The US Small Business Administration (SBA) recently issued a final rule providing two new methods for small business government contractors to obtain past performance evaluations that can be used to support bids for major federal government contracts. The purpose of the rule is to address a common problem faced by small businesses when competing for government contracts, namely the lack of a record of past qualifications. However, in order to implement recent legislative changes from the National Defense Authorization Act for Fiscal Year 2021, a small business contractor may use a previous performance rating (1) for work performed as a member of a joint venture and (2) for work performed as a subcontractor of the carried out first stage. The key provisions of this remarkable final rule, effective August 22, 2022, are discussed below.
Past performance of a joint venture
- Under the SBA’s final rule, a small business may receive consideration for past performance for past performance of a joint venture of which the small business was a member.
- To receive consideration for past performance, if the small business does not independently demonstrate the prior performance required for the award, the small business may elect to use the joint venture’s past performance. For example, a prompt may require three past performance examples. In this case, this final rule authorizes the small business provider to provide two examples of past performance on its own behalf and one example of performance from a joint venture of which it has been a member, if the small business cannot independently provide the third past example of performance on its own.
- In its bid for a principal contract, the small business must (a) identify the joint venture; (b) the joint venture contracts that the small business wishes to use; and (c) describe to the agency what duties or responsibilities the small company performed as a joint venture member.
- However, the small business cannot claim a performance credit for work performed solely by other partners in the joint venture.
- The contract officer “takes into account the information provided by the small business about its duties and responsibilities under the joint venture.”
Previous achievements as a first level subcontractor
- Under the SBA’s final rule, a small business may also receive prior service consideration for service as a first-level subcontractor. This mechanism is limited to small companies operating as first-level subcontractors under contracts that included subcontracting schemes.
- The small business may require the main contractor to provide an evaluation of the past performance of its subcontractor. The prime contractor, in turn, must submit a review to the requesting small business within 15 calendar days of the request.
- According to this last rule, the requested rating will be prepared, which will include at least the following rating factors in the requested rating: (a) technical (quality of the product or service); (b) cost control (not applicable to fixed fixed prices or fixed prices with economic price adjustment agreements); (c) schedule/punctuality; (d) management or business relationships; and (e) other (if applicable).
- The requested rating uses the five scale rating system of FAR 42.1503: Exceptional, Very Good, Satisfactory, Marginal and Unsatisfactory.
- The last rule does not impose a limit on how up-to-date the evaluated contract must be.
- This last rule clarifies that a joint venture composed of small businesses may receive past service consideration for work performed by the joint venture as a first-tier subcontractor.
- A small business member of the joint venture subcontractor may request a previous performance evaluation from the prime contractor for a contract that included a subcontracting schedule. The prime contractor, in turn, must provide the joint venture member with the requested assessment within 15 calendar days of the request. The requested rating would be willing to include at least the following rating factors in the requested record: (a) technical (quality of the product or service); (b) cost control (not applicable to fixed fixed prices or fixed prices with economic price adjustment agreements); (c) schedule/punctuality; (d) management or business relationships; (e) and other considerations. The small company could then use this rating to “determine its past performance in accordance with the previous provision on the submission of joint ventures’ past performance.”
As noted above, this final rule will come into effect on August 22, 2022.