Small Businesses Have More Opportunities to Obtain Past Performance Ratings under SBA Final Rule

The Small Business Administration issued a final rule effective August 22, 2022 (Federal Register: Past Performance Ratings for Small Business Joint Venture Members and Small Business First-Tier Subcontractors), which provides two new methods for small business government contractors to obtain/receive credit for past performance ratings. Prior to this rule, small businesses did not always receive credit for past performance for much of their efforts supporting the Federal Government. A small business can now get credit for past performance under a joint venture or use a past performance ratings for work performed as a first-tier subcontractor to compete for their own prime contracts. It is unclear whether the FAR 52.219-9 Small Business Subcontracting Plan clause will be updated.

Past Performance Credit for Joint Venture Contractors

Small businesses that participate as a member of a joint venture may receive past performance consideration when they cannot independently demonstrate past performance under a Federal Government contract. This is done by the small business identifying the following items in their offer for a new prime contract:

• The name of the joint venture;
• The contracts of the joint venture that the small business was involved in; and
• A description of the duties/responsibilities of the small business performance as a joint venture member.

The small business cannot take credit for the work performed by other members of the joint venture.

Past Performance as a First Tier Subcontractor

Small business contractors can also request past performance ratings for work performed as a first-tier subcontractor under a prime contract that requires a small business subcontracting plan. Even if the prime was not required to develop a small business plan, a request can still be made however the prime is not required to provide the rating. But small businesses need to be careful, as the final rule contains specific timelines. The subcontractor must request the past performance rating within 30 calendar days of completion of the prime contract’s period of performance. Yes, completion of the prime contract not the subcontract. The prime contractor and the small business can negotiate a longer period of time to submit the request but cannot shorten the 30-day time period.

If the small business is not timely and misses the 30-day request window, the prime contractor is not required to prepare a performance rating but can at its discretion.

Is there a format for the past performance rating the prime must use?

Yes and no. A prime contractor must include the following evaluation factors at a minimum:

• Technical evaluation regarding the quality of the product or service;
• Cost control evaluation if other than firm-fixed price (FFP) or FFP with economic price adjustment contracts;
• Evaluation regarding the schedule/timeliness;
• Evaluation on management or business relations; and
• Other evaluation factors as applicable.

The prime contractor must also use the five-scale rating system in FAR 42.1503(b)(4):

• Exceptional
• Very good
• Satisfactory
• Marginal
• Unsatisfactory

Does the Final Rule Apply to All First-Tier Small Business Subcontracts?

No, it does not. The final rule applies to small business subcontractors under a prime contract that requires a subcontracting plan. So, if a prime contractor is a small business (i.e., subcontracting plan not required), a prime contractor is not required to provide a past performance rating but can prepare one at its discretion.

Does the Subcontractor Have to Submit the Past Performance Ratings to the Government?

No. The subcontractor can selectively include or not include the past performance rating or joint venture information in its prime proposal to the government. The government must consider the past performance information submitted with the small business’ proposal. While the final rule doesn’t provide a time period on how recent the rating must be, the government solicitations may state a time period.

So, What Actions Should Small Businesses Take

Small businesses should read the final rule and understand the required information that needs to be included in the request to the prime contractor and timeframe for submitting a request. In order to do this, the small business needs to have a process in place to annotate when the prime contract will be completed so they don’t miss the 30-calendar day window to submit a request. First-tier subcontractors can also request an extension to the 30-day requirement but the prime needs to agree.

While a best practice would be to submit the request to the prime contractor upon completion of the subcontract, this was addressed in the comments, rejected by the SBA and is not included in the final rule. The final rule specifically states 30 days after the prime contractor’s period of performance ends.   However, Redstone recommends small businesses coordinate with its prime contractor to see if they can request/obtain a past performance rating after a subcontract is complete instead of waiting for completion of the prime contract. Prime contractors may be willing to provide the past performance after the subcontract is completed, since prime contractors, as part of their purchasing system, will generally provide vendor ratings after subcontract completion. Whether upon completion of the subcontract or prime contract, small businesses should document examples of exceptional performance to provide with their request. Prime contractors do not always know all the behind the scenes effort undertaken to deliver the supplies or services early or on time. This will assist the prime in preparing the evaluation especially when the prime contractor has turnover.