The Small Business Administration (SBA) has issued a new rule implementing Section 868 of the FY21 NDAA which requires agencies to consider the past performance ratings for certain subcontractors when these entities are competing for prime government contracts. The new rule went into effect on August 22, 2022, and requires agencies to accept 1) self-described past performance information from small business members of a joint venture if the small business has no relevant past performance of its own, and 2) CPARS-like ratings prepared by prime contractors for their first-tier subcontractors if the prime contractor was required to develop a subcontracting plan under its prime contract. The goal of the rule is to provide these qualifying subcontractors with a way to demonstrate past performance with greater ease than before.
Prior to this rule, offerors with past performance only as a subcontractor could compete for prime government contracts but often lacked the requisite past performance because the solicitation would require past performance that was obtained as a prime contractor on projects that were similar in size and scope to the instant procurement. Although the procurement regulations provide that a lack of past performance may not count against an offeror unfavorably, in reality, it does.
SBA believes that by implementing this new rule, entities that have past performance as a first-tier subcontractor or member of a joint venture will rise to the occasion, enhancing competition and providing for more competitive pricing.
What does this all mean for you? First, prime contractors will need to update their active subcontracting plans as applicable to include the updated rule language. Second, at a first-tier subcontractor's request, the prime must supply the rating within 15 calendar days. A qualifying subcontractor only has 30 calendar days to request ratings following the completion of a prime contract period of performance, so subcontractors should not delay. CPARS-like ratings for use on future government bids are as valuable for subcontractors as it has been for prime contractors.
Prime contractors with subcontracting plans should prepare for ratings requests in the near future as ignoring ratings requests will cost you. A failure to comply could lead to the government withholding award fees, terminating contracts, downgrading performance ratings, liquidated damages, and potential debarment.
Prime contractors may work toward implementing the rule changes by developing a ratings request system or platform and rubrics based on the CPARS. Once in place, prudent prime contractors may consider proactively alerting qualifying subcontractors now as to the ratings request process to head off a flurry of requests preceding the installment of a formal request process.
If you have any questions about this legal update please contact the Government Contracts group.
