DoD Past Performance Is Getting a Reset in FY 2026—and Small Businesses Stand to Win

If you have ever felt stuck in the classic government contracting catch-22, you are not alone:

“We need DoD past performance to win DoD work… but we need to win DoD work to get DoD past performance.”

For years, that dynamic has been one of the biggest barriers to entry for small businesses and nontraditional defense contractors. It quietly tilts evaluations toward incumbents, even when a smaller firm has the right expertise, the right team, and a track record of delivering similar outcomes in the commercial world.

Congress just took a direct swing at that problem.

In the 2026 National Defense Authorization Act (S.1071, 119th Congress), lawmakers included a set of past performance changes that push the Department of Defense to broaden what “counts” and how it can be evaluated. The goal is straightforward: increase competition and reduce barriers that disproportionately hit small businesses.

The timeline matters, too. The NDAA was enacted on December 18, 2025, and DoD must issue the required guidance no later than December 18, 2026. In other words, by mid-December 2026, contracting teams across DoD should have clearer direction to open the door wider for companies that have proven performance, even if that performance happened outside the federal bubble.

Let’s break down what changed, why it matters, and how you can position your business to benefit.

Why Past Performance Has Been Such a Big Deal (and Such a Big Headache)

Past performance is one of the government’s main tools for reducing risk. It answers basic questions a contracting officer needs to justify an award:

• Have you done something like this before?
• Did you deliver on time and within scope?
• Were you responsive, professional, and easy to work with?
• Did you manage quality, staffing, and compliance effectively?

In federal contracting, this is often captured in CPARS (Contractor Performance Assessment Reporting System) for certain contract types and thresholds. But CPARS is, by definition, government work. If you are newer to federal contracting, you may have limited CPARS history even if you have years of successful delivery in the commercial sector.

That gap has been one of the most frustrating “hidden walls” for small businesses: you can be fully capable, but evaluations may not reflect it if the scoring model strongly favors prior federal or DoD references.

What Congress Mandated in the FY 2026 NDAA

The key change appears in Section 824, titled “Increasing Competition in Defense Contracting.” The past performance piece is in subsection (a), “Uses of Past Performance.”

Here is what Congress directed DoD to do.

1) Accept a Wider Range of Past Performance, Including Commercial and Non-Government Projects

DoD must issue guidance on when it should accept past performance from a broader range of projects, specifically including commercial or non-government projects as relevant past performance for awarding contracts or other agreements.

That is a major signal. It does not eliminate past performance. It does not guarantee that every solicitation will treat commercial work the same as federal work. But it does require DoD to give its acquisition workforce practical guidance on when and how to treat commercial success as valid evidence of capability.

This is particularly important for:

• Companies entering DoD for the first time
• High-growth firms with strong commercial delivery history
• Emerging tech providers working in fast-moving areas where government precedent is limited
• Small businesses that have performed similar work for regulated industries (healthcare, finance, energy) but not for DoD specifically

2) Create a Clear Way to Validate Non-Government References

DoD must also issue guidance on how it can validate commercial and non-government past performance references. The NDAA points to practical validation methods such as:

• Requiring an official from the referencing organization to attest to authenticity
• Requiring verifiable contact information for references

This matters because one reason agencies lean on CPARS is that it is standardized and internal. Commercial references can feel “messier” to validate. Congress is telling DoD to standardize the validation so contracting teams can rely on it confidently.

For contractors, the implication is simple: your commercial references may be more usable than ever, but you will need them packaged in a way that is easy to verify.

3) Use Alternative Evaluation Methods When Past Performance Is Not the Best Fit

The NDAA also directs DoD to provide guidance on using alternative evaluation methods, other than past performance, when the requirement has little precedent. The text calls out options like:

• Demonstrations
• Testing of technologies as part of the proposal process

This is one of the most exciting opportunities for small businesses, especially those offering innovative solutions or specialized capabilities. If you can demonstrate capability in a controlled, objective way, you reduce the advantage incumbents get from being “known.”

One Important Clarifier: This Guidance “Supplements, Not Supplants”

Congress explicitly states that the new guidance should supplement existing DoD policy and procedures for past performance and evaluation factors. Translation: this is not a total overhaul of the evaluation world overnight. It is an expansion and modernization designed to increase competition without abandoning risk management.

What These Changes Mean for Small Businesses in Practical Terms

Here is the big shift: your story is no longer limited to your federal history.

If you have real performance in the commercial market, especially with measurable results, you can position that work as relevant in a way DoD is being directed to accept more often.

Benefit #1: The “No Federal Past Performance” Problem Gets Softer

You may still be asked for federal past performance in certain procurements. But the door is opening wider for solicitations where commercial work can be deemed relevant, especially when:

• The requirement is new or evolving
• The market is more commercialized (IT, cyber, SaaS, cloud, AI)
• The government wants more competition
• DoD wants capability quickly and needs alternatives to incumbents

Benefit #2: Commercial Credibility Can Start Carrying Real Weight

If you have delivered for demanding commercial customers, think hospitals, banks, utilities, national retailers, major manufacturers, that performance often demonstrates the same things DoD cares about: reliability, responsiveness, security, quality management, and scalability.

The key is presenting it in a “government-readable” way:

• Scope and complexity
• Timelines and milestones
• Quantified outcomes (uptime, cost savings, throughput, incident reduction)
• Quality controls and customer satisfaction indicators
• Proof points that map directly to the solicitation

Benefit #3: Innovative Companies Can Compete on Proof, Not Legacy

Alternative evaluation methods like demos and testing can be a game-changer for:

• Cybersecurity providers
• Data analytics and AI solution firms
• Advanced manufacturing companies
• Drone/robotics or sensor technology vendors
• Specialized logistics or supply chain solutions

Instead of fighting an uphill battle against incumbents with deeper CPARS history, you may see more opportunities where the government says, in effect: “Show us what it can do.”

Concrete Examples of How This Could Play Out

Example 1: Cybersecurity Firm Moving from Commercial to DoD

A small cybersecurity firm has protected healthcare networks for five years and reduced ransomware incidents dramatically for multiple clients. Historically, they struggle because they lack DoD CPARS.

Under these NDAA-driven changes, DoD guidance could allow those commercial engagements to count as relevant past performance, provided the references are verifiable and properly documented.

Example 2: Manufacturing Company with No Federal Prime Awards

A small manufacturer has delivered high-tolerance components to aerospace and industrial customers, meeting strict QC and delivery requirements. A DoD solicitation for similar components could recognize that commercial delivery as relevant, even if the company has never been a prime on a federal contract.

Example 3: Emerging Tech with Few Comparable Federal References

A software company offers a newer capability, for example automated anomaly detection, that does not have a long history of federal use. Instead of defaulting to “who has done this before for DoD,” a procurement could lean into demonstrations and objective testing as part of proposal evaluation.

What You Should Do Now to Prepare (So You Are Ready When the Door Opens Wider)

These changes create opportunity, but only if you can support your claims with clean documentation. Here is a practical checklist you can start on now.

1) Build a “Commercial Past Performance Library”

Pick 3 to 6 projects that best demonstrate:

• Similar scope and complexity
• Similar customer environment (regulated, high security, time-sensitive)
• Outcomes you can quantify

Create one-page summaries for each:

• Customer name (or allowable anonymized identifier if required)
• Period of performance
• Dollar value or scale indicators
• Key tasks performed
• Measurable results
• Customer point of contact information (with permission)

2) Prepare References for Verification

Because DoD is being directed to validate non-government references, make it easy:

• Confirm who can speak on behalf of the customer
• Confirm email and phone
• Ask the customer contact if they can provide a simple written attestation if requested
• Make sure the reference understands they may be contacted

3) Translate Commercial Work into Government Language

This is where many capable firms miss the mark. It is not enough to say, “We did great work.”

You want your write-up to sound like it belongs in an evaluation:

• What was the requirement?
• What was the challenge?
• What approach did you use?
• What controls and processes ensured quality?
• What was delivered, and what changed as a result?

4) Get Ready for Demonstrations

If you sell a solution that can be demonstrated:

• Create a repeatable demo environment
• Document what you can prove objectively
• Prepare short use-case scripts aligned to likely DoD needs
• Make sure your team can execute the demo under time constraints

5) Stay Active, Not Passive

This is the moment to stay engaged:

• Watch for solicitations that emphasize innovation, prototypes, or commercial solutions
• Pursue teaming and subcontracting that can build federal performance while you leverage commercial credibility
• Keep your capability statement and SAM/SBS aligned to the exact outcomes you can prove

Why This Is a Great Time to Stay in the Game

The most important takeaway is the intent behind the law: Congress is pushing DoD to increase competition and reduce the “incumbent-only” gravity that has held back small and nontraditional firms.

That does not mean it will become easy overnight. But it does mean the acquisition system is being nudged toward something small businesses have argued for a long time: if you can prove capability, you should have a real shot, even if your proof comes from outside the federal marketplace.

If you have been discouraged, this is a strong reason to re-engage, refine your positioning, and push forward with a smarter strategy.

How FedBiz Access Helps You Turn These Changes Into Wins

Legislative changes create opportunity, but execution wins contracts.

FedBiz Access has 25 years of experience helping small businesses compete and win in the government marketplace. We help you translate policy shifts like these into practical moves: how to position your experience, how to present past performance in an evaluation-friendly way, how to target the right opportunities, and how to market to the right buyers at the right time.

If you want help building a past performance strategy that takes advantage of these DoD changes, especially if your strongest track record is commercial, reach out.

Call FedBiz Access: 844-628-8914 or book a complimentary consultation, and let’s map out the most direct path to turning your real-world performance into a stronger competitive position in 2026 and beyond.