisions

Past Performance of a Joint Venture

• Under the SBA’s final rule, a small business concern may receive past performance consideration for the past performance of a joint venture of which the small business was a member.

• To receive past performance consideration, where the small business does not independently demonstrate past performance necessary for award, the small business may elect to use the joint venture’s past performance. For example, a solicitation might require three past performance examples. In that case, this final rule authorizes the small business offeror to submit two examples from performance in its own name and one example from performance of a joint venture of which it was a member, if the small business cannot independently provide the third example of past performance on its own.

• In its offer for a prime contract, the small business must identify (a) the joint venture; (b) the contract(s) of the joint venture that the small business elects to use; and (c) describe to the agency what duties or responsibilities the small business carried out as a joint venture member.

• The small business cannot, however, claim past performance credit for work performed exclusively by other partners to the joint venture.

• The contracting officer “shall consider the information that the small business provided about its duties and responsibilities carried out as part of the joint venture.”

Past Performance as a First-Tier Subcontractor

• Under the SBA’s final rule, a small business concern may also receive past performance consideration for performance as a first-tier subcontractor. This mechanism is limited to small businesses that performed as first-tier subcontractors on contracts that included subcontracting plans.

• The small business may request a rating of its subcontractor past performance from the prime contractor. The prime contractor, in turn, must provide a rating to the requesting small business within 15 calendar days of the request.

• Under this final rule, the requested rating is prepared, including, at a minimum, the following evaluation factors in the requested rating: (a) technical (quality of product or service); (b) cost control (not applicable for firm-fixed-price or fixed-price with economic price adjustment arrangements); (c) schedule/timeliness; (d) management or business relations; and (e) other (as applicable).

• The requested rating will use the five-scale rating system from FAR 42.1503: Exceptional, Very Good, Satisfactory, Marginal, and Unsatisfactory.

• The final rule does not contain a limit on how recent the evaluated contract must be.

• This final rule clarifies that a joint venture composed of small businesses may receive past performance consideration for work that the joint venture performed as a first-tier subcontractor.

• A small business member of the joint venture subcontractor may request a past performance rating from the prime contractor for a contract that included a subcontracting plan. The prime contractor, in turn, must provide the requested rating to the joint venture member within 15 calendar days of the request. The requested rating would be prepared to include, at a minimum, the following evaluation factors in the requested record: (a) technical (quality of product or service); (b) cost control (not applicable for firm-fixed-price or fixed-price with economic price adjustment arrangements); (c) schedule/timeliness; (d) management or business relations; (e) and other considerations. The small business could then use that rating to “establish its past performance in accordance with the prior provision on submitting joint venture past performance.”

Conclusion

As noted above, this final rule takes effect on August 22, 2022.