[Federal Register Volume 87, Number 140 (Friday, July 22, 2022)]
[Rules and Regulations]
[Pages 43731-43740]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-15622]



 ========================================================================
 Rules and Regulations
                                                 Federal Register
 ________________________________________________________________________
 
 This section of the FEDERAL REGISTER contains regulatory documents 
 having general applicability and legal effect, most of which are keyed 
 to and codified in the Code of Federal Regulations, which is published 
 under 50 titles pursuant to 44 U.S.C. 1510.
 
 The Code of Federal Regulations is sold by the Superintendent of Documents. 
 
 ========================================================================
 

  Federal Register / Vol. 87, No. 140 / Friday, July 22, 2022 / Rules 
and Regulations  

[[Page 43731]]



SMALL BUSINESS ADMINISTRATION

13 CFR Part 125

RIN 3245-AH71


Past Performance Ratings for Small Business Joint Venture Members 
and Small Business First-Tier Subcontractors

AGENCY: U.S. Small Business Administration.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The U.S. Small Business Administration (SBA) is amending its 
regulations to implement new provisions of the National Defense 
Authorization Act (NDAA) Fiscal Year (FY) 2021. The final rule provides 
new methods for small business government contractors to obtain past 
performance ratings to be used with offers on prime contracts with the 
Federal Government. A small business contractor may use a past 
performance rating for work performed as a member of a joint venture or 
for work performed as a first-tier subcontractor. This final rule 
updates the requirements for small business subcontracting plans to add 
a requirement for prime contractors to provide past performance to a 
first-tier, small business subcontractor when requested by the small 
business.

DATES: This rule is effective on August 22, 2022.

FOR FURTHER INFORMATION CONTACT: Donna Fudge, Procurement Analyst, 
Office of Policy Planning and Liaison, Small Business Administration, 
at [email protected], (202) 205-6363.

SUPPLEMENTARY INFORMATION:

I. Background Information

    Section 868 of National Defense Authorization Act (NDAA) for Fiscal 
Year (FY) 2021, Public Law 116-283, addressed a common obstacle that 
small businesses may face when competing for prime Federal Government 
contracts: possessing qualifying past performance. The final rule 
implements section 868 by providing small businesses with two new 
methods for obtaining qualifying past performance. First, a small 
business may use the past performance of a joint venture of which it is 
a member, provided that the small business worked on the joint 
venture's contract or contracts. Second, a small business may use past 
performance it obtained as a first-tier subcontractor on a prime 
contract with a subcontracting plan. For this latter method, section 
868 authorizes the small business to seek a past performance rating 
from the prime contractor and submit the rating with the small 
business' offer on a new prime contract. SBA published a proposed rule 
on November 18, 2021, 86 FR 64410, to implement section 868. After 
receiving comments from the public, SBA finalizes the rule with the 
changes described below.
    Section 868 added a new section 15(e)(5) to the Small Business Act, 
15 U.S.C. 644(e)(5), to address past performance ratings of joint 
ventures for small business concerns. A small business concern that 
previously participated in a joint venture with another business 
concern (whether or not the other concern was small) may use the past 
performance of the joint venture with the small business' offer on a 
prime contract. Section 15(e)(5) required SBA to establish regulations 
to allow the small business to elect to use the joint venture's past 
performance if the small business has no relevant past performance of 
its own. The small business must: (i) identify to the contracting 
officer the joint venture of which the small business was a member; 
(ii) specify the contract(s) of the joint venture the small business 
elects to use; and (iii) inform the contracting officer what duties and 
responsibilities the small business carried out as part of the joint 
venture. In turn, the contracting officer shall consider the past 
performance of the joint venture when evaluating the past performance 
of the small business concern, giving due consideration to the 
information submitted about the duties and responsibilities that the 
small business carried out.
    To address first-tier small business subcontractors, section 868 
amended section 8(d)(17) of the Small Business Act, 15 U.S.C. 
637(d)(17), which previously discussed a pilot program, to provide past 
performance ratings for small business subcontractors. Under section 
868, small business concerns may obtain past performance ratings for 
performance as a first-tier subcontractor on a prime contract that 
included a subcontracting plan. The final rule requires the prime 
contractor on the prime contract to provide a rating of the small 
business' past performance with respect to that prime contract to the 
small business within 15 calendar days of the request. If the small 
business elects to use the past performance rating, the contracting 
officer shall consider the past performance rating when evaluating the 
small business' offer on a prime contract.
    This final rule creates a separate mechanism for first-tier 
subcontractors to obtain past performance ratings. A Federal 
Acquisition Regulation (FAR) rule implementing this requirement will 
account for the additional burden in its existing information 
collection and clearance for the information collection will be 
obtained by the General Services Administration (GSA) for the FAR 
Council.
    SBA received 15 comments in response to the proposed rule. The 
following discusses and responds to the comments.

II. Summary of and Response to Comments

Support for the Rule

    Comment: SBA received numerous comments expressing support for this 
final rule.
    Response: SBA appreciates the feedback and engagement from 
stakeholders. SBA will implement the rule with the changes as noted 
below.

Outside the Scope of the Rule

    Comments: Comments were received pertaining to SBA's revised 
regulations to facilitate agency use of affiliate past performance. 
Both commenters suggested the Federal Acquisition Regulation (FAR) 
section 15.305(a)(2)(iii) be amended to mandate past performance 
acquired by entity-owned affiliated/sister companies be evaluated.
    Response: SBA does not have authority to amend the FAR. Requiring 
procuring activities to use affiliate/sister companies past performance 
would require the FAR Council to open a FAR

[[Page 43732]]

Case. Therefore, the proposed change is outside the scope of this 
rulemaking.
    Comment: A commenter suggested continued use of Past Performance 
Questionnaires and increasing use of small business invitation for bid 
set-aside opportunities. This commenter also suggested promotion of 
SBA's Mentor-Prot[eacute]g[eacute] program and consideration by the 
government of past performance from commercial (non-Federal) projects.
    Response: The FAR currently provides for consideration of Federal, 
State, and local government, and private past performance. See FAR 
15.305(a)(2)(ii). Additionally, SBA recently amended its Mentor-
Prot[eacute]g[eacute] regulation (85 FR 66146), effective November 16, 
2020, and the amended regulation allows for consideration of past 
performance of both members of a Mentor-Prot[eacute]g[eacute] 
relationship. Therefore, no changes to this rule are necessary.

Negative Impact on Small Business From No Past Performance

    SBA requested comments on whether small business subcontractors 
have been negatively impacted in competing for prime contracts due to 
not having a past performance rating(s).
    Comments: There were several responsive comments, and all the 
respondents described some level of negative impact to small business 
because of lack of past performance ratings. More specifically, most of 
the commenters observed that solicitations require small businesses to 
have prior past performance--and in some cases, as a prime contractor--
to win a prime contract. This treatment limits the ability of Black-
owned small businesses and Native-owned small businesses to compete for 
contracts, in particular, two commenters stated. Additionally, four 
commenters suggested that lack of past performance creates an obstacle 
to small business participation, restrains competition, and restricts 
the government's access to innovative products.
    Response: SBA acknowledges the impediments that small businesses 
have faced due to not having past performance ratings. As it now 
stands, FAR 15.302(a)(2)(iv) provides small businesses the opportunity 
to compete without a record of past performance. Section 868 of the 
NDAA FY 2021, however, sought to address small businesses not being 
able to compete for contracts because of lack of past performance. SBA 
believes that, by implementing this rule, the government will be able 
to attract new small business prime contractors. This will enhance 
competition in government contracting and provide agencies with 
increased access to innovative products and services.

Timeframe for Responding to a Small Business' Request for a Rating

    Comments: The time period within which the prime contractor must 
respond to the subcontractor's request was set at 15 calendar days in 
the proposed rule. Three commenters supported the 15-calendar-day time 
period. One commenter requested a 10-business-day period, and another 
commenter requested a 15-business-day period. One commenter believed 
that a longer period of 30 days would still allow subcontractors enough 
time to prepare their proposal packages. Another commenter also 
observed that subcontractors could negotiate a period shorter than 15 
days, and prime contractors could require in the subcontract that 
subcontractors reuse prior ratings from the same prime if one already 
has been provided.
    Response: SBA adopts the 15 calendar-day response period as 
specified in the proposed rule. That period provides enough time for 
the prime contractor to prepare a response while still permitting the 
small business to respond to proposal deadlines. With respect to 
reusing prior ratings, the rule permits the subcontractor to use the 
same rating for multiple proposals. SBA does not anticipate that 
subcontractors will request multiple ratings from a prime contractor 
for the same work.

Timeframe for Using the Rating

    Comments: Two commenters sought clarification on the period within 
which a subcontractor could continue to use its past performance rating 
for offers on prime contracts. The commenters suggested that a rating 
completed by the prime at the end of the contract be valid for three 
years to five years.
    Response: The proposed rule had included a provision, similar to 
FAR 42.1503(g), that past performance would need to be from within 
three years (six for construction and architect-engineering) to be 
considered relevant. However, FAR 42.1503(g) applies only to past-
performance information in CPARS, and, because the past-performance 
ratings in this rule are not in CPARS, that limitation does not apply. 
Instead, agencies have discretion to determine what is relevant with 
regard to past performance and could accept past performance that is 
older than the period in FAR 42.1503(g), as the comments suggest. The 
timeliness restriction also is not provided for in statute. This final 
rule therefore removes the timeliness restriction on using past 
performance.

Timeframe for Small Business Subcontractor To Request Past Performance 
Rating

    SBA requested comments on whether to prescribe a time frame within 
which the subcontractor must make a request to the prime contractor for 
a rating under this final rule.
    Comments: There were numerous comments suggesting a timeframe for 
the small business subcontractor to request a past performance rating. 
A few commenters suggested a 30-day time period after the period of 
performance within which the subcontractor would be required to request 
a rating. One suggested that the prime should review the small business 
on an annual basis, in addition to a review upon request during or 
within 90 days after the contractor's performance period. One commenter 
preferred a process in which the prime contractor would submit a rating 
within 14 days of the end of the contract and the subcontractor would 
receive 14 days to respond.
    A separate commenter indicated that the subcontractors should be 
required to request a rating during the period of performance of the 
contract. Outside of the performance, the commenter stated, it would be 
difficult to accurately rate the subcontractor because of shifts in 
personnel. Similarly, another commenter wrote that subcontractors 
should not submit requests after the date of their final invoices. One 
commenter stated that SBA should require that the time period be 
specified in the subcontract agreement, but the commenter did not 
suggest a default period. Conversely, two commenters did not support 
negotiating the timelines and stated that the timelines should be 
uniform. One commenter expressed that subcontractors should only 
request ratings after the subcontractor's work is complete.
    Response: SBA agrees with the commenters that the final rule should 
include a specific default period within which the subcontractor must 
submit its request to the prime contractor for a past performance 
rating. Based on the comments, SBA sets the deadline as 30 calendar 
days after completion of the period of performance for the prime 
contractor's contract with the government. This time period balances 
the prime's desire to avoid having an open-ended obligation, and the 
subcontractor's need for flexibility in submitting its request. The 
prime contractor and the subcontractor may choose to negotiate a later 
deadline than 30 calendar days after the prime's

[[Page 43733]]

contract completion. But the prime contractor cannot set a deadline 
earlier than the 30 calendar days after the prime's completion.
    SBA disagrees that subcontractors should be limited to requesting 
ratings after their work on a contract is complete. For prime 
contracting, the government can provide ratings prior to contract 
completion (i.e., at the end of base periods or option years). This 
rule treats subcontractors similarly by allowing them to request 
ratings midway through performance. Further, the intent of this change 
is to provide subcontractors more access to past performance ratings.

Allowing Ratings for Contracts Without a Subcontracting Plan

    Comments: A few commenters suggested the rule should allow for 
ratings on subcontracts even where the prime is not required to have a 
subcontracting plan. These commenters expressed that this limits the 
ability to obtain a rating, particularly where the subcontractor is 
performing on another small business' prime contract.
    Response: This final rule adopts the language in the proposed rule, 
which limited the requirement for subcontractors to request ratings to 
those prime contractors with subcontracting plans. Section 868 of NDAA 
FY 2021 included a precise definition of ``covered contract'' that 
limits application to those contracts with subcontracting plans. SBA 
observes, however, that a prime contractor could choose to provide a 
past performance rating, even though the contract did not include a 
subcontracting plan. An agency could then consider that rating at its 
discretion.

Concern Regarding Enforcement if Primes Do Not Provide Performance to 
Small Business Subcontractors

    Comments: A few commenters expressed concern that there may be no 
enforcement mechanisms to ensure that prime contractors provide 
performance ratings for small business subcontractors. Three commenters 
specifically mentioned the lack of penalty for prime contractors that 
do not provide performance ratings.
    Response: There are several provisions in the current regulatory 
framework that will help to enforce the duty of prime contractors to 
provide performance ratings for small business first-tier 
subcontractors when requested. The rule establishes that responding to 
subcontractor requests will be included in the prime contractor's 
subcontracting plans. See 13 CFR 125.3(c)(1)(xii)(A). There are 
consequences for failing to comply with a subcontracting plan, 
including: contract remedies such as termination for default or the 
withholding of award fees; a lower past performance rating under the 
subcontracting element (FAR 42.1502(g)(1) and 42.1503(b)(2)(v)); 
liquidated damages for failing to make a good faith effort to comply 
with the subcontracting plan (FAR 19.705-7); and even debarment if the 
failure is willful or repeated (FAR 9.406-2(b)(1)(i)).
    Furthermore, subcontractors may notify the contracting officer of 
the prime's failure to provide a required rating, similar to the 
process provided for in FAR 52.242-5. SBA is therefore adding to this 
final rule that subcontractors should notify the contracting officer in 
the event that the prime contractor fails to submit the requested 
rating within the rule's prescribed timeframe.

Use of Standard/Contractor Performance Assessment Reporting System 
Format

    Comments: SBA received several comments suggesting a standardized 
format for prime contractors to use in evaluating the past performance 
for subcontractors. Two commenters suggested using the Contractor 
Performance Assessment Reporting System (CPARS) format as the 
subcontractor past performance ratings format. Four commenters 
suggested using a standardized format, based on objective measures such 
as work scope and funded amount. One commenter suggested SBA should 
provide a sample past performance template to be added as an appendix 
to the subcontract. One commenter suggested clarification that a small 
business subcontractor rating does not need to be established for each 
subcontract.
    Response: In response to these comments, SBA finds that the past 
performance evaluation factors should be the same as the CPARS 
evaluation factors. These evaluation factors are the minimum required 
to use in rating a subcontractor's past performance. The rule does not 
preclude the use of additional evaluation factors. In response to the 
comments seeking a standardized rating format, SBA is adding to the 
final rule that the prime contractor shall use the five-scale rating 
system at FAR 42.1503(b)(4): Exceptional, Very Good, Satisfactory, 
Marginal, and Unsatisfactory. SBA does not find it necessary to provide 
a past performance template, as the evaluation factors and ratings 
level mirror CPARS.

Concern About Subjective Performance Ratings and Inquiries on Disputing 
the Performance Rating

    Comments: Several commenters expressed concern about subjective 
past performance ratings and whether subcontractors could dispute the 
past performance rating. One commenter suggested that the prime 
contractor's rating of its subcontractor(s) has the potential to be 
subjective because of changes in the program managers. One commenter 
stated there is the potential for conflicts with prime contractors 
providing subcontractor past performance ratings. Two commenters 
suggested the government should provide regulatory guidance and 
procedures to ensure unbiased or consistent and fair assessments. Three 
commenters suggested the subcontractors should be allowed to rebut the 
past performance rating issued by the prime, similar to how a prime 
rebuts its CPARS rating by the government.
    Response: In response to these comments, SBA notes that the statute 
provides the small business subcontractor with discretion in electing 
to use or not use the past performance rating. As discussed in the 
comments regarding a standard format, and in response to the comment 
seeking additional guidance, the final rule includes a rating system by 
reference to the definitions in FAR 42.1503. This final rule does not 
adopt a rebuttal procedure as none is provided or required by the 
statute. However, subcontractors may be able to negotiate a rebuttal 
procedure as part of their subcontract.

Stakeholders Who Will Benefit From the Proposed Rule

    Comments: Commenters expressed that the proposed rule would likely 
benefit certain stakeholders and groups more than others. One commenter 
believed that the proposed rule would tend to benefit small businesses 
that had been more established and had been doing business for a number 
of years. Another commenter believed that the proposed rule could 
specifically benefit small, Black-owned businesses.
    Response: SBA agrees that this rule will mostly benefit small 
businesses that are prepared to bid on prime contracts but are 
currently held back by a lack of prime contract performance. The rule 
addresses this problem by allowing for past performance ratings for 
first-tier subcontracting experience. That is the design of the statute 
and the problem being addressed.

[[Page 43734]]

Retroactive Application of the Rule

    Comment: A commenter suggested that the rule be made retroactive, 
so that subcontractors could receive past performance ratings on 
recently completed contracts.
    Response: The final rule does not make the rule retroactive. 
Generally, unless their language requires it, new legislative 
enactments are not retroactive. Bowen v. Georgetown Univ. Hosp., 488 
U.S. 204, 208 (1988). Nevertheless, a prime contractor could respond to 
a first-tier subcontractor's request for a past performance rating, 
even if not required by the prime contractor's subcontracting plan. 
Such ratings still could be considered by the contracting agency if 
submitted with the proposal for a prime contract.

Prime Contractor Should Automatically Provide Past Performance Rating

    Comments: Commenters expressed support for making a past 
performance rating of small business subcontractor(s) a requirement for 
prime contractors even if no past performance rating is requested by 
the small business subcontractor. In other words, the past performance 
rating would be automatic after performance. Both commenters believed 
that this should happen within 14 or 15 days of performance.
    Response: Section 868 explicitly states that its requirements only 
apply when a first-tier small business subcontractor requests a past 
performance rating; therefore, it does not apply to all contracts, as 
not all first-tier subcontractors will request a past performance 
rating. The statute presumes this, perhaps because a small business 
might not be interested in bidding on future prime contracts or because 
it already has sufficient past performance to bid on a prime contract. 
Given the statutory language, this rule does not expand the coverage of 
past performance ratings, as doing so could potentially add unnecessary 
burden on prime contractors to issue performance ratings to every small 
business first-tier subcontractor.

Primes Should Rate Small Business Subcontractors as Part of the CPARS 
Process

    Comments: Several commenters suggested prime contractors fill out 
small business subcontractor past performance ratings as part of CPARS. 
Two commenters suggested a first-tier subcontractor past performance 
rating be required to be filed annually by the prime as part of the 
prime's CPARS rating. One commenter suggested primes be required to 
file subcontractor past performance ratings as part of satisfactory 
completion of the prime's contract. One commenter suggested requiring a 
prime to complete a subcontractor past performance rating at the end of 
a contract or order.
    Response: CPARS is a website designed for federal contracting 
officers to objectively evaluate the performance of prime contractors 
and allows other source selection officials to review contractor past 
performance ratings. The CPARS system is not designed to allow prime 
contractors the ability to complete a subcontractor past performance 
rating. Access to completed evaluations is restricted to individuals 
working on source selections for federal solicitations. In response to 
the comments, SBA notes that the statute, section 868, applies only 
when the small business has requested a past performance rating, not to 
every small business subcontract. Given the statutory language, this 
rule does not expand the coverage of past performance ratings, as doing 
so could potentially add unnecessary burden on prime contractors to 
issue performance ratings to every small business first-tier 
subcontractor.

Minimum Subcontract Value Threshold for Past Performance Rating

    Comment: A commenter suggested the rule include a minimum threshold 
of $750,000.00 or $2 million, below which it would not apply to a 
subcontractor. The commenter suggested that the government conduct a 
study of the administrative cost of responding within the 15-day 
timeframe when the subcontract was of small value. Another commenter 
suggested that, when the subcontract exceeded the recommended threshold 
of 10% of the total contract value, the government be required to rate 
the subcontractor in CPARS.
    Response: This rule implements section 868 of the NDAA for FY 2021, 
which applies to all eligible first-tier small business subcontractors 
performing on prime contracts with subcontracting plans. The statute 
did not include a threshold for applicability; therefore, no threshold 
is included in this final rule.

Reporting Mechanism for Subcontractor or Joint Venture Past Performance

    Comments: Commenters suggested use of an explicit mechanism for 
reporting first-tier subcontractor performance. One commenter merely 
asked what systems would be utilized while the other commenter 
suggested a reporting mechanism from the prime contractor to the 
requesting agency.
    Response: The statute that SBA is implementing does not create a 
formal reporting mechanism for past performance as a first-tier 
subcontractor. This is because it is up to the small business 
submitting past performance as a first-tier subcontractor to provide 
those ratings to the government. As the small business will be in 
possession of the past performance ratings, there is no need to 
formalize a reporting mechanism. Past performance ratings and/or 
information will be submitted to the agency in accordance with the 
solicitation.

Administrative Burden on Prime Contractors

    Comment: A commenter expressed concern about the administrative 
burden on prime contractors in preparing subcontract past performance 
ratings. The commenter stated that its subcontractors have access to 
the performance rating system through a subcontractor portal; however, 
it is not unique to a specific contract.
    Response: SBA notes the prime contractor is only required to 
provide a rating at the request of the first-tier small business 
subcontractor. Not every first-tier small business subcontractor will 
request a rating.

Subcontracting Past Performance Rating Should Be Weighted Differently 
Than Prime Contractor Performance

    Comment: A commenter suggested that past performance as a 
subcontractor should be weighted less than past performance as a prime 
contractor. This commenter expressed concern that a small business 
subcontractor could selectively choose to request past performance only 
on projects where they expect a good rating. This is in contrast to 
prime contractor performance, which is always rated good or bad.
    Response: SBA does not agree that first-tier subcontractor past 
performance should be weighted differently than prime contractor past 
performance. Implementing the statute in this manner would be 
inconsistent with its intent, which is to help small businesses to have 
qualifying past performance. In addition, while it is true that 
subcontractors may choose which contracts on which they request a 
performance rating, a prime contractor can also choose what past 
performance examples to submit with its proposal(s). In this way, a 
subcontractor's past performance rating is equivalent to that of a 
prime contractor. In addition, and in accordance with FAR 15.305(a)(2), 
when past performance is an evaluation factor, the currency and 
relevance of the

[[Page 43735]]

information, source of the information, context of the data, and 
general trends in contractor's performance shall be considered; 
therefore, there is no need to make explicit or require a contracting 
officer to evaluate past performance as a first-tier subcontractor 
differently than past performance as a prime contractor.

Evaluating Joint Venture Members Based on Ownership and Liability

    Comment: A commenter opposed the restriction on evaluating joint 
venture members only on the duties and responsibilities that the member 
carried out as part of the joint venture. The commenter remarked that 
any joint venture with significant ownership is held jointly and 
severally liable for the work; as such, the member should enjoy the 
benefit of past performance credit.
    Response: SBA believes the joint venture member should establish 
its participation in the joint venture's contract in order to receive 
past performance evaluation. This is necessary regardless of the 
member's level of participation because the agency needs to be able to 
gauge the relevancy of the past performance. Even where a member's 
involvement is limited to taking on risk and liability, that still 
could be part of the duties and responsibilities that the small 
business carried out for the joint venture.

Adding Language About the Subcontractor Past Performance Being Equal to 
CPARS Rating

    Comment: A commenter suggested language should be added to 13 CFR 
125.11(c)(3) making a subcontractor past performance rating equal to a 
CPARS rating for a prime contractor.
    Response: SBA is not adopting this suggested language for the 
following reasons. SBA believes that, in most cases, the subcontractor 
past performance rating should be treated as equivalent to a prime's 
past performance rating. While agencies are required to use CPARS as 
one of the sources of past performance information in source selections 
when past performance is an evaluation factor, the FAR does not 
indicate that the information in CPARS is to be weighted more highly 
than information obtained from other sources. Under FAR 15.305(a)(2), 
when past performance is an evaluation factor, the currency and 
relevance of the information, source of the information, context of the 
data, and general trends in the contractor's performance shall be 
considered. Additionally, past performance is evaluated in accordance 
with the solicitation. The recency and relevancy of past-performance 
information will differ from one source selection to the next; 
therefore, it is not necessary to indicate that the past-performance 
rating provided to a first-tier small subcontractor by its prime 
contractor is equally weighted in importance to information obtained 
from CPARS. In response to this comment and for the reasons state 
above, SBA clarifies that the importance of past performance 
information is dependent on the individual acquisition, not on the 
source of the information.

III. Section-by-Section Analysis

13 CFR 125.3

    This final rule adds a requirement to prime contractors' 
subcontracting plans. The subcontracting plan 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 requested rating is prepared including, at a minimum, the 
following evaluation factors in the requested rating: (a) Technical 
(quality of product or service); (b) Cost control (not applicable for 
firm-fixed-price or fixed-price with economic price adjustment 
arrangements); (c) Schedule/timeliness; (d) Management or business 
relations; and (e) Other (as applicable). The requested rating will use 
the five-scale rating system from FAR 14.1503: Exceptional, Very Good, 
Satisfactory, Marginal, and Unsatisfactory.

13 CFR 125.11

    This final rule renumbers 13 CFR 125.11 and subsequent sections to 
create a new section 125.11. New subsection 125.11(a) provides general 
guidance to require agencies to consider the past performance of 
certain small business offerors that have been members of joint 
ventures or first-tier subcontractors. The remainder of this final rule 
addresses the two scenarios from NDAA 2021.
    First, a small business concern may receive past performance 
consideration for the past performance of a joint venture of which the 
small business was a member. To receive past performance consideration, 
where the small business does not independently demonstrate past 
performance necessary for award, the small business may elect to use 
the joint venture's past performance and the contracting officer shall 
consider the joint venture past performance that the small business has 
elected to use. In its offer for a prime contract, the small business 
must identify: (i) the joint venture; (ii) the contract(s) of the joint 
venture that the small business elects to use; and (iii) describe to 
the agency what duties or responsibilities the small business carried 
out as a joint venture member. The small business cannot, however, 
claim past performance credit for work performed exclusively by other 
partners to the joint venture.
    As required by NDAA 2021, the contracting officer shall consider 
the information that the small business provided about its duties and 
responsibilities carried out as part of the joint venture. Where the 
small business does not independently demonstrate past performance 
necessary for award, agencies shall consider a small business' 
successful rating of past performance through a joint venture. For 
example, a solicitation might require three past performance examples. 
This final rule authorizes the small business offeror to submit two 
examples from performance in its own name and one example from 
performance of a joint venture of which it was a member if the small 
business cannot independently provide the third example of past 
performance on its own. This final rule provides that the joint 
venture's past performance may supplement the relevant past performance 
of the small business when the small business cannot independently 
demonstrate the past performance on its own.
    Second, a small business concern may receive past performance 
consideration for performance as a first-tier subcontractor. NDAA FY21 
directs that this mechanism is limited to small businesses that 
performed as first-tier subcontractors on contracts that include 
subcontracting plans. The small business may request a rating of its 
subcontractor past performance from the prime contractor. Under the 
final rule, the prime contractor must provide a rating to the 
requesting small business within 15 calendar days of the request.
    Under this final rule, the requested rating is prepared including, 
at a minimum, the following evaluation factors in the requested rating: 
(a) Technical (quality of product or service); (b) Cost control (not 
applicable for firm-fixed-price or fixed-price with economic price 
adjustment arrangements); (c) Schedule/timeliness; (d) Management or 
business relations; and (e) Other (as applicable). The requested rating 
will use the five-scale rating system from FAR 42.1503: Exceptional, 
Very Good, Satisfactory, Marginal, and Unsatisfactory. The final rule 
does not contain a limit on how recent the evaluated contract must be. 
The final rule clarifies that one scenario where this applies is where 
the small business lacks a rating in the Contractor Performance 
Assessment Reporting System (CPARS).

[[Page 43736]]

    This final rule clarifies that a joint venture composed of small 
businesses may receive past performance consideration for work that the 
joint venture performed as a first-tier subcontractor. A small business 
member of the joint venture subcontractor may request a past 
performance rating from the prime contractor for a contract that 
included a subcontracting plan. The prime contractor must provide the 
requested rating to the joint venture member within 15 calendar days of 
the request. The requested rating would be prepared to include, at a 
minimum, the following evaluation factors in the requested record: (a) 
Technical (quality of product or service); (b) Cost control (not 
applicable for firm-fixed-price or fixed-price with economic price 
adjustment arrangements); (c) Schedule/timeliness; (d) Management or 
business relations; (e) Other (as applicable). The small business could 
then use that rating to establish its past performance in accordance 
with the prior provision on submitting joint venture past performance.

13 CFR 125.28

    SBA is changing the reference from 125.15(a) to 125.18(a) 
everywhere it appears in this section due to renumbering of sections. 
Section 125.18(a) provides the requirements for representation of 
service-disabled veteran-owned (SDVO) small business status.

13 CFR 125.29

    SBA is changing the reference from 125.8 to 125.12 everywhere it 
appears in this section due to renumbering of sections. Section 125.12 
provides the definitions that are important in the Service-Disabled 
Veteran-Owned (SDVO) Small Business Concern (SBC) program.

13 CFR 125.30

    SBA is changing the reference from 125.8 to 125.12 everywhere it 
appears in this section due to renumbering of sections. Section 125.12 
provides the definitions that are important in the SDVO SBC program.

IV. Compliance With Executive Orders 12866, 12988, 13132, 13175, 13563, 
the Congressional Review Act (5 U.S.C. 801-808), the Paperwork 
Reduction Act (44 U.S.C., Ch. 35), and the Regulatory Flexibility Act, 
(5 U.S.C. 601-612)

Executive Order 12866

    The Office of Management and Budget (OMB) has determined that this 
rule is a significant regulatory action for the purposes of Executive 
Order 12866. Accordingly, the next section contains SBA's Regulatory 
Impact Analysis.
    Regulatory Impact Analysis:
    1. Is there a need for the regulatory action?
    This rule is necessary to satisfy statutory requirements to 
implement section 868 of National Defense Authorization Act of Fiscal 
Year 2021 (NDAA FY 2021). Section 868 (e) requires the Administrator to 
issue rules to carry out the section.
    Absence of past performance has been a limitation for small 
businesses when pursuing procurement opportunities that evaluate past 
performance. Small businesses often have past performance through work 
performed as a joint venture partner or as a subcontractor, but this 
experience and past performance is often not acknowledged or credited 
to the relevant small business in the evaluation process. This final 
rule is necessary to address that shortcoming in the evaluation of past 
performance and experience.
    The Federal Acquisition Regulation (FAR) states that ``past 
performance, except as set forth in paragraph (c)(3)(iii) of this 
section, shall be evaluated in all source selections for negotiated 
competitive acquisitions expected to exceed the simplified acquisition 
threshold.'' See FAR 15.304(c)(3)(i). Past performance is ``one 
indicator of an offeror's ability to perform the contract 
successfully.'' See FAR 15.305(a)(2). FAR 15.305(a)(2)(iv) provides 
that, ``[i]n 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.'' Because past performance may be considered a 
responsibility factor or because past performance affects an offeror's 
evaluation as compared to other offerors, the ability of small 
businesses that have been first-tier subcontractors or participated in 
joint ventures to demonstrate past performance increases their 
competitiveness in Federal contracting.
    2. What is the baseline, and the incremental benefits and costs of 
this regulatory action?
    OMB directs agencies to establish an appropriate baseline to 
evaluate any benefits, costs, or transfer impacts of regulatory actions 
and alternative approaches considered. The baseline should represent 
the agency's best assessment of what the world would look like absent 
the regulatory action. For a regulatory action that modifies or 
replaces an existing regulation, a baseline assuming no change to the 
regulation generally provides an appropriate benchmark for evaluating 
benefits, costs, or transfer impacts of proposed regulatory changes and 
their alternatives. This final rule implements the changes, by 
modifying and expanding the rating procedures of the unimplemented 
pilot program in 8(d)(17) of the Small Business Act (15 U.S.C. 
637(d)(17)), which was added by section 1822 of the National Defense 
Authorization Act of 2017.
    NDAA FY 2021 amends Section 8(d)(17) of the Act to allow small 
businesses that performed as first tier subcontractors to request a 
past performance rating from the prime contractor. The prime contractor 
must provide a rating of the small business past performance with 
respect to that prime contract to the small business within 15 calendar 
days of the request. The requested rating would be prepared to include, 
at a minimum, the following evaluation factors in the requested rating: 
(a) Technical (quality of product or service); (b) Cost control (not 
applicable for firm-fixed price or fixed-price with economic price 
adjustment arrangements); (c) Schedule/timeliness; (d) Management or 
business relations; (e) Other (as applicable). The requested rating 
will use the five-scale rating system from FAR 42.1503: Exceptional, 
Very Good, Satisfactory, Marginal, and Unsatisfactory. This final rule 
modifies the pilot program, in which a small business that had not 
performed as a prime contractor could 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 
Federal Government contract requiring a subcontracting plan. Section 
868(a) amends Section 15(e) of the Small Business Act to direct the 
establishment of regulations that allow the use of past performance in 
joint ventures in Federal contracting offers. This amendment expands 
the opportunities for past performance consideration by including 
consideration of the past performance of a joint venture of which the 
small business was a member.
    The baseline is that which exists without implementation of the 
pilot program in section 8(d)(17) of the Small Business Act. In this 
environment, when a Federal agency creates a procurement opportunity 
requiring an offeror to provide examples of past performance, a newer 
small business concern may forego the opportunity because it 
individually lacks the required number of examples and then opt to join 
an established prime contractor's team as a subcontractor.

[[Page 43737]]

    The most significant benefit of this final rule to small businesses 
is that it enhances the small businesses' ability to compete for 
Federal contracting opportunities. The Federal Acquisition Regulation 
(FAR) states that ``past performance, except as set forth in paragraph 
(c)(3)(iii) of this section, shall be evaluated in all source 
selections for negotiated competitive acquisitions expected to exceed 
the simplified acquisition threshold.'' See FAR 15.304(c)(3)(i). FAR 
15.305(a)(2)(iv) provides that, ``[i]n 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.'' Nevertheless, small 
businesses without past experience as prime contractors may forego 
seeking some Federal contracting opportunities. This enhancement of 
Federal contracting opportunities is consistent with the amendment of 
the Small Business Act, which states that ``procurement strategies used 
by a Federal department or agency having contract authority shall 
facilitate the maximum participation of small business concerns as 
prime contractors, subcontractors, and suppliers.'' 15 U.S.C. 
644(e)(1).
    With more small businesses able to demonstrate past performance, 
agencies will have a larger pool of small businesses competing for 
contracting opportunities. This added competition may result in lower 
prices to the Government. SBA cannot quantify this impact prior to 
proposal of applicable FAR rules.
    Costs of this final rule to the private sector include the prime 
contractor's provision, upon request to provide a past performance 
rating. The time burden of this requirement to the prime contractor is 
similar to that of the pilot program's past performance rating 
requirement. SBA estimates the fulfillment of a past performance 
request to require about 30 minutes of time. Assuming that a 
compilation of a rating of past performance involves 30 minutes of work 
by an employee of the prime contractor and valuing the time at $93.44 
per hour,\1\ SBA estimates that each rating request costs a prime 
contractor $46.72 in labor plus de minimis costs of transmission of the 
rating. There were approximately 34,000 individual subcontracting plans 
with 24,000 at the prime contract level in fiscal year 2015 (81 FR 
94249), but it is not known how many small businesses were involved in 
these subcontracting plans or how many small businesses were involved 
in multiple subcontracting plans. SBA notes that 1,800 small businesses 
have active SBA-approved Mentor-Prot[eacute]g[eacute] agreements.\2\ 
SBA also notes that in FY 2019, the Electronic Subcontracting Reporting 
System (eSRS) listed 2,082 commercial plans with small businesses.
---------------------------------------------------------------------------

    \1\ The median hourly wage for construction managers is $46.72, 
according to 2020 Bureau of Labor Statistics (BLS) data, and the 
hourly rate of $93.44 includes 100 percent more for benefits and 
overhead. Source for hourly rate: https://www.bls.gov/ooh/management/construction-managers.htm. Retrieved June 8, 2021.
    \2\ One of the goals of the SBA's Mentor-Prot[eacute]g[eacute] 
program is to promote the ability of small prot[eacute]g[eacute] 
businesses to successfully compete for government contracting 
opportunities. Prot[eacute]g[eacute] small businesses often form 
joint ventures with their mentors to pursue specific procurement 
requirements in order to gain experience and be able independently 
perform similar requirements in the future.
---------------------------------------------------------------------------

    Assuming half, or 900, of the small businesses with active 
agreements in the Mentor-Prot[eacute]g[eacute] program request a rating 
of past performance each year, the annual cost to the private sector of 
fulfilling these requests for past performance ratings would be $42,048 
plus de minimis costs. Assuming small businesses with 10 percent of 
24,000 subcontracting plans at the prime contract level, in addition to 
those in the Mentor-Prot[eacute]g[eacute] program, request a rating of 
past performance each year, the annual cost to the private sector of 
fulfilling these requests is $112,128. Assuming each of the 2,082 
commercial plans has two to four subcontracts, and half of the total 
subcontracts represents small business that would request a past 
performance rating each year, then the annual cost to the private 
sector of fulfilling these requests would be $145,907 plus de minimis 
costs. With these assumptions, total annual costs to the private sector 
of fulfilling requests is $300,083 plus de minimis costs.
    The requirement of small business offerors that have been members 
of joint ventures to identify the joint venture, identify the 
contract(s) of the joint venture, and describe duties or 
responsibilities as a joint venture member in order to receive 
consideration of past performance involves a resource cost to the small 
business offerors that compile the specified information. SBA notes 
that this cost would be voluntarily incurred by small businesses that 
assess the enhancement of Federal contracting opportunities from 
consideration of past performance to be of greater value than the 
incremental costs incurred.
    If more small businesses meet past performance standards and then 
submit proposals to contracting agencies, administrative costs to the 
Government may increase when a contracting agency reviews an increased 
number of proposals and past performance ratings. SBA cannot quantify 
these costs and notes that increased competition may offset these costs 
to the Government.
    The ability of more small businesses to demonstrate past 
performance may redistribute some Federal contracts from businesses 
that can demonstrate past performance in the baseline scenario that 
exists with no implementation of the pilot program. This redistribution 
would not affect overall economic activity. This final rule and its 
effects do not change the amount of dollars in all available Federal 
contracts. SBA cannot quantify the actual outcome of the gains and 
losses from the redistribution of contracts among different groups of 
small businesses that would result from an increased number of small 
businesses with the ability to demonstrate their experience and past 
performance, but it expects that competition from small businesses with 
newly established past performance ratings may displace some small 
businesses that had established ratings in Federal contracting 
opportunities. A partial offset of this transfer impact among small 
businesses may occur with increased numbers of contracts set aside for 
small businesses through the Rule of Two, which states there is a 
reasonable expectation that the contracting officer will obtain offers 
from at least two small businesses and award will be made at fair 
market price.
    3. What are the alternatives to this rule?
    This final rule implements specific statutory provisions in Section 
868 of the NDAA FY 2021. There are no alternatives that would meet the 
statutory requirements.

Executive Order 12988

    This final rule meets applicable standards set forth in sections 
3(a) and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to 
minimize litigation, eliminate ambiguity, and reduce burden. The action 
does not have retroactive or preemptive effect.

Executive Order 13132

    This final rule does not have federalism implications as defined in 
Executive Order 13132. It will not have substantial direct effects on 
the States, on the relationship between the National Government and the 
States, or on the distribution of power and responsibilities among the 
various levels of government, as specified in the Executive Order. As 
such it does not warrant the preparation of a Federalism Assessment.

[[Page 43738]]

Executive Order 13175

    This final rule does not have tribal implications under Executive 
Order 13175, Consultation and Coordination with Indian Tribal 
Governments, because it would not have a substantial direct effect on 
one or more Indian tribes, on the relationship between the Federal 
Government and Indian tribes, or on the distribution of power and 
responsibilities between the Federal Government and Indian tribes.

Executive Order 13563

    This Executive Order directs agencies to, among other things: (a) 
afford the public a meaningful opportunity to comment through the 
internet on proposed regulations, with a comment period that should 
generally consist of not less than 60 days; (b) provide for an ``open 
exchange'' of information among government officials, experts, 
stakeholders, and the public; and (c) seek the views of those who are 
likely to be affected by the rulemaking, even before issuing a notice 
of proposed rulemaking. As far as practicable or relevant, SBA 
considers these requirements in developing this rule, as discussed 
below.
    1. Did the agency use the best available techniques to quantify 
anticipated present and future costs when responding to E.O. 12866 
(e.g., identifying changing future compliance costs that might result 
from technological innovation or anticipated behavioral changes)?
    To the extent possible the Agency utilized the most recent data 
available in the Federal Procurement Data System-Next Generation, 
System for Award Management, and Electronic Subcontracting Reporting 
System.
    2. Public participation: Did the agency: (a) Afford the public a 
meaningful opportunity to comment through the internet on any proposed 
regulation, with a comment period that should generally consist of not 
less than 60 days; (b) provide for an ``open exchange'' of information 
among Government officials, experts, stakeholders, and the public; (c) 
provide timely online access to the rulemaking docket on 
Regulations.gov; and (d) seek the views of those who are likely to be 
affected by rulemaking, even before issuing a notice of proposed 
rulemaking?
    The proposed rule had a 60-day comment period and was posted on 
www.regulations.gov to allow the public to comment meaningfully on its 
provisions. SBA received comments from 15 commenters in response to the 
Proposed Rule. SBA has reviewed all the comments while drafting this 
final rule. SBA submitted the final rule to OMB for interagency review.
    3. Flexibility: Did the agency identify and consider regulatory 
approaches that reduce burdens and maintain flexibility and freedom of 
choice for the public?
    Yes, the final rule implements statutory provisions that provide 
new methods for small business government contractors to obtain past 
performance ratings to be used with offers on prime contracts with the 
Federal Government. The final rule updates the requirements for small 
business subcontracting plans to add a requirement for prime 
contractors to provide past performance to a small business, first-tier 
subcontractor when requested by the small business first-tier 
subcontractor. The final rule enhances the small business' ability to 
compete for Federal Government prime contracting opportunities.

Congressional Review Act

    Subtitle E of the Small Business Regulatory Enforcement Fairness 
Act of 1996 (codified at 5 U.S.C. 801-808), also known as the 
Congressional Review Act or CRA, generally provides that before a rule 
may take effect, the agency promulgating the rule must submit a rule 
report, which includes a copy of the rule, to each House of the 
Congress and to the Comptroller General of the United States. SBA will 
submit a report containing this rule and other required information to 
the U.S. Senate, the U.S. House of Representatives, and the Comptroller 
General of the United States. A major rule under the CRA cannot take 
effect until 60 days after it is published in the Federal Register. 
OMB's Office of Information and Regulatory Affairs has determined that 
this rule is not a ``major rule'' as defined by 5 U.S.C. 804(2).

Paperwork Reduction Act

    This rule updates the requirements for small business 
subcontracting plans to add a requirement for prime contractors to 
provide past performance ratings to a first-tier small business 
subcontractor when requested. A FAR rule implementing this requirement 
will account for the additional burden in its existing information 
collection and clearance for the information collection will be 
obtained by the GSA for the FAR Council.
    In this final rule, SBA provides for a small business concern to 
receive past performance consideration for the past performance of a 
joint venture of which the small business was a member. This does not 
require a new information collection because the burden is already 
accounted for when the Government contracting officer rates the joint 
venture entity serving as a prime contractor.

Regulatory Flexibility Act, 5 U.S.C. 601-612

    The Regulatory Flexibility Act (RFA), 5 U.S.C. 601, requires 
administrative agencies to consider the effect of their actions on 
small entities, small nonprofit enterprises, and small local 
governments. Pursuant to the RFA, when an agency issues a rulemaking, 
the agency must prepare a regulatory flexibility analysis which 
describes the impact of the rule on small entities. However, section 
605 of the RFA allows an agency to certify a rule, in lieu of preparing 
an analysis if the rulemaking is not expected to have a significant 
economic impact on a substantial number of small entities. The RFA 
defines ``small entity'' to include ``small businesses,'' ``small 
organization,'' and ``small governmental jurisdictions.''
    This final rule provides new methods for small business contractors 
to obtain past performance ratings to be used with offers on prime 
contracts. As such, the rule relates to small business concerns but 
would not affect ``small organizations'' or ``small governmental 
jurisdictions'' because those programs generally apply only to 
``business concerns'' as defined by SBA regulations; in other words, to 
small businesses organized for profit. ``Small organizations'' or 
``small governmental jurisdictions'' are non-profits or governmental 
entities and do not generally qualify as ``business concerns'' within 
the meaning of SBA's regulations.
    There are approximately 1,800 active SBA-approved Mentor-
Prot[eacute]g[eacute] agreements and SBA estimates that half, or 900, 
small businesses with active agreements would request a past 
performance rating from its prime contractor in a year. Of the 24,000 
subcontracting plans at the prime contract level in fiscal year 2015, 
SBA assumes for this analysis that up to 2,400 that are not in the 
Mentor-Prot[eacute]g[eacute] program may request a past performance 
rating each year. Additionally, in FY 2019 there were 2,082 commercial 
plans with small businesses. Assuming two to four subcontracts for each 
commercial plan, and half of them request a past performance rating, 
SBA estimates that up to 3,123 small businesses involved in commercial 
plans may request a past performance rating each year. The changes 
allow small business contractors to request a past performance rating 
from a prime contractor for whom they performed

[[Page 43739]]

work as a first-tier subcontractor or as a member of a joint venture. 
In addition, the final rule updates the requirements for small business 
subcontracting plans to add a responsibility for prime contractors to 
provide past performance of the first-tier when requested by that 
first-tier subcontractor.
    As a result, SBA does not believe the final rule would have a 
disparate impact on small businesses or would impose any additional 
significant costs. For the reasons discussed, SBA certifies that this 
final rule does not have a significant economic impact on a substantial 
number of small business concerns.

List of Subjects in 13 CFR Part 125

    Government contracts, Government procurement, Reporting and 
recordkeeping requirements, Small business subcontracting, Small 
businesses.

    For the reasons stated in the preamble, SBA amends 13 CFR part 125 
as follows:

PART 125--GOVERNMENT CONTRACTING PROGRAMS

0
1. The authority citation for part 125 continues to read as follows:

    Authority: 15 U.S.C. 632(p), (q), 634(b)(6), 637, 644, 657b, 
657(f), and 657r.


0
2. Amend Sec.  125.3 by:
0
a. Removing the word ``and'' at the end of paragraphs (c)(1)(ix) and 
(x);
0
b. Removing the period at the end of paragraph (c)(1)(xi) and adding 
``; and'' in its place; and
0
c. Adding paragraph (c)(1)(xii).
    The addition reads as follows:


Sec.  125.3  What types of subcontracting assistance are available to 
small businesses?

* * * * *
    (c) * * *
    (1) * * *
    (xii)(A) The prime contractor, upon request from a first-tier small 
business subcontractor, shall provide the subcontractor with a rating 
of the subcontractor's past performance. The prime contractor must 
provide the small business subcontractor the requested rating within 15 
calendar days of the request. The rating provided by the prime 
contractor to the first-tier small business subcontractor shall utilize 
the five-scale ratings system found in FAR 42.1503 (48 CFR 42.1503): 
Exceptional, Very Good, Satisfactory, Marginal, and Unsatisfactory. If 
the subcontractor will use the rating for an offer on a prime contract, 
it must include, at a minimum, the following evaluation factors in the 
requested rating:
    (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).
    (B) The requirement in paragraph (c)(1)(xii)(A) of this section is 
not subject to the flow-down in paragraph (c)(1)(x) of this section.
    (C) A first-tier small business subcontractor must make the request 
for a performance rating from the prime contractor within 30 calendar 
days after the completion of the period of performance for the prime 
contractor's contract with the Government. The prime contractor and the 
first-tier small business subcontractor may negotiate a later deadline 
for the request for a performance rating, but in no case can the prime 
contractor impose a deadline earlier than 30 calendar days after the 
completion of the period of performance for the prime contractor's 
contract with the Government.
    (D) The rating provided by the prime contractor to the first-tier 
small business subcontractor shall utilize the five-scale ratings 
system found in FAR 42.1503 (48 CFR 42.1503): Exceptional, Very Good, 
Satisfactory, Marginal, and Unsatisfactory.
* * * * *


Sec.  Sec.  125.11 through 125.14   [Redesignated as Sec. Sec.  125.12 
through 125.15]

0
3. Redesignate Sec. Sec.  125.11 through 125.14 as Sec. Sec.  125.12 
through 125.15.

0
4. Add new Sec.  125.11 before subpart A to read as follows:


Sec.  125.11  Past performance ratings for certain small business 
concerns.

    (a) General. In accordance with sections 15(e)(5) and 8(d)(17) of 
the Small Business Act, agencies are required to consider the past 
performance of certain small business offerors that have been members 
of joint ventures or have been first-tier subcontractors. The agencies 
shall consider the small business' past performance for the evaluated 
contract or order similarly to a prime-contract past performance.
    (b) Small business concerns that have been members of joint 
ventures--(1) Joint venture past performance. (i) When submitting an 
offer for a prime contract, a small business concern that has been a 
member of a joint venture may elect to use the experience and past 
performance of the joint venture (whether or not the other joint 
venture partners were small business concerns) where the small business 
does not independently demonstrate past performance necessary for 
award. The small business concern, when making such an election, shall:
    (A) Identify to the contracting officer the joint venture of which 
the small business concern is or was a member;
    (B) Identify the contract or contracts of the joint venture that 
the small business elects to use for its experience and past 
performance for the prime contract offer; and
    (C) Inform the contracting officer what duties and responsibilities 
the concern carried out or is carrying out as part of the joint 
venture.
    (ii) A small business cannot identify and use as its own experience 
and past performance work that was performed exclusively by other 
partners to the joint venture.
    (2) Evaluation. When evaluating the past performance of a small 
business concern that has submitted an offer on a prime contract, the 
contracting officer shall consider the joint venture past performance 
that the concern elected to use under paragraph (b)(1) of this section, 
giving due consideration to the information provided under paragraph 
(b)(1)(i)(C) of this section for the performance of the evaluated 
contract or order. This includes where the small business concern lacks 
a past performance rating as a prime contractor in the Contractor 
Performance Assessment Reporting System, or successor system used by 
the Federal Government to monitor or rate contractor past performance.
    (c) Small business concerns that have performed as first-tier 
subcontractors--(1) Responsibility of prime contractors. A small 
business concern may request a rating of its subcontractor past 
performance from the prime contractor for a contract on which the 
concern was a first-tier subcontractor and which included a 
subcontracting plan. The prime contractor shall provide the rating to 
the small business concern within 15 calendar days of the request. The 
rating provided by the prime contractor to the first-tier small 
business subcontractor shall utilize the five-scale ratings system 
found in FAR 42.1503 (48 CFR 42.1503): Exceptional, Very Good, 
Satisfactory, Marginal, and Unsatisfactory. The prime contractor must 
include, at a minimum, the following evaluation factors in the 
requested rating:
    (i) Technical (quality of product or service);
    (ii) Cost control (not applicable for firm-fixed-price or fixed-
price with economic price adjustment arrangements);

[[Page 43740]]

    (iii) Schedule/timeliness;
    (iv) Management or business relations; and
    (v) Other (as applicable).
    (2) Responsibility of first-tier small business subcontractors. A 
first-tier small business subcontractor must make the request for a 
performance rating from the prime contractor within 30 days after the 
completion of the period of performance for the prime contractor's 
contract with the Government. However, the prime contractor and the 
first-tier small business subcontractor may negotiate a later deadline 
for the request for a performance rating, but in no case can the prime 
contractor impose a deadline earlier than 30 days after the completion 
of the period of performance for the prime contractor's contract with 
the Government. The subcontractor may notify the contracting officer in 
the event that the prime contractor does not comply with its 
responsibility to submit a timely rating.
    (3) Joint ventures that performed as first-tier subcontractors. A 
small business member of a joint venture may request a past performance 
rating under paragraph (c)(1) of this section, where a joint venture 
performed as a first-tier subcontractor. The joint venture member may 
then submit the subcontractor past performance rating to a procuring 
agency in accordance with paragraph (b) of this section.
    (4) Evaluation. When evaluating the past performance of a small 
business concern that elected to use a rating for its offer on a prime 
contract, a contracting officer shall consider the concern's experience 
and rating of past performance as a first-tier subcontractor. This 
includes where the small business concern lacks a past performance 
rating as a prime contractor in the Contractor Performance Assessment 
Reporting System (CPARS), or successor system used by the Federal 
Government to monitor or rate contractor past performance.


Sec.  125.28  [Amended]

0
5. Amend Sec.  125.28 in paragraph (a) by removing ``Sec.  125.15(a)'' 
and adding ``Sec.  125.18(a)'' in its place.


Sec.  125.29  [Amended]

0
6. Amend Sec.  125.29 in paragraph (a) by removing ``Sec.  125.8'' and 
adding ``Sec.  125.12'' in its place.


Sec.  125.30  [Amended]

0
7. Amend Sec.  125.30 in paragraph (g)(4) by removing ``Sec.  125.8'' 
and adding ``Sec.  125.12'' in its place.

Isabella Casillas Guzman,
Administrator.
[FR Doc. 2022-15622 Filed 7-21-22; 8:45 am]
BILLING CODE 8026-09-P