Upgrade from past performance for small business leads to additional compliance requirement for large contractors | Fox Rothschild LLP


A recently released Small Business Administration Final Rule offers two new ways for small businesses to meet past performance requirements when competing for federal prime contracts. The rule takes effect on August 22, 2022.

The Rule is a slam dunk for small business entrepreneurs that will open the door to increased procurement opportunities. But, as often happens, small business rules and regulations don’t exist in a vacuum. Contractors other than small (or large) with contracts requiring subcontracting plans should be notified new compliance requirements created by the final rule.

Let’s start by looking at the new avenues of past performance created by the final rule that will soon be available to small businesses.

First, a small business that “has previously participated in a joint venture with another business (whether or not the other business is a small business) may use the joint venture’s past performance with the small business’s bid on a prime contract.” The rule requires the small business to identify the relevant contract(s) performed by the joint venture and the duties/responsibilities of the small business in performing the work. Once established, the contracting officer must “consider the past performance of the joint venture when evaluating the past performance of the small business, giving due consideration to information provided on the tasks and responsibilities undertaken by the small business company “.

Second, small businesses can rely on past performance based on performance as a first-tier subcontractor on a prime contract that required a subcontracting plan. The small business must request the past performance rating directly from the prime contractor and provide it to the contracting officer as part of their proposal.

It is this second part of the final rule that creates additional compliance obligations for major contractors.

When requested, the prime contractor must provide the past performance rating to the small business in 15 calendar days. The rating must use the default five-scale CPARS rating system found in FAR 42.1503 (Exceptional to Unsatisfactory) and must assess (at a minimum) the performance of the small business in terms of (1) Technical, (2) Cost Control , (3) Calendar/Calendar, (4) Management and (5) Other (if applicable).

The final rule also adds some teeth to the new contractor compliance requirement. The requirement to respond to an appropriate request for past performance evaluation should be included in the contractor’s subcontracting plan. As such, there is consequences for non-compliance, including termination for default, negative CPARS ratings, and damages for failure to make a good faith effort toward compliance. The rule even goes so far as to encourage subcontractors to notify the contracting officer in the event that the prime contractor does not submit the requested quotation within the prescribed time.

Unsurprisingly, the final rule translates to two sets of takeaways:

For small businesses, familiarize yourself with new options for reporting past performance on federal contracts.

Large contractors, act now to update your compliance program to include this new requirement as part of your small business outsourcing plan.

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