Key Details: The Small Business Administration (SBA) implemented a final rule on August 22, 2022. This final rule, titled “Past Performance Ratings for Small Business Joint Venture Members and Small Business First-Tier Subcontractors” set forth two methods where small business contractors can obtain past performance credit. This is extremely vital when competing for federal prime contracts as businesses grow. This final rule implemented Section 868 of the National Defense Authorization Act of Fiscal 2021 which was aimed to make it easier for small business subcontractors to obtain past performance ratings to compete for contracts.
The Federal Register notes that this final rule enables a small business contractor to use a past performance rating for work performed as a member of a joint venture or for work performed as a first-tier subcontractor. As such, the final rule adds a requirement for prime contractors to provide past performance to a first-tier small business subcontractor when requested in the small business subcontracting plan.
This final rule provides small business contractors with the ability to expand and establish a record of meaningful past performance that can create further competitive advantage. The following sections describe the key takeaways of the final rule. For further information, contact Ryan & Wetmore today.
Method 1: Past Performance Credit for Joint Venture Contractors
Under the SBA’s final rule, small businesses that were a member of a joint venture may receive past performance consideration. This is relevant to contractors who currently cannot independently demonstrate the past performance required for an award.
Small business contractors must identify the following items in their offer for a prime contract:
- The joint venture.
- The contract(s) of the joint venture that the small business contractor elects to use.
- A description of the duties / responsibilities of the small business performance as a joint venture member.
An important item to note is that small business contractors cannot claim past performance credit for work performed by another partner of a joint venture.
Method 2: Past Performance Credit as a First-Tier Subcontractor
Under the SBA’s final rule, small business contractors are able to obtain past performance consideration for work performed as a first-tier subcontractor. Following this, the small business concern may request their performance rating from the prime contractor who, in turn, must provide the rating within 15 calendar days of the request. Additionally, the first-tier subcontractor must request the performance rating within 30 calendar days of completion of the prime contractor’s period of performance.
The requested rating must include the following (at a minimum) evaluation factors:
- A technical evaluation regarding the quality of the product or service.
- A cost control evaluation (this is not applicable to firm-fixed-price or fixed-price with economic price adjustment contracts).
- Evaluation regarding the schedule / timeliness.
- Evaluation on management or business relations.
- Other evaluation factors (as applicable).
Furthermore, this requested rating will use the following rating system from FAR (Federal Acquisition Regulations) 42.1503:
- Exceptional
- Very good
- Satisfactory
- Marginal
- Unsatisfactory
Conclusion and Next Steps
This final rule enables many small business contractors to gain past performance ratings in order to pursue prime contracts. As such, small business contractors are encouraged to review the final rule and their previous performance on contracts to fully understand where they qualify to use these two methodologies. Large prime contractors are also encouraged to review the final rule to understand the necessary evaluation metrics the final rule imposes when their first-tier subcontractors begin requesting past performance ratings.
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About Peter Ryan
Partner, Co-founder, & CPA
Peter T. Ryan co-founded Ryan & Wetmore in 1988 with business partner Michael J. Wetmore. Peter provides clients with the best strategies for success. His expertise extends across various industries. Peter obtained a Master of Business Administration in Finance from the University of Baltimore and a Bachelor of Arts in Accounting from the Catholic University of America.
About Rosie Cheng
Finance Consultant
Rosie Cheng is a Finance Consultant at Ryan & Wetmore. She focuses on government contracting services and produces many of the firm’s government contracting newsletters. Rosie graduated from Georgetown University with a Master of Science in Management and from William and Mary with a Bachelor of Business Administration.