Federal government agencies have traditionally used some form of past performance review (i.e., references of an offeror's performance record with other government and non-government customers) as a part of the competitive evaluation process. In federal government contracting, past performance was often one of several key measures of an offeror's ability to provide the government with quality services.
In an era of procurement reform, and considering the government's sweeping changes in the way it procures information technology, past performance is rapidly becoming the predominant non-cost evaluation factor.
In 1994, as part of the Federal Acquisition Streamlining Act, or FASA, Congress established the use of past performance as a routine contract award evaluation factor. This basic principle has been implemented in the Federal Acquisition Regulations, or FAR, which require past performance ratings as one of two mandatory evaluation criteria (in addition to cost/price) for most competitively negotiated procurements. Factors that a procuring agency looks for in assessing past performance include the quality of the product or service provided in previous contracts, timeliness of performance, cost control and customer satisfaction.
The Office of Federal Procurement Policy, which implements the president's agenda on federal procurement reform, has proposed that, at minimum, past performance should be rated at 25 percent or more of the total award evaluation. It also recommended that it should be at least equal in significance to any other non-cost evaluation factor, such as technical and management abilities.
The FAR had originally envisioned that past performance would be evaluated for all solicitations issued on or after July 1, 1997, on contracts expected to exceed $500,000 in value, and the Defense Department had even considered accelerating that date by 18 months. But the DoD has since reconsidered its position in light of a recent government-sponsored study which criticized the effectiveness of past performance reviews, especially on smaller-dollar contracts. As a result, the government has suspended, at least temporarily, the use of past performance evaluations on contracts below $1 million.
The action reflects concerns expressed by DoD regarding the amount and type of information that should be collected and on the cost effectiveness of collecting and using past performance data on smaller-dollar contracts. One of the key concerns of both the government and industry is that procuring agencies are not universally or consistently applying the rules governing evaluations of past performance. Obviously, past performance evaluations are experiencing some growing pains in the ever-evolving government procurement process.
Use of past performance evaluations in government contracting makes good business sense, but also has its drawbacks, some of which could kill a contract award, or a contractor for that matter. For example, an agency may obtain inaccurate information that negatively impacts a contractor's past performance rating or may fail entirely to look at legitimate mitigating factors even if the contractor had prior performance problems.
In addition, the FAR requires that firms lacking any "relevant" contracting history receive a neutral past performance rating. Yet, because the term "neutral" is not defined in the regulations, an offeror with a favorable past performance history may unfairly be selected over one with no past performance history even if the lesser-experienced contractor has a better proposal.
Another danger, especially to small companies having only a handful of contracts, is that a single negative reference, justified or not, which is passed from agency to agency may result in a company essentially being de facto debarred from doing business with the government. Such an albatross could plague even those contractors who otherwise have an excellent performance history.
A contractor can assure its best chances of receiving favorable past performance evaluations by providing the most current and accurate past performance data in an initial proposal, even if the information may be available to the agency by other sources. It should never be assumed that the procuring agency will have the full story on an offeror's performance record.
If a problem arose in a prior contract, it is always wise to include explanatory information that may pre-empt a negative rating. It would also be wise to participate in an agency's review of contract performance, either during the contract period or when the agency issues its post-completion "report card." Such agency evaluations are the most common sources of past performance data, and their proper use could mean the difference between winning and losing the next competition.
In addition, procuring agencies are now looking at the performance histories of subcontractors that team with companies on larger prime contracts. Thus, prime contractors should assess whether a subcontractor or other teaming partner has a good contracting record. A subcontractor's poor performance record can easily reflect negatively on a prime contractor's past performance rating and vice versa.
James C. Fontana is counsel to Reed Smith Shaw & McClay in McLean, Va., and a member of the firm's Government Contracts and Export Compliance Group, as well as its Technology Law Group. Fontana was previously senior counsel to BDM International Inc. He can be reached at email@example.com.