New SBA Rule on Small Business Past Performance Also Has Implications for Large Businesses

Merle M. DeLancey Jr. 

The U.S. Small Business Administration (“SBA”) recently issued a final rule that creates new opportunities for small businesses to submit relevant past performance, and new requirements for large/other than small prime contractors to provide past performance reviews to first-tier small business subcontractors.

The final rule is intended to help small businesses overcome the hurdle of having minimal past performance to use in competitive procurements. The rule creates new mechanisms to permit small businesses to use the past performance of a joint venture in which it was a member, or to use its performance as a first-tier subcontractor. The new rule takes effect on August 22, 2022.

The rule also has implications for large businesses. The provisions that allow small businesses to use experience as a first-tier subcontractor include a new procedure that obligates prime contractors to provide first-tier subcontractors with past performance assessments upon request.

The small business must request the past performance rating directly from the prime contractor. When requested, the prime contractor must provide the past performance rating to the small business within 15 calendar days. The rating must utilize the default five-scale Contractor Performance Assessment Reporting System (“CPARS”) ratings system found at FAR 42.1503 (Exceptional to Unsatisfactory) and must evaluate (at a minimum) the small business’s performance in terms of (1) Technical, (2) Cost Control, (3) Schedule/Timeliness, (4) Management, and (5) Other (as applicable). The obligation to respond to a request for a past performance rating must be included in the prime contractor’s subcontracting plan.

A prime contractor’s failure to comply could result in termination for default, negative CPARS ratings, and liquidated damages if it fails to make a good faith effort to comply. The final rule encourages subcontractors to notify the contracting officer if a prime contractor fails to submit the requested rating within the prescribed timeframe.

Because of the 15-day response deadline, we recommend adding a specific point-of-contact for subcontractors to submit a request to avoid any requests falling through the cracks. We also recommend that large business create a CPARS template they can use for evaluations of first-tier subcontractors.

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