A long-awaited rule eliminates the Small Business “Catch-22” that goes away August 22, 2022. The rule will open many new doors for emerging small businesses!

On July 22, the Small Business Administration (SBA) published a final rule amending 13 C.F.R. Part 125 implementing the National Defense Authorization Act (NDAA) FY 2021. This rule will go in effect August 22 and is intended to assist small businesses by expanding contract opportunities where past performance as a subcontract or Joint Venture will be evaluated – and counted – during source selection.

In the past, this “Catch 22” has restricted small businesses’ abilities to respond to proposals as primes. They did not receive credit for their first-tier subcontracting work or work as part of a joint venture (JV). One of the more frustrating obstacles for small business participation in Governmentwide Acquisition Contracts (GWACs) such as OASIS, Alliant, or others, is that Small Businesses could only claim past performance for contracts wherein they were the prime. Therefore, they were not able to achieve a competitive past performance score. This excluded many, if not most, emerging small businesses from competing on GWACs. Now, small businesses will be able to use their past performance experiences as subcontractors or as part of a JV.

Prime Contractors Must Provide Subcontractor Past Performance

Under this rule, the prime contractor will be required to provide a rating when the first-tier subcontractor requests it. The subcontracting plan now requires the prime contractor to provide a rating of a first-tier subcontractor’s past performance within 15 calendar days of the first-tier subcontractor’s request. The subcontractor must make the request “within 30 days after the completion of the period of performance of the prime contractor’s contract with the Government.”

The prime contractor’s rating report will include:

  1. Technical (quality of product or service);
  2. Cost control (not applicable for firm-fixed-price or fixed-price with economic price adjustment arrangements);
  3. Schedule/timeliness;
  4. Management or business relations; and
  5. Other (as applicable)

Penalties For Primes Who Don’t Report Subcontractor Performance

This rule establishes penalties for prime contractors who fail to provide requested subcontractor ratings. The subcontractor may notify the contracting officer if the prime contractor does not submit a timely rating. A prime faces possible termination for default; withholding of award fees; lower past performance ratings; liquidated damages for failing to make a good faith effort to comply with subcontracting plans; and even debarment.

How to Get Credit for Joint Ventures Experience

A Small Business will only receive credit for the duties and responsibilities that they performed under the joint venture. An agency is required to consider the past performance of a small business in a joint venture when certain requirements have been fulfilled.

Thus, in order to ensure that it receives credit for its past performance, a small business must:

  1. Identify the joint venture
  2. Identify the contract(s) of the JV
  3. Describe duties or responsibilities as a JV member

How this Rule Will Boost Small Businesses Government Sales?

Many small businesses enter the federal marketplace as subcontractors. Past performance experience as a sub has always hindered their ability to compete. This rule opens a new path to federal opportunities formerly out of their reach. The prime contractor’s report will be similar to CPARS, with past performance records similar to those Federal contracting officers currently provide for primes. But remember, you must request the rating from the prime contractor within 30 days of completion of the period of performance of the prime contractor’s contract with the Government.

The SBA deserves credit for developing this rule and removing a serious obstacle to small businesses entering the Federal marketplace.

At Coley, we are eager to share this good news and provide as much guidance as possible to help you win more government opportunities. Coley itself is an SDVOSB and we have helped emerging small businesses grow and sustain success for over 20 years. Coley provides real world training to small businesses looking to understand how to grow in the government marketplace via our FedMap Capture training program.

If you have further questions about the new rule or any other government contracting question, please contact us by phone at 210-402-6766, by email at hello@coleygsa.com or schedule some time to talk to us directly.

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