The Department of Defense finally issued its rule to implement Section 865 of the National Defense Authorization Act (NDAA) for fiscal year 2024 (Pub. L. 118-31). The act required the DoD to issue a regulation by July 2024 that mandated the DoD must consider affiliate past performance of small business concerns in procurements. The changes to 48 CFR 215.305 are bolded and underlined below:

215.305 Proposal evaluation.

(a) (2) (A) Past performance evaluation. When a past performance evaluation is required by FAR 15.304, and the solicitation includes the clause at FAR 52.219-8, Utilization of Small Business Concerns, the evaluation factors shall include the past performance of offerors in complying with requirements of that clause. When a past performance evaluation is required by FAR 15.304, and the solicitation includes the clause at FAR 52.219-9, Small Business Subcontracting Plan, the evaluation factors shall include the past performance of offerors in complying with requirements of that clause.

(B) Contracting officers shall consider an offeror’s failure to make a good faith effort to comply with its comprehensive subcontracting plan under the Test Program described at 219.702-70 as part of the evaluation of the past performance.

(C) When evaluating the past performance of an offeror that is a small business concern in response to a competitive solicitation, contracting officers shall consider relevant past performance information provided for affiliates of the offeror.

Particularly worthy of note:

• • The requirement is mandatory: agencies “shall consider relevant past performance information provided for affiliates of the offeror…”
  • The regulation does not define what is “relevant past performance.”

In the explanation that accompanies the final rule, the DoD states:

When past performance will be evaluated in a source selection, contracting officers already request offerors to submit past performance information. This rule will allow offerors to provide past performance information for an affiliate company within that submission, and the Government would consider those submissions during the existing evaluation process.

The DoD has not provided any specific regulatory guidance as to how agencies must apply affiliate past performance going forward, but has stated only that the “existing evaluation process” will be used. Therefore, it remains to be seen whether contracting officers will attempt to limit the use of affiliate past performance through restrictions on what they view as “relevant past performance” or will take a more expansive approach.

Alaska Native Corporations, Tribes, and NHOs should keep in mind that their exemption from affiliation under SBA rules is relevant for the purpose of determining their size under the SBA’s size standards. That affiliation exemption under SBA’s regulations would not apply to this new DFAR regulation. The FARs and DFARs carry their own definition of affiliation—48 CFR 2.101 “Affiliates”—that would apply and permit Alaska Native Corporations, Tribes, and NHOs to rely on the past performance of their affiliates.

The rule is effective November 15, 2024.

This article summarizes aspects of the law. This article does not constitute legal advice. For legal advice for your situation, you should contact an attorney.