Past Performance Ratings for Small Business Joint Venture Members and Small Business First-Tier Subcontractors, 64410-64416 [2021-25002]

Agencies

• SMALL BUSINESS ADMINISTRATION

[Federal Register Volume 86, Number 220 (Thursday, November 18, 2021)]
[Proposed Rules]
[Pages 64410-64416]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-25002]


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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: Proposed rule.

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SUMMARY: The Small Business Administration is proposing to amend its 
regulations to implement new provisions of the National Defense 
Authorization Act (NDAA) Fiscal Year 2021 (FY 2021). The proposed rule 
would 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. 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 
proposed rule updates the requirements for small business 
subcontracting plans to add a requirement for prime contractors to 
report past performance to a first-tier, small business subcontractor 
when requested by the small business that was a first-tier 
subcontractor.

DATES: Comments must be received on or before January 18, 2022.

ADDRESSES: You may submit comments, identified by RIN: 3245-AH71, by 
any of the following methods:
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments.
     Email: Donna Fudge, Procurement Analyst, Office of Policy 
Planning and Liaison, Small Business Administration, at 
[email protected].
    SBA will post all comments on https://www.regulations.gov. If you 
wish to submit confidential business information (CBI), as defined in 
the User Notice at https://www.regulations.gov, please submit the 
information to Donna Fudge, Small Business Administration at 
[email protected]. Highlight the information that you consider to be 
CBI and explain why you believe SBA should hold this information as 
confidential. SBA will review the information and make the final 
determination on whether it will publish the information.

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

[[Page 64411]]


SUPPLEMENTARY INFORMATION:

I. Background Information

    Section 868 of NDAA FY21, Public Law 116-283, addresses a common 
obstacle that small businesses may face when competing for prime 
Federal Government contracts: Possessing qualifying past performance. 
The proposed 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.
    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) directs 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) 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 other small business subcontractors. Under the 
section 868 program, 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 proposed rule 
would require the prime contractor on the prime contract to provide a 
rating of the small business's past performance with respect to that 
prime contract to the small business within 15 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's offer on a prime contract.
    Because section 868 replaced the prior pilot program in section 
8(d)(17), SBA will no longer pursue the pilot program as described in 
83 FR 17583. This proposed rule creates a separate mechanism for first-
tier subcontractors to obtain past performance ratings. The Federal 
Acquisition Regulation (FAR) rule implementing this requirement will 
account for the information collection, and clearance for the 
information collection will be obtained by the FAR Council.
    SBA requests comments on whether small business subcontractors have 
been negatively impacted in competing for prime contracts due to not 
having a past performance rating(s).
    SBA also seeks comment on whether to prescribe a time frame within 
which the subcontractor must make a request to the prime contractor for 
a rating under this proposed rule. If the prime contractor is currently 
in the period of performance for its contract, the prime contractor 
would be bound by its subcontracting plan to respond to the 
subcontractor's request. After the period of performance, however, the 
prime contractor would not necessarily be required to respond, because 
the contract would have ended. SBA seeks comment on whether to 
recommend that a subcontractor submit its request for a rating within 
the period of performance of the prime contractor's contract. If there 
might be a reasonable period of time after the physical completion of 
the prime contractor's contract in which the subcontractor should or 
must submit its request, SBA seeks comment on how to implement that 
time period into the prime contractor's Federal contract and what the 
time period might be. SBA also seeks comment on if the prime contractor 
and subcontractor might negotiate time periods and procedures by which 
the subcontractor can request a rating, and, if so, how to recognize 
that ability to negotiate in this regulatory prescription. In 
particular, should SBA recommend that the subcontractor negotiate the 
procedures for submitting a request and the time frames?

II. Section-by-Section Analysis

13 CFR 125.3

    This proposed rule would add a requirement to prime contractors' 
subcontracting plans. The subcontracting plan will require the prime 
contractor to provide a rating of a first-tier subcontractor's past 
performance within 15 days of the first-tier subcontractor's 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; and (e) Other (as applicable).

13 CFR 125.11

    This proposed rule renumbers 13 CFR 125.11 and subsequent sections 
to create a new Sec.  125.11. New Sec.  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 proposed 
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,

[[Page 64412]]

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 proposed rule would 
authorize 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 proposed 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 
proposed rule, the prime contractor must provide a rating to the 
requesting small business withinwith 15 days of the request.
    Under this proposed rule, 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; and (e) Other (as applicable). The 
proposed rule clarifies that one scenario where this applies is where 
the small business lacks a rating in the Contractor Performance 
Assessment Reporting System (CPARS). In that case, the agency shall 
consider the small business's subcontractor past performance rating as 
being equivalent to a CPARS rating.
    This proposed 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 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 proposing to change the reference from Sec.  125.15(a) to 
Sec.  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 proposed to change the reference from Sec.  125.8 to Sec.  
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 proposing to change the reference from Sec.  125.8 to Sec.  
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.

III. Compliance With Executive Orders 12866, 12988, 13132, 13175, 
13563, 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.
    1. Regulatory Impact Analysis: 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 FY21). 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 proposed 
rule is necessary to address that shortcoming in the evaluation of past 
performance and experience.
    The 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). Past 
performance is ``one indicator of an offeror's ability to perform the 
contract successfully.'' See FAR 15.305(a)(2). FAR 15.302(a)(2)(iv) 
provides 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. 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 proposed rule would implement 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 FY21 amended 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

[[Page 64413]]

within 15 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). This 
proposed rule would modify 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.
    The most significant benefit of this proposed rule to small 
businesses is that it would enhance of the small businesses' ability to 
compete in Federal contracting opportunities. The 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 15.302(a)(2)(iv) 
provides 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. 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 before 
proposal of applicable FAR rules.
    Costs of this proposed 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 1,461 small businesses 
have active SBA-approved Mentor-Prot[eacute]g[eacute] agreements.\2\ 
SBA also notes that in FY2019, the Electronic Subcontracting Reporting 
System (eSRS) listed 2,082 commercial plans with small businesses.
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    \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.
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    Assuming that half, or 731, 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 $34,152 
plus de minimis costs. Assuming that 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 $292,187 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 proposed 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

[[Page 64414]]

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 proposed rule would implement specific statutory provisions in 
Section 868 of the NDAA FY21. There are no alternatives that would meet 
the statutory requirements.

Executive Order 12988

    This proposed 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 proposed 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.

Executive Order 13175

    This proposed 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 will have a 60-day comment period and will be 
posted on www.regulations.gov to allow the public to comment 
meaningfully on its provisions.
    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 proposed 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 proposed rule would update the requirements for 
small business subcontracting plans to add a requirement for prime 
contractors to report past performance to a small business, first-tier 
subcontractor when requested by the small business first-tier 
subcontractor. The proposed rule will enhance the small business' 
ability to compete for Federal Government prime contracting 
opportunities.

Paperwork Reduction Act

    This rule, if adopted in final form, would update the requirements 
for small business subcontracting plans to add a requirement for prime 
contractors to report past performance to a small business, first-tier 
subcontractor when requested by the small business first-tier 
subcontractor. The FAR rule implementing this requirement will account 
for this information collection, and clearance for the information 
collection will be obtained by the FAR Council.
    In this proposed rule, SBA also proposes that 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. This does not require a new information collection because the 
Government contracting officer rates the joint venture entity.

Regulatory Flexibility Act

    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 proposed 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 1,431 active SBA-approved Mentor-
Prot[eacute]g[eacute] agreements and SBA estimates that half, or 731, 
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 FY2019 there were 2,082 commercial

[[Page 64415]]

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 proposed 
changes allow small business contractors to request a past performance 
rating from a prime contractor for whom they performed work as a first-
tier subcontractor or as a member of a joint venture. In addition, the 
proposed rule updates the requirements for small business 
subcontracting plans to add a responsibility for prime contractors to 
report past performance of the first-tier when requested by that first-
tier subcontractor.
    As a result, SBA does not believe the proposed rule would have a 
disparate impact on small businesses or would impose any additional 
significant costs. For the reasons discussed, SBA certifies that this 
proposed rule would 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 businesses, Small business 
subcontracting.

    For the reasons stated in the preamble, SBA proposes to amend 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, 657f, 
657q, 657r, and 657s; 38 U.S.C. 501 and 8127.

0
2. Amend Sec.  125.3 by:
0
a. Removing the word ``and'' at the ends of pargarphs (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 
days of the request. 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 flowdown in paragraph (c)(1)(x) of this section.
* * * * *


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 125.15.4. 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 completion 
of the performance of the evaluated contract or order.
    (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 days of the request. 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);
    (iii) Schedule/timeliness;
    (iv) Management or business relations; and
    (v) Other (as applicable).
    (2) Joint ventures that performed as first-tier subcontractors. A 
small business member of a joint venture may request a past performance 
rating under pararaph (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.
    (3) 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

[[Page 64416]]

and that is within three years (six for construction and architect-
engineering) of the completion of 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.


Sec.  125.28  [Amended]

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


Sec. Sec.  125.29 and 125.30  [Amended]

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6. In addition to the amendments set forth above, in 13 CFR part 125, 
remove ``Sec.  125.8'' and add ``Sec.  125.12'' in its place in the 
following places:
0
a. Sec.  125.29(a); and
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b. Sec.  125.30(g)(4).

Isabella Casillas Guzman,
Administrator.
[FR Doc. 2021-25002 Filed 11-17-21; 8:45 am]
BILLING CODE 8026-03-P