Congress Orders DoD Past Performance Changes
The DoD will be required to implement the past performance changes by December 2026 with the goal of increasing competition.
Jan. 22, 2026
With the goal of increasing competition for Department of Defense contracts and expanding the DoD industrial base, Congress is directing that the DoD adopt three specific changes to how it uses past performance.
These changes, which are part of the 2026 National Defense Authorization Act, must be adopted no later than mid-December of this year. In this article, I examine the pending DoD past performance changes.
A Quick Initial Note
Before we get started, a quick initial note about the terminology I use in this article. As readers are undoubtedly aware, the President issued an Executive Order last year allowing the DoD to be called the Department of War. Under the Executive Order, both names--Department of Defense and Department of War--are permitted.
In this article, I use the term “Department of Defense” because that’s the term Congress uses in the 2026 NDAA.
Section 824 of the 2026 National Defense Authorization Act
One of the key government contracting focus areas of the 2026 NDAA is increasing competition and lowering industry barriers to serving DoD--particularly for small businesses and other non-traditional defense contractors.
To help achieve this goal, the bill, among other things, substantially reduces the number of contracts covered by the cost accounting standards, raises the prime contract threshold for requiring cost or pricing data, and directs the DoD to “make recommendations to identify and eliminate specific, unnecessary procedural barriers that disproportionately affect the ability of small business concerns and nontraditional defense contractors, to compete for contracts” with the DoD. In keeping with this theme, the 2026 NDAA also addresses how the DoD accepts and uses past performance.
Section 824 of the 2026 NDAA is called, simply enough, “INCREASING COMPETITION IN DEFENSE CONTRACTING.” Paragraph (a) of Section 824 establishes the following requirements:
(a) Uses of Past Performance.--(1) In general.--Not later than 1 year after the date of the enactment of this Act, the Secretary of Defense shall issue guidance, including examples and templates where appropriate, on--
(A) when the Department of Defense should accept past performance on a wider range of projects, such as a requirement without much precedent, in order to have increased competition among eligible firms with capability to perform a requirement, by including commercial or non-government projects as relevant past performance for the purposes of awarding contracts or other agreements;
(B) a means by which the Department may validate non-government past performance references, including by requiring an official of an entity providing past performance references to attest to their authenticity and by providing verifiable contact information for the references; and
(C) using alternative methods of evaluation other than past performance that may be appropriate for a requirement without much precedent, such as demonstrations and testing of technologies as part of the proposal process for contracts or other awards of the Department.
Section 824 clarifies that these new requirements are meant to supplement, not replace, existing policies and procedures:
(2) Supplement not supplant.--The guidance issued under paragraph (1) shall supplement existing Department of Defense policy and procedures for consideration of past performance and other evaluation factors and methods.
Section 824 is part of a continuing effort by Congress to help small businesses and other nontraditional defense contractors overcome what is often a major hurdle to doing business with the DoD--the lack of sufficient recent, relevant past performance to be truly competitive on certain acquisitions.
In the 2024 NDAA, Congress required DoD to consider the relevant past performance of a small business’s affiliates and in the 2019 NDAA, Congress directed the DoD to implement a rule requiring the consideration of the past performance of certain joint venture partners and first-tier subcontractors. Now Section 824 gets added to the mix.
The Potential Impacts of Section 824 of the 2026 NDAA
The full impact of Section 824 won’t be known until the DoD responds to the Congressional mandate, but I’m cautiously optimistic that Section 824, once implemented, will help more small businesses and nontraditional defense contractors enter the DoD marketplace. I’m specifically encouraged by two pieces of Section 824:
The potential for expanded acceptance and use of non-governmental past performance. In my experience, even contractors with a considerable amount of experience in their industries can wind up with “neutral” or middling past performance scores if their past performance is non-governmental. (Sometimes, as a matter of practice if not a black-and-white solicitation requirement, the highest past performance scores seem reserved not just for contractors with governmental experience, but experience with the specific agency in question). Making the jump from commercial contracts to government contracts will become easier if the chicken-and-egg conundrum that is obtaining governmental past performance is less potent.
The possibility of using alternative methods of demonstrating capability, such as product tests and demonstrations. I’ve seen my share of solicitations where, arguably, there was not “much precedent” for the specific work in question but past performance still played a critical role in the scoring. I’ll be curious to see how this requirement is implemented, as it could potentially be quite impactful--or not, if “without much precedent” is so narrowly defined that it doesn’t apply to many acquisitions.
A Few Final Words
According to a Defense Logistics Agency study in 2023, the small business defense industrial base shrank by 40% in the preceding decade. SBA’s most recent small business scorecard, for Fiscal Year 2024, shows that the downward trend continues.
Obviously, there are many factors behind the shrinking small business industrial base, which is not just a DoD phenomenon. That said, in my experience, the role that past performance plays in acquisitions can sometimes serve as something of a gatekeeper, making it more difficult for companies of all sizes to make the jump from commercial to federal work.
The 2026 NDAA became law on December 18, 2025. That means that DoD’s one-year clock is ticking with a deadline of December 18, 2026 to implement the changes required by Section 824.
I’ll keep my eyes peeled.
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