SBA Issues New Rules to Enable Small Businesses to Use Additional Types of Past Performance When Bidding on Prime Contracts

08.16.2022

The U.S. Small Business Administration (“SBA”) has issued new rules that will enable small government contractors to use additional types of past performance when bidding on prime federal contracts. Recognizing that many small businesses lack experience that qualifies as past performance when bidding on federal prime contracts, the SBA has amended its regulations to provide two new methods for small businesses to claim qualifying past performance.

First, federal agencies are now required to consider the past performance a small business obtained as a first-tier subcontractor on a prime contract that has a small business subcontracting plan. And second, when bidding on a federal prime contract a small business will be able to use the past performance of a joint venture of which it is a member, provided that it worked on the joint venture’s contract. The new regulations go into effect on August 22 and will be set forth in 13 C.F.R. § 125.3 and 125.11.

The new rules also require prime contractors to provide a rating of a small business subcontractor’s past performance on a contract with a subcontracting plan within 15 days of the request from the small business. A small business must ask the prime contractor to provide the rating within 30 days after the completion of the period of performance on the prime contract, unless the parties agree to a later date. If the prime contractor does not provide a timely rating, the subcontractor can notify the contracting officer. The SBA noted that by allowing past performance ratings for first-tier subcontractors to be used, the rule primarily will benefit small businesses that are prepared to bid on prime contracts, but that do not have prime contract past performance. 

The new regulations also will require agencies to consider the past performance of a joint venture when a small business member of a joint venture bids on a prime contract and does not independently have the past performance necessary. Importantly, a small business cannot count as its own past performance work that was performed exclusively by other members of the joint venture. A prior regulation, 13 C.F.R. § 125.8(e), already provides that when an all-small business or mentor-protégé joint venture bids on a prime contract, the agency has to consider the work and qualifications held by each member, as well as work performed by the joint venture. The new rule provides the inverse: when a small business that is a member of a joint venture bids on a prime contract, the agency has to consider the work performed by the joint venture. This includes work that the joint venture performed as a first-tier subcontractor, when the prime contract included a subcontracting plan.

By increasing the number of small businesses that will be able to demonstrate past performance, the Government will have a larger pool of small businesses that can be awarded prime contracts. For more than a decade, the number of small businesses awarded prime federal contracts has been decreasing, even though the monetary amount of contracts awarded to small businesses has increased. The aim of the new rules is to enable more small businesses to bid on and obtain prime contracts, which could increase the small business supplier base.