SBA Requires Consideration of Some Subcontractors’ Capabilities, Experience & Past Performance

It’s commonly misunderstood that the FAR requires procuring agencies to consider the capabilities, past performance and experience of an offeror’s proposed subcontractors. Unfortunately, that’s just not true.

But now, as part of a comprehensive new final rule, the SBA will require agencies to consider the capabilities, past performance and experience of small business subcontractors in certain cases.

Many people believe that the FAR mandates consideration of a subcontractor’s qualifications, particularly past performance. Instead, for negotiated procurements, FAR 15.305(a)(2)(iii) says that agencies “should” consider the past performance of certain subcontractors–but “should” is not the same as “must.” Some other types of acquisitions, like FSS orders, don’t even go that far.

While procuring agencies are bound to follow the ground rules set forth in their solicitations, they have broad discretion over the significance and weight given a subcontractor’s qualifications. For small business primes, in particular, this can occasionally lead to unpleasant surprises: the prime expects to get high scores thanks to its subcontractors’ capabilities, only to find that the agency has a different view.

In a final rule published October 16, 2020, the SBA has taken some of the guesswork out of figuring out whether a procuring agency will consider a subcontractor’s qualifications. The final rule, which will be codified as 13 C.F.R. 125.2(g), says:

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 does not independently demonstrate capabilities and past performance necessary for award.

It’s an important change, especially because the rule requires the procuring agency to consider the subcontractors’ qualifications “as” the qualifications of the prime contractor. That said, it’s also important to note that the new rule has three important limits.

First, the rule only applies to the offer of a “small business prime.” Large business primes cannot avail themselves of the new rule.

Second, the rule covers a “team of small business subcontractors.” Unfortunately, SBA’s commentary accompanying the final rule didn’t delve any further into this issue, but it seems SBA’s intent is that the new rule apply only to small business subcontractors, not large business subcontractors.

Third, the subcontractor or subcontractors in question must be identified in the proposal. This, of course, is only logical: there is no good reason for a procuring agency to give an offeror evaluation credit for a mystery subcontractor.

Despite these limits, the new SBA regulation will undoubtedly prove beneficial to many small prime contractors. The new regulation takes effect November 16, 2020.

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