2021 NDAA Provides Increased Opportunities for Small Businesses to Establish Past Performance

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The 2021 National Defense Authorization Act (NDAA) includes a significant change to how small businesses may establish past performance when bidding for prime contracts, greatly increasing the opportunity for small businesses to establish positive past performance ratings.

Previously, small businesses could not rely on experience gained through their participation in a joint venture unless a solicitation expressly allowed. Under Section 868 of the 2021 NDAA, however, if a small business does not have past performance of its own, it may rely on past performance accumulated as part of a joint venture in all proposals. Furthermore, contracting officers are required to consider this experience when evaluating the past performance of the small business concern.

This revision will be made by adding the following language at Section 15(e) of the Small Business Act (15 U.S.C. 644(e):

(5) Past performance ratings of joint ventures for small business concerns

With respect to evaluating an offer for a prime contract made by a small business concern that previously participated in a joint venture with another business concern (whether or not such other business concern was a small business concern), the Administrator shall establish regulations—

(A) allowing the small business concern to elect to use the past performance of the joint venture if the small business concern has no relevant past performance of its own;

(B) requiring the small business concern, when making an election under subparagraph (A)—

(i) to identify to the contracting officer the joint venture of which the small business concern was a member; and

(ii) to inform the contracting officer what duties and responsibilities the small business concern carried out as part of the joint venture; and

(C) requiring a contracting officer, if the small business concern makes an election under subparagraph (A), to consider the past performance of the joint venture when evaluating the past performance of the small business concern, giving due consideration to the information provided under subparagraph (B)(ii).

Expanding on the previous pilot program set forth at Section 8(d)(17) of the Small Business Act, small businesses that performed as a first-tier subcontractor on a covered contract will be entitled to use that experience to establish a record of past performance—and contracting officers will be required to consider the experience when evaluating the small business for award of a prime contract.

This revision to the Small Business Act will remove reference to the "pilot program" and replace it with the following text:

(17) Past performance ratings for certain small business subcontractors

Upon request by a small business concern that performed as a first tier subcontractor on a covered contract (as defined in paragraph (13)(A)), the prime contractor for such covered contract shall submit to such small business concern a record of past performance for such small business concern with respect to such covered contract. If a small business concern elects to use such record of past performance, a contracting officer shall consider such record of past performance when evaluating an offer for a prime contract made by such small business concern.

These two provisions of the 2021 NDAA expand the opportunities for small businesses to establish past performance, thereby enabling small businesses to be more competitive when bidding for prime contracts. While the 2021 NDAA remains under threat of veto, these provisions likely will remain once the NDAA is enacted.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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