INFOTECH AND THE LAW

Corporate consolidation has been a defining feature of the federal market over the past 10 years. Over the same period, past performance has become a prominent evaluation factor in all negotiated procurements.The combination of these developments with the inevitable movement of employees within the marketplace has created interesting questions regarding the "ownership" of a company's past performance.For example, when can the performance of one business unit within a corporation be attributed to another unit of the same corporation? How is past performance to be evaluated when a company's key employees have transferred to a competitor?The first step in answering such questions, of course, is to review the solicitation. Good solicitations explain the specific process by which an agency will evaluate past performance. In fact, solicitations sometimes state precisely how an agency plans to evaluate the past performance of affiliates, team members and key employees.In the absence of such guidance, however, companies should look to rules that have developed in the context of bid protests.For example, with regard to affiliates' past performance, the general rule is that an agency cannot attribute the performance of one corporate affiliate to another based solely on the fact of an affiliation. Rather, an agency must consider the nature and extent of the relationship between the two affiliates. In particular, it should focus on whether the work force, management, facilities or other resources of one affiliate may affect contract performance by the other.It is also important for an agency to verify the relationship between two affiliates before attributing the past performance of one to the other. Only if the exact nature of a corporate relationship is known can the agency make a meaningful, informed decision regarding whether attribution is appropriate.In a lead case illustrating these principles, the comptroller general sustained a protest in which an agency downgraded an offerer's proposal on the basis of an affiliate's negative past performance. In that case, the comptroller general found that the agency lacked sufficient information on whether the affiliate would actually be involved in contract performance.Interestingly, the comptroller general reached this conclusion despite the fact that the offerer had not only mentioned the experience of the affiliate in its proposal, but had actually listed certain of the affiliate's contracts in the past performance section of the proposal.Warning that such representations are essentially self-serving, the comptroller general held that an agency cannot simply accept an offerer's representation that the performance of an affiliate, positive or negative, should be attributed to that offerer. Rather, the agency must determine that the affiliate has "some actual or potential relationship to contract performance."A related issue arises when key employees of one company transfer to a competitor. Who gets credit for the excellent performance of those employees, the old company or the new?The comptroller general recently faced this situation in a case where three key employees had migrated from an existing source to an aspiring source, and the two companies then met in a closely contested procurement. The agency rated the existing source's past performance as "excellent," but rated the aspiring source, where the key employees now worked, as "good."The aspiring source protested, claiming that the agency failed to account for the migration of personnel in the evaluation of past performance. The comptroller general disagreed and found that the agency credited the aspiring source for the favorable past performance of its key employees, but reasonably concluded that there were other factors that prevented the aspiring source from receiving an excellent rating. Similarly, the agency expressly considered downgrading the existing source's excellent rating because of the departure of the key employees, but ultimately left the rating intact because the company had continued to perform successfully despite the loss of the key employees.Concluding that the evaluation reasonably considered and accounted for the migration of the key personnel, the comptroller general rejected the protest.As these cases demonstrate, contractors should be sensitive to the manner in which they and their competitors take credit for the past performance of affiliates and former employees. In certain cases, proof of "ownership" may be required.