New Small Business Subcontractor Past Performance Rule

The new rule

A new SBA final rule intended to help small businesses receive evaluation credit for relevant past performance became effective on August 22, 2022. The rule is in a new section 13 C.F.R. 125.11. The rule requires contracting officers to consider the past performance of small business offerors that have been members of joint ventures or have been first-tier subcontractors. The rule provides that agencies must consider the small business’ past performance similarly to a prime-contract past performance, and requires prime contractors to draft performance ratings for first tier small business subcontractors.

Past performance as a member of a joint venture

A small business member of a joint venture may cite the experience and past performance of the joint venture (whether or not the other joint venture partners were small business concerns) where the small business does not independently demonstrate past performance necessary for award. The small business must inform the contracting officer what work it performed in the joint venture. The small business receives past performance evaluation credit for, and is evaluated for the work it actually performed, as if it were a prime contract.

Past performance as a first-tier subcontractor

A first-tier small business subcontractor or member of a joint venture can request the prime contractor to provide a rating of its performance within 30 days (or other negotiated time) after the completion of the prime contract period of performance. The prime contractor must provide the rating within 15 calendar days of the request. The rating must follow the CPARS five-scale rating system in FAR 42.1503: Exceptional, Very Good, Satisfactory, Marginal, and Unsatisfactory. The rating must include at least the following evaluation factors: Technical, Cost Control (except for firm-fixed price subcontracts), schedule/timeliness, management, and other (as applicable).

The small business can submit the rating to an agency, and an agency must consider that past performance rating when evaluating the small business’ offer on a prime contract. The final rule does not contain a timeliness restriction on using past performance.

Unresolved issues

The rule does not have a rebuttal process similar to the CPARS system. In the rule comments, the SBA advises subcontractors to negotiate a rebuttal procedure as part of the subcontract. There are also no specific enforcement mechanisms when a prime does not draft the ratings in a timely manner. The rule itself states a subcontractor may notify the contracting officer when a prime is not timely, and in the comments the SBA pointed to the various penalties built in to the subcontracting plan regulation, including termination; a lower past performance rating; liquidated damages; and even suspension or debarment.

This article is general information, not legal advice.