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How a new SBA rule impacts subcontractors

Creative using a bookmarked book icon and the US Small Business Administration logo | SBA rule for subcontractors | Knowify

The Small Business Administration (SBA) will is rolling out a new rule that goes into effect today, August 22, 2022, that will impact subcontractors across the country. The new SBA requirements implement section 868 of the National Defense Authorization Act of fiscal 2021. Whereby two additional methods will become available for small business government contractors to receive past performance ratings. These ratings can then be used with offers on prime contracts within the Federal Government.

In the past, small business subcontractors were limited in their ability to use performance experience as an aide to win contracts as a prime. This resulted in two options. One, it forced the business to become a subcontractor; two, they had to become a 51% owner in a joint venture. When the time came for a proposal, however, there was no obligation to evaluate past performance. This meant a small business couldn’t take advantage of experience as a subcontractor or joint venture partner.

To amend this dilemma, the rule states, “A small business contractor can use a past performance rating for worked performed as a member of a joint venture or for work performed as a first-tier subcontractor.”

What’s in the new rule?

Essential requirements of the rule will give subcontractors a minimum of 30 days to request a rating. The SBA believes subcontractors should not have to wait for the contract work to be completed to request ratings. As a consequence, subcontractors should request performance reviews as soon as possible. Its recommended to include a review as part of the subcontract to ensure a review and rating. Once a request is submitted, a prime contractor will have 15 days to provide a rating. With a rating secured, a small business can present its rating report to an agency. The agency is then obligated to consider the rating when evaluating offers on a prime contract.

The ratings themselves will be near identical to CPARS evaluation factors on a five-scale system as follows:

  1. Exceptional
  2. Very Good
  3. Satisfactory
  4. Marginal
  5. Unsatisfactory

Some aspects remain unclear, however, as there does not appear to be a rebuttal process. In response, the SBA recommends including a rebuttal procedure as part of the subcontract. Others fear that the rule will be too difficult to enforce, pointing to a situation where the prime contractor ignores the request and refuses to submit a rating. In this case, strict punishments exist, including liquidated damages and possible debarment. If a prime contractor does not submit a review within the 15-day period, subcontractors are advised to notify a contracting officer.

Key takeaways

The SBA believes the rule will promote competition among government contracting and improve access to products and services. The goal is to draw in more small business prime contractors, making it easier for small businesses to showcase joint venture past performance during the evaluation process. Overall, the new SBA requirements are big win for small business contractors.

For further information, the SBA recommends reaching out to Donna Fudge, Procurement Analyst, at the Office of Policy Planning and Liaison at the Small Business Administration, at Donna.Fudge@sba.gov, (202) 205–6363.

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