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Oles Morrison

SBA’s Upcoming Pilot Program for Small Business Subcontractor Past Performance Reviews – Potential Benefits for Small Business Subcontractors and Large Business Primes

Back when Congress passed the FY2017 NDAA, they included a provision (Section 1822) requiring SBA to create a pilot program to provide opportunities for qualified subcontractors to obtain past performance ratings. Specifically, Congress mandated that SBA create a 3-year pilot program whereby small business concerns without a past performance rating as a prime contractor in the Past Performance Information Retrieval System (PPIRS) (i.e., without a CPAR) may request a past performance rating in the Contractor Performance Assessment Reporting System (CPARS), if the small business is a first tier subcontractor under a “covered contract.”  This pilot program has been codified at 15 U.S.C. 637(d)(17).

Recently, SBA published notice indicating that it will soon – possibly as early as late June 2018 – be commencing this pilot program. This exciting program could give both small business subcontractors and large business primes an additional tool to improve their chances of winning future contract awards. SBA has called for comments on the pilot program by June 19, specifically on the process outlined in SBA’s notice and SBA’s proposed application form for the pilot program (proposed SBA Form 2465).

Who is Eligible to Participate in the Pilot Program

In order to be eligible for the pilot program, a subcontractor must meet all of the following criteria:

  1. Be a Small Business Concern;
  2. Be without a Past Performance Rating as a prime contractor in CPARS;
  3. The application must be made in connection with the Small Business Concern’s performance of a first-tier subcontract under a contract that requires a subcontracting plan;
  4. Completed an application and submitted within 270 days after the Small Business Concern completed the work for which it seeks a past performance rating OR 180 days after the prime contractor completes work on the contract, whichever is earlier.
  5. Subcontract value meets the mandatory CPARS level: exceed the simplified acquisition threshold (as defined in FAR 2.101) or subcontracts for architect-engineer services valued at $35,000 or more as provided in FAR 42.1502; and
  6. Subcontractor is registered and active in the System for Award Management (SAM) located at www.sam.gov.

As seen above, the biggest restriction to this program is that to qualify the small business subcontractor cannot already have any past performance rating “as a prime” in CPARS. However, the pilot program does not necessarily limit a subcontractor to a single past performance review. Nothing prevents a subcontractor from receiving multiple past performance reviews as a subcontractor in CPARS under the pilot program. Small business concerns who only do work as subcontractors may be able to use this program multiple times, which could make them both a significantly more attractive teaming partner for large business primes and increase their own chances of winning prime contracts in the future.

How do Subcontractors Request a Past Performance Rating Under the Pilot Program?

  1. An eligible small business subcontractor completes a SBA Form 2465, which includes, amongst other things, the subcontractor’s suggested performance ratings for each past performance element (i.e. self-ratings) and “justification and written evidence supporting [each] suggested rating.”  The small business subcontractor then certifies the form and sends it to SBA’s Commercial Market Representative (the “Appropriate Official”) at SPPP@sba.gov.
  2. The Appropriate Official forwards the SBA Form 2465 to the Prime Contractor and the Office of Small Disadvantaged Business Utilization (“OSDBU”). The OSDBU and Prime Contractor have 30 calendar days to concur with the small business subcontractor’s suggested ratings, or to contest the suggested ratings and provide justifications for disagreement.
  3. If the OSDBU and the Prime Contractor both agree on a rating, or if either the OSDBU or Prime Contractor fail to respond and the responding person agrees with the small business subcontractor’s suggested ratings, the Appropriate Official shall enter the agreed-upon past performance rating in CPARS.
  4. Alternatively, if the OSDBU and the Prime Contractor both fail to respond to the submitted SBA Form 2465 within 30 days, or if they disagree about the rating, or if either the OSDBU or Prime Contractor fail to respond and the responding person disagrees with the small business subcontractor’s suggested rating, the disagreeing persons (OSDBU and/or Prime Contractor) shall submit a notice contesting the application to the Appropriate Official. The small business subcontractor then has an opportunity to submit comments, rebuttals, or additional information relating to its past performance. The Appropriate Official shall enter into CPARS “a rating that is neither favorable nor unfavorable” along with the initial application from the small business subcontractor, any responses of the OSDBU, the prime contractor, and any additional information provided by the small business subcontractor.

How a Part Performance Review Issued Under the Pilot Program Can be Used

Congress included the following broad language in the legislation concerning the use of past performance reviewed issued under the pilot program: “A small business subcontractor may use a past performance rating given under [this pilot program] to establish its past performance for a prime contract.”

Why Large and Small Businesses Should be Interested in this Pilot Program

Past performance reviews are the life blood of source selection in federal procurement. Nearly every federal procurement will have a past performance evaluation criteria of some kind, and generally past performance is the second most important evaluation criteria (after price). While the law (FAR 15.305(a)(2)) requires that in “the case of an offeror without a record of relevant past performance or for whom information on past performance is not available, the offeror may not be evaluated favorably or unfavorably on past performance,” the reality is that contractors that receive neutral evaluations on the past performance factor rarely win a contract award, absent a major price advantage. Given the importance of the past performance reviews to the source selection process, especially those past performance reviews that reside in CPARS/PPIRS, the SBA’s Pilot Program for Small Business Subcontractor Past Performance Reviews can provide significant advantages for both large business primes and small business subcontractors.

For small business subcontractors the advantages are clear. The pilot program will allow small business subcontractors to get one (or potentially multiple) past performance reviews in CPARS if they do not already have a past performance review as a prime in CPARS. Moreover, because of the process for program, small business subcontractors will be able to receive a past performance review on their own terms, a distinct advantage from the circumstances a prime contractor encounters. The small business subcontractor will be able to propose ratings (which become the ratings default if not countered by the reviewers), they get to cherry-pick which projects/periods of performance to request past performance review for (which allows the small business to only request a past performance review when it knows its performance has been excellent), and the risk of a negative review is mitigated by the requirement that if their is disagreement on a rating the past performance review will be entered into CPARS with “a rating that is neither favorable nor unfavorable.”  Given all these advantages, small business subcontractors without a review in CPARS as a prime should be able to use the pilot program to build a record of past performance, which will better enable them to compete for procurements as a prime contractor in the future, and which will make them a more attractive teaming partner to large business primes (as many source selections allow or require consideration of the past performance records of both the prime and major subcontractors).

This pilot program could also provide major benefits to large business primes that encourage their small business subcontractors to apply for past performance reviews. As already noted, many source selections allow or require consideration of the past performance records of both the prime and major subcontractors. Thus, large business primes often have an increased chance of receiving award if their subcontractors have a strong record of relevant past performance. Under the pilot program, the large business prime actually has influence on the past performance rating that its subcontractor receives, which essentially gives large business primes a role in improving their own team’s past performance record for use on future procurement. Large business primes should encourage the small business subcontractors that they frequently team with to take advantage of this pilot program, thereby allowing the large business prime to present a stronger record of past performance for its team in future procurements.