The National Defense Authorization Act for Fiscal Year 2021 (“NDAA”) took some significant steps to help small businesses make the leap from subcontracting to becoming a Prime. Having been an in-house counsel at some small businesses and going through the struggle of identifying the best past performance reference, I understand just how important these rule changes will be to small businesses. These changes will give a small business a much better chance of making the leap and winning a prime contract.
Past Performance Changes Under the NDAA
Section 868 of the NDAA make two significant changes involving past performance references:
1) it requires contracting officers to consider past performance as a first-tier subcontractor; and
2) small businesses can use work performed as part of a joint venture as a past performance reference.
Specifically, the NDAA modifies the Small Business Act (“Act”) 15 U.S.C. 644(e) by adding sections addressing each category.
Perhaps the most important part in each section is that this is not discretionary. Arguably, first-tier subcontract past performance should already be considered under FAR 15.305(a)(2), but it is quite common for a solicitation to restrict the evaluation to “prime contract” past performance. Given this history, Congress took the matter out of an agency’s hands. The NDAA states that if a small business uses a first tier subcontract past performance, “a contracting officer shall consider such record of past performance …” NDAA 21, Section 868(b). If you have been around government contracting for more than five minutes, you know the importance of “shall.”
The changes relating to joint venture past performance are even more favorable. Under the revision a small business can use the performance of a Joint Venture (“JV”) even it the JV partner is not a small business. Meaning, if you are a small business partnered with a large company in a JV, you can now use the work of that JV for past performance. The small business does have to identify its duties and responsibilities under the JV; so, it appears that this use will be limited to a JV where the small business is a significant participant.
There are some gaps in the language of the Statute which will be filled in by SBA regulations. Luckily, Congress gave the SBA a very short timeline to enact these new regulations. The NDAA requires the SBA to issue a rulemaking to carry out these changes within 120 days of enactment of the NDAA. Since the legislation was enacted on January 1, 2021, the SBA rules must be issued by the end of April.
Given this timeline, I would expect to see some proposed rules in the next few weeks. We will send an update as soon as those rules hit the street. In the meantime, smart small businesses should be going over their subcontracting and joint venture portfolios and identifying the best potential past performance references.
If you have questions about these changes or the bid process in general, contact Lewis Rhodes at 703-868-8653 today.