SBA’s Proposed Rule: New Past Performance Ratings Options for Small Businesses
Key Details: On November 11, 2021, the U.S. Small Business Administration (SBA) released a proposed rule that amends certain regulations to incorporate Section 868 of the National Defense Authorization Act (NDAA), Fiscal Year 2021. The SBA’s proposed rule aims to provide small business contractors with new ways to obtain past performance ratings to use on offers of prime contracts with the federal government. Through this proposed rule, small business contractors may experience lowered barriers and a heightened ability to compete for contracts.
Obtaining Past Performance Ratings
The SBA’s proposed rule addresses the obstacle of possessing qualifying past performance that many small businesses contractors face when competing for prime contracts. This proposed rule implements Section 868 and provides small business contractors with two options for obtaining qualifying past performance:
- Small businesses may use joint venture past performance in circumstances where the small business performed on the joint venture’s contract or contracts.
- Small businesses may use past performance obtained while fulfilling a first-tier subcontractor role on a prime contract with a subcontracting plan.
A Helpful Section Added to the Small Business Act
Section 868 also adds a new Section 15(e)(5) to the Small Business Act, 15 U.S.C 644(e)(5) that addresses joint venture past performance ratings. This Section directs the SBA to allow and create regulations for small businesses to use joint ventures as past performance if the small business has no relevant experience of its own. To use a joint venture as past performance, small businesses must:
- Identify the joint venture of which they were a member to the contracting officer.
- Identify the contract of the joint venture.
- Communicate to the contracting officer what duties and responsibilities they carried out as part of the joint venture contract.
Furthermore, Section 868 amends Section 8(d)(17) of the Small Business Act, 15 U.S.C 637(d)(17) to address first-tier small business subcontractors. Under this amended section, small business subcontractors can obtain past performance ratings for performance as a first-tier subcontractor on a prime contract where a subcontracting plan was in place.
For prime contractors, this proposed rule would require the prime contractor to furnish a past performance rating of its first-tier subcontractor upon request by the subcontractor. The past performance rating would be due within 15 days of the request. Hence, this part of the proposed rule not only affects subcontractors but also creates a new duty for prime contractors administering subcontracting plans.
The SBA Comment Period for Past Performance Ratings
Comments on the proposed rule are requested by January 18, 2022. This comment period provides small business contractors and subcontractors with the opportunity to provide feedback to further enhance their opportunity to compete for additional contracts in the future.
Comments can be submitted via the Federal eRulemaking Portal. Of particular interest to the SBA is information on how small business subcontractors have been negatively impacted due to the lack of available past performance ratings. The SBA has also requested comments on if the implementation of a time frame is required. Under this time frame, subcontractors must make a request to the prime contractor to receive a past performance rating related to their work efforts.
The SBA’s proposed rule will hopefully lower barriers and propel small business contractors and subcontractors to compete for more contracts. Small businesses can review the proposed rule, consider how it may help their going-forward business development strategy, and if interested, submit comments to the SBA before January 18, 2022.
As this proposed rule is still in the preliminary stages of development, government contractors can contact Ryan & Wetmore here for further information or to discuss strategy and planning for small business government contractors looking to grow their business.
Today’s Thought Leaders
Contact us today by calling 301-585-0506.
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, including government contracting. 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.
Read Pete’s full bio.
About Rosie Cheng
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.