RGCI - 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.Contact Us for a Consultation

Written by Lynne Nalley, CPA

Lynne Nalley, CPA Lynne is a Director with Redstone Government Consulting, Inc. providing government contract consulting services to our clients primarily related to Commercial Item Determinations and support, Cost Accounting Standards, DFARS Business System Audits, Proposals, and Incurred Cost. Prior to joining Redstone Government Consulting, Lynne served in several capacities with DCAA and DCMA for over 35 years. Professional Experience Lynne began her career working with DCAA in the Honeywell Resident Office, Clearwater, FL in 1984. Lynne’s experience included various positions which involved conducting or reviewing forward proposals or rate audits, financial capability audits, progress payments, accounting and estimating systems, cost accounting standards, claims and disclosure statement reviews. She is an expert in FAR, DFARS, CAS and testified as an expert witness. Lynne assisted in drafting the commercial item guidance for DCAA Headquarters. Lynne was assigned as a Regional Technical Specialist where she provided guidance to 20 field offices on highly complex or technical issues relative to forward pricing, financial capability or progress payment issues. As an Assistant for Quality, she was involved in reviewing and ensuring audit reports were in compliance with policy and GAGAS as well as made NASBA certified presentations to the staff including but not limited to billing reviews, CAS, unallowable cost and progress payments. To enhance her experience in government contracting, Lynne accepted a position with DCMA in 2015 as part of the newly organized DCMA Cadre of Experts in the Commercial Item Group. This included performing reviews of prime contractor’s assertions and/or commercial item determinations as well as performing price analyses. Lynne was a project lead and later became a lead analyst where she engaged with the buying commands on requests and reviewed price analysis reviews performed by a team of 5 analysts. She also assisted the DCMA CPSR team relative to commercial items and co-instructed the Commercial Item Training presented to DCMA. Education Lynne earned a Bachelor of Science Degree in Accounting from the University of Central Florida. Certifications State of Florida Certified Public Accountant State of Alabama Certified Public Accountant Defense Acquisition Workforce Improvement Act (DAWIA) Level III- Auditing DAWIA Level III – Contracting

About Redstone GCI

Redstone GCI is a consulting firm focused on fulfilling the needs of government contractors in all areas of compliance. With a singular mission to help contractors through the multiple layers of “red tape,” we allow contractors to focus on what they do best – support their mission with the U.S. Government. We are home to a group of consultants made up of GovCon industry professionals, CPAs, attorneys, and retired government audit and acquisition professionals.

Our focus and knowledge of audit and compliance functions administered by DCAA and DCMA will always be at the heart of what we do. However, for the past decade, we’ve strategically grown to support other areas of the government contractor back-office with that same level of focus and expertise. We’ve added expertise in contracts management, subcontract administration, proposal pricing, various software systems, HR and employment law, property administration, manufacturing, data analytics/reporting, Grant specialists, M&A, and many other areas. When we see a trend in the needs of contractors, we act to ensure we can provide the best expertise in the market to fulfill those needs.

One thing our clients can be certain of is that with the Redstone GCI Team in your corner, there is no problem too big and no issue too technical for our team to tackle.

Topics: Small Business Compliance, Contractor Purchasing System Review (CPSR)