Question is from the agency's POV:

An agency has a solicitation. Offeror A submits a timely proposal. In its proposal, Offeror A lists 3 Past Performance references. The agency emails all 3 references a PP Questionnaire about Offeror A. All 3 references respond by returning the Questionnaire filled out. At this point, the agency CO realizes that 1 of the 3 references turns out to be a proposed subcontractor for the current solicitation by the agency.

What should the CO do?

Is this subcontractor being proposed by Offeror A or another offeror?

Yes, the subcontractor will work for Offeror A on the eventual contract from the agency's solicitation, if Offeror A is awarded the contract. So is this a conflict of interest situation? Should the PP evaluators simply give less weight to the PP info provided by the subcontractor? Or should the PP evaluators NOT rely on or include the subcontractor's answers on the PP Questionnaire at all?

I'd be inclined to exclude this particular questionnaire from the evaluation and proceed in accordance with FAR 15.306.

Navy,

your recommendation to enter into discussions could apply by including or excluding the PP from a once upon a time Sub. I would verify the POP, value, close-out and other factors to establish the PP write up by the subcontractor.

Further research to determine merits to the write up and conclusions should be included in PP rating if all can pass the sniff test. I see no reason to exclude if the once upon a time relationship existed and had a happy ending.

general,

I understood the situation to be that the subcontractor was not a "once-upon-a-time" subcontractor, but a subcontractor that was being proposed on the specific solicitation under which Offeror A had submitted a proposal.

And just to be clear, I did not recommend entering into discussions. Award without discussions is addressed in FAR 15.306., as well as with discussions. I can't tell from the minimal info provided by govt2310 whether discussions are necessary or not.

Assume that we are not yet at the stage in the acquisition process where we can decide whether discussions are needed are not.

Unless the solicitation forbade using a prospective sub as a reference, and unless you have any reason to doubt the veracity of the information that you've been given, then I say that you should consider the information as you would information from any other source.

Would it be "reasonable" for the agency to put into a future solicitation a restriction forbidding a prospective sub as a PP reference?

If you wish to avoid any appearance of conflict of interest, I don't see why you couldn't require independent references. What if someone teams up with another firm as a joint venture and they submit references for each other from another Joint ventured project? Don't limit the prohibition to subs...

Would it be "reasonable" for the agency to put into a future solicitation a restriction forbidding a prospective sub as a PP reference?

In my opinion, yes.

Ok. I am just thinking that a prospective offeror might argue that such a prohibition is unreasonable in that it is too restrictive.