Major Past Performance Reforms: Will it Help or Hurt Government Contractors?

If you’ve been in government contracting long enough, you already know the truth about past performance:

It’s one of the biggest gatekeepers in federal acquisition.

Not because the idea is wrong—past performance should matter—but because the way it’s been applied for years has made it painfully hard for new, small, and innovative contractors to break through.

And now Congress is actively changing that system.

Over the last several NDAA cycles (FY2021 through FY2026), we’ve seen some of the most meaningful reforms to past performance evaluation in decades—especially for DoD. The intent behind these changes is straightforward: lower barriers to entry, broaden competition, and help the government access innovation faster.

But here’s what I want to focus on in this article:

These reforms will help a lot of contractors… and they can also hurt you badly if you don’t understand what the government is really doing under the hood.

So let’s talk about it the way I’d explain it in a real conversation with a contractor getting ready to bid.

The Past Performance “Catch-22” Is Real (and It’s Been Getting Contractors Stuck for Years)

For decades, the federal government has relied heavily on “Best Value” source selections. Under FAR Part 15, agencies often evaluate past performance as a core factor—because they want performance confidence, not just a low price.

That makes total sense in theory.

But in practice, it has created a brutal Catch-22:

• You can’t win without past performance

• You can’t get past performance without winning

• So you stay stuck… usually as a subcontractor or in low-dollar set-aside work

Even though FAR says a contractor with no past performance should receive a “Neutral” rating, we all know how that plays out when a team is making a tradeoff decision. Neutral often gets treated like a risk. And risk gets cut early.

This is one of the biggest reasons why so many capable contractors don’t scale.

And it’s exactly the wall Congress is trying to break down.

The Big Shift: DoD Must Consider Affiliate Past Performance (FY2024 NDAA)

From Discretionary to Mandatory: The "Shall" Mandate

One of the loudest changes in this whole reform wave came from the FY2024 NDAA—specifically Section 865.

Congress basically told DoD:

Stop treating small businesses like they’re starting from zero just because they’re structured under a corporate family.

The FY2024 reform requires DoD contracting officers to consider relevant past performance information provided for affiliates when evaluating a small business offerer in a competitive solicitation.

That single word—SHALL—changes everything.

This linguistic shift—from "may/should" to "shall"—has massive legal implications:

• Elimination of Arbitrary Exclusion: COs can no longer refuse to review citations simply because the UEI belongs to a sister company or parent.

• Standardization Across DoD: This harmonizes evaluations across military departments, preventing fragmentation.

• Empowerment of Corporate Families: Small businesses can pool collective experience of their corporate ecosystem.

This wasn’t written as a suggestion. It wasn’t written as “at the contracting officer’s discretion.” The intent was to remove the old pattern where agencies could ignore affiliate experience because “it’s another UEI” or “separate legal entity.”

Now, if you’re a small business and you have a parent company, sister company, holding company, teaming partner, or affiliate that has relevant work…

That experience is officially usable.

Why This Helps: Small Businesses Can Bid Faster, With More Credibility

This is where the opportunity gets exciting—especially for small business new entrants.

When I look at this reform through a practical lens, it clearly benefits:

• Startups entering federal markets for the first time

• New small businesses created under a corporate structure

• Joint ventures trying to break into prime positions

• Firms transitioning from subcontracting to priming

And this aligns with the way I framed it in the stakeholder impact chart:

Small Business New Entrants

How it helps: HIGHThey can bid immediately using affiliate, JV, teaming partner, subcontractor, or commercial experience—and reduce the number of “Neutral” ratings that hold them back.

That matters because the moment you remove “Neutral,” you change what the government sees:

• You look less risky

• You look more proven

• You look easier to justify in an award decision

If you’ve ever lost a deal because you couldn’t compete against an incumbent’s record, you already know how big this is.

The Catch: The “Meaningful Involvement” Test Is Still the Real Gatekeeper

Here’s the part contractors miss when they get too excited.

Yes—Congress told DoD to consider affiliate past performance.

But Congress did not erase GAO case law.

That means the GAO standard still applies: if you want credit for affiliate past performance, you must prove there’s a legitimate connection between that affiliate’s performance history and your ability to perform this new contract.

This is what’s commonly described as the “meaningful involvement” doctrine or the nexus test—meaning the government needs to see that the affiliate’s resources will actually contribute to successful performance.

So if your proposal sounds like:

“Our sister company did this amazing contract. Trust us.”

That’s not enough.

The government’s real question is:

“Okay… how does that past performance transfer to THIS contract outcome?”

This is why the chart shows that small business new entrants can also get hurt:

Small Business New Entrants

How it hurts: MODERATE

• Risk of affiliation findings if you over-rely on large affiliates

• High documentation burden

That documentation burden is real. This isn’t a “good story” problem. This is a proof problem.

The Hidden Risk: SBA Affiliation Problems and the “Over-Reliance” Trap

Another major risk—especially for small businesses—is that if you lean too heavily on a large affiliate to win contracts, you might unintentionally trigger SBA affiliation rule issues.

Affiliation rules are complex, and “control” can be determined by more than ownership. It can include management overlap and reliance on another firm for resources.

So the irony is this:

Congress wants small businesses to use affiliate experience to compete.

But if a small business uses that affiliate too heavily—especially a large business affiliate—it can raise red flags.

That’s why the strategy can’t be “borrow everything.” The strategy has to be “transfer what matters and document it correctly.”

Established Small Businesses: This Could Feel Like the Government Diluted Your Advantage

If you’re an established small business, you probably have mixed feelings about all this.

Because on one hand, the reforms help you too.

But on the other hand, it creates a new kind of competition that didn’t exist the same way before.

Established Small Businesses

How it helps: LOW

• You can leverage your own affiliates if structured properly

• Subcontractor/Teaming rating rights create new assets

How it hurts: HIGH

• Incumbency advantage diluted

• Competition from “shells” backed by powerful affiliates

Let me say it plainly:

If you spent 10 years building a name, building CPARS, building your agency reputation, and grinding your way into “trusted vendor status”…

It can feel like someone just opened a shortcut lane for competitors.

Now you’re not only competing against new small businesses.

You’re competing against new small businesses that may be backed by corporate resources, experienced personnel, proven systems, and mature infrastructure.

That changes the landscape.

The old advantage used to be, “We’ve done it before.”

Now the advantage is shifting toward, “We can prove we can perform—no matter how we’re structured.”

Large Primes: This Might Become a Compliance Problem (Not a Competitive One)

Most people assume large primes will always be winners in regulatory changes.

But I don’t think that’s automatically true here.

Because while large primes can benefit strategically—especially if they have small business subsidiaries—they also face increasing administrative and compliance burdens as the reforms expand.

Large Prime Contractors

How it helps: MODERATE

• Can acquire or boost small business subsidiaries with corporate resources

How it hurts: HIGH

• Massive compliance burden to rate subcontractors

• Liability for meaningful involvement failures

And this is not theoretical.

The reforms going back to FY2021 created new past performance dynamics for subcontractors, including statutory rights for certain small business first-tier subs to request performance ratings.

When you combine that with the increasing scrutiny around “meaningful involvement,” it means primes now have a new kind of operational risk:

You can’t just name subs to win and then minimize them later.

If you propose meaningful involvement, you need meaningful involvement.

Otherwise, you’re exposing the award to protest risk and opening yourself up to performance and compliance issues.

Commercial / Nontraditional Companies: Congress Is Trying to Bring You In

This is one of the most important future-facing themes in the entire reform movement.

DoD wants innovation. It wants speed. It wants commercial technology. And it wants new entrants into the Defense Industrial Base.

The FY2026 NDAA pushes this even further by expanding acceptance of commercial or non-government past performance and encouraging alternative evaluation methods, including demonstrations and technology testing.

Commercial / Nontraditional Firms

How it helps: HIGH

• Commercial-first mandate and demonstrations lower barriers

• “Price history” style simplifications can reduce friction

How it hurts: MODERATE

• Reference validation requirements

• Uneven adoption across DoD components

And this last point is key.

Even if Congress mandates change, adoption won’t be uniform across the entire DoD enterprise overnight.

Some offices will embrace commercial past performance fast.

Other offices will keep acting like CPARS is the only evidence that matters.

So commercial firms will likely face a transition period where they have to fight harder for acceptance depending on the buyer.

Past Performance Is Becoming Transferable (If You Structure and Document It Right)

This is the biggest mindset shift I want contractors to walk away with:

Past performance used to be treated like something only the contract holder owned.

Now, Congress is pushing past performance to become something that can be pooled, transferred, shared, and validated across a broader set of structures:

• affiliates

• joint ventures

• subcontractors/teams

• key personnel experience

• commercial past performance

The government is trying to modernize the reality of how business works.

But the tradeoff is this:

The era of “trust me” past performance is ending.

The era of “prove it and document it” past performance has begun.

My Practical Suggestions: How I Would Play This If I Were Competing Today

If I were competing in this environment right now—especially as a small business trying to scale—I’d treat these reforms like an opportunity window.

But I’d also treat them like a compliance risk if handled sloppily.

Here are my practical suggestions.

1) Inventory Your Full Experience Ecosystem

This isn’t just about your CPARS anymore.

I would inventory relevant experience across:

• Affiliates

• JVs

• Teaming partners

• Key personnel past contracts

• Relevant subcontract work

• Commercial projects that map to government outcomes

Then I’d build a structured library I can pull from quickly when a solicitation drops.

Because speed matters. And relevance matters even more.

2) Build Your “Meaningful Involvement” Proof Before You Bid

If you’re citing affiliate or teaming partner past performance, don’t wait until the proposal is due to figure out how you’ll prove transfer.

Your proposal needs to clearly show the resource transfer:

• What people are transferring

• What tools or systems are transferring

• What processes are transferring

• What the affiliate or partner is actually doing in performance

This is not fluff writing.

This is what protects you from losing in evaluation or getting knocked out in a protest.

The reforms don’t remove the standard.

They raise the standard—because now more people can play.

3) Treat Subcontractor Past Performance Like a Growth Asset

For years, subcontractors have done the work but had limited visibility inside government evaluation systems.

That’s changing.

As these reforms continue, subcontract performance recognition becomes a real pathway to building confidence—even before you become a consistent prime.

If you’re a small business subcontractor, I’d stop thinking:

“I just need a prime to carry me.”

And start thinking:

“How do I capture proof of performance so I can prime the next one?”

So… Will These Reforms Help or Hurt Government Contractors?

My answer is simple:

Both, it will help and hurt, depending on a few factors.

These reforms will help contractors who are ready to move fast, structure smart, and document clearly.

They will hurt contractors who rely on incumbency comfort, vague narratives, or past performance writeups that don’t prove operational transfer.

Based on the combined NDAA reforms, the biggest winners will likely be:

• small businesses that can show clear transfer of affiliate or partner capabilities

• contractors that build proof-based performance narratives instead of lists

• commercial firms that can validate outcomes and demonstrate capability

• teams that are ready to compete in evaluation models beyond CPARS

And the most at-risk groups will likely be:

• incumbents relying on history instead of disciplined execution

• contractors citing affiliates without documenting meaningful involvement

• primes that don’t operationalize subcontractor rating processes

• firms that treat past performance as an admin requirement instead of a strategic asset

Final Thought: Congress Opened the Door—But You Still Have to Walk Through It Correctly

Congress didn’t eliminate past performance.

They modernized it.

They made it more inclusive and more flexible so DoD can access capability faster—especially during a period where national security priorities demand speed, innovation, and resilience across the defense industrial base.

But they also increased the proof requirement.

So the new game isn’t simply:

“Do you have past performance?”

The new game is:

“Can you prove you can perform—using documented, defensible, transferable experience—regardless of where it came from?”

And if you build your strategy around that reality, these reforms won’t be a threat.

They’ll be one of the biggest growth opportunities we’ve seen in years.

If you want my full White Paper on this topic with appendices, use this link to download the full research document.

https://drive.google.com/file/d/1c1xGljj5mOtWjMv6PtHdFSvDj7UeM4AW/view?usp=sharing 

ABOUT THE AUTHOR: 

Abraham Xiong is a technologist, government contracting expert, entrepreneur, and founder of www.Govafy.com. He’s passionate about helping businesses compete smarter in federal contracting and enjoys sharing ideas through articles, videos, trainings, and social communities. Outside of work, you’ll usually find him playing pickleball or fishing.

Learn more: www.abrahamxiong.com