Late last year, the U.S. Small Business Administration (SBA) issued a lengthy final rule that made changes to various SBA regulations. While the SBA highlighted its changes to the Mentor-Protégé program, the rule will have wide-ranging impacts on small business contracting, including the treatment of a small business offeror’s capabilities, past performance, and experience.
Prior to the issuance of the SBA’s new rule, FAR 15.305(a)(2)(iii) stated that an agency “should” consider the past performance of key subcontractors, but the use of “should” left agencies with broad discretion to consider (or not consider) subcontractor past performance. In many cases, agencies still issued solicitations that explicitly precluded consideration of subcontractor experience. Such limitations prevented small business offerors from using key subcontractors or a teaming arrangement to establish the required experience and past performance.
The SBA’s recent changes provide small business contractors with a new tool to establish the required experience and past performance, and a potential advantage when competing for new contracts. Specifically, the new rule adds a paragraph to the SBA’s regulations (to be codified at 13 C.F.R. 125.2(g)) that states:
When an offer of a small business prime contractor includes a proposed team of small business subcontractors and specifically identifies the first-tier subcontractor(s) in the proposal, the head of the agency must consider the capabilities, past performance, and experience of each first-tier subcontractor that is part of the team as the capabilities, past performance, and experience of the small business prime contractor if the capabilities, past performance, and experience of the small business prime do not independently demonstrate capabilities and past performance necessary for award.
Thus, an agency must consider the capabilities, experience, and past performance of first tier subcontractors as the experience of the prime contractor where:
- The prime contractor is a small business;
- The prime contractor proposes a “team” of small business subcontractors that are identified in the proposal; and
- The prime contractor does not independently demonstrate the capabilities and past performance necessary for award.
Significantly, the new regulation does not limit the use of subcontractor experience to small business set-asides. Moreover, there is no indication that a large business will similarly be able to rely on subcontractor experience.
Small business contractors should keep these changes in mind when reviewing solicitations, and be mindful that a bid protest challenging a solicitation must be filed prior to the deadline for proposals. Our team has already used this new rule to secure revisions to a solicitation to require consideration of small business subcontractor experience and allow for teaming arrangements.
Our government contracting team is available to assist you with questions on these new regulations and any other government contracting matters.