Among the radical changes in federal solicitations conducted through evaluation of competitive proposals is increased emphasis on the use of past performance as an evaluation factor. Traditionally, past performance has been an element of the responsibility determination required by 41 U.S.C. § 253b(c). But for some fifteen years, responsibility criteria have been fair game for use as evaluation factors. Delta Data Systems Corp. v. Webster, 744 F.2d 197, 201 (D.C. Cir. 1984).
Today past performance, together with evaluated price/cost, is one of only two statutorily-mandated evaluation factors. Here we'll examine a new emphasis on past performance as an evaluation factor, and we'll consider problems that may be encountered pending establishment of agency past performance evaluation and reporting systems.
When it passed the Federal Acquisition Streamlining Act of 1994 (FASA), Congress included two legislative findings:
(A) Past contract performance is one of the relevant factors that a contracting officer of an executive agency should consider in awarding a contract.
(B) It is appropriate for a contracting officer to consider past performance of an offeror as an indicator of the likelihood that the contractor will successfully perform.
Pub. L. No. 103-355, § 1091(b)(1), 108 Stat. 3272 (1994).
Congress then enacted into law provisions requiring the Office of Federal Procurement Policy (OFPP) to prescribe guidance for use of past performance as an evaluation factor, including “standards for evaluating past performance with respect to cost (when appropriate), schedule, compliance with technical or functional specifications, and other relevant factors that facilitate consistent and fair evaluation . . . .” 41 U.S.C. § 405(j)(1)(A). Congress required that offerors be “afforded an opportunity to submit relevant information on past contract performance,” 41 U.S.C. § 405(j)(1)(C)(i), and it required that “such information submitted by offerors [be] considered,” 41 U.S.C. § 405(j)(1)(C)(ii). With respect to offerors about which there is no information on past contract performance, or when past contract performance information is unavailable, Congress required that “the offeror may not be evaluated favorably or unfavorably on the factor of past contract performance.” 41 U.S.C. § 405(j)(2). In addition, Congress mandated that OFPP prescribe policies for collecting and maintaining information on past contract performance. 41 U.S.C. § 405(j)(1)(B).
In May 1995, OFPP issued an interim edition of its guide to BEST PRACTICES IN PAST PERFORMANCE. Herein OFPP suggests that comparative evaluation of past performance is a better method to make “best value” selection decisions, that current evaluation practices allow offerors “that can write outstanding proposals, but may not perform accordingly, to continue to win' contracts when other competing offerors have significantly better performance records, and therefore, offer a higher probability of meeting contract requirements.” OFPP recognizes the significant effort required to make a selection decision through comparisons of relative strengths and weaknesses as discerned from evaluation of detailed technical and management proposals, and it takes as a premise that “[m]uch and, at times, all of this often voluminous risk assessment information can be eliminated by evaluating how well the offerors performed in the past on similar contracts.”
OFPP has discharged its FASA obligations in Federal Acquisition Regulation (FAR) 15.605(b)(1)(ii), which requires that past performance be an evaluation factor in all competitively negotiated acquisitions expected to exceed $100,000; in FAR 15.604(b), which tasks agency technical officials with responsibility for developing past performance selection criteria; in FAR 15.610(c)(6), which requires that when discussions are conducted, offerors be provided “an opportunity to discuss past performance information obtained from references on which the offeror had not had a previous opportunity to comment;” and in FAR 15.1004(e)(4), which requires that debriefings shall not reveal the “names of individuals providing reference information about an offeror's past performance.” The remainder of OFPP's obligations is discharged in FAR subpart 42.15, which establishes procedures for agency past performance evaluation and reporting systems.
Generally, FAR 42.1502(a) requires an evaluation of contractor performance for each contract over $100,000 at the time of contract completion, and on an interim basis for contracts whose term exceeds one year. FAR 42.1503(a) suggests that agency procedures should require comments from the contracting office, the technical office, and from end users. Contractors are required by FAR 42.1503(b) to be afforded a chance to comment on proposed evaluations, and agencies are to provide for consideration of disagreements at a level above the contracting officer.
Decisions resulting from the review are to be made in writing, and OFPP's PAST PERFORMANCE guide says that agencies should issue decisions within fifteen working days of receipt of the contractor's rebuttal. The evaluation, contractor response, and any decision are to be marked as “source selection information” and retained for a period not to exceed three years after completion of contract performance, FAR 42.1503(e). Agencies are required to share past performance information when requested for evaluation purposes; information may be provided through interview and/or sending the records to the requesting source selection official(s). FAR 42.1503(c).
The implementation schedule requires that past performance be used as an evaluation factor in all solicitations exceeding $1 million not later than July 1, 1995, in all solicitations exceeding $500,000 not later than July 1, 1997, and in all solicitations exceeding $100,000 not later than January 1, 1999. FAR 15.605(b)(1)(ii). Agencies are required to evaluate contractor performance for each contract exceeding $1 million beginning July 1, 1995; for each contract exceeding $500,000 beginning July 1, 1996; and for each contract exceeding $100,000 beginning January 1, 1998. FAR 42.1502(a).
OFPP's PAST PERFORMANCE guide offers suggestions for using past performance as an evaluation factor. In it, OFPP recommends that to avoid losing its impact, past performance should be considered as a stand-alone factor, and not integrated into other factors. OFPP opines that subfactors should be tailored to key performance criteria in the statement of work, and that subfactors should focus on just what discriminates a “good” performer from a “poor” performer for the type of goods and/or services to be delivered. The guide suggests six generic subfactors: quality of product or service, timeliness of performance, cost control, business practices, end user satisfaction, and key personnel past performance.
Quality is to be evaluated by just how the contractor complied with contract requirements and whether deliverables conformed to good workmanship standards. Timeliness concerns adherence to contract schedules and contractor responsiveness to technical direction. Cost control envisions performance objectives beyond those contained in cost-type contracts. These include whether the contractor operated at or below budget, submitted reasonably priced adjustment proposals, and provided current, accurate, and complete billings. Business practices are meant to measure just how well the contractor worked with the contracting officer and agency technical representatives. End user satisfaction measures the results of contract performance from the perspective of the persons to whom goods or services were delivered. And key personnel past performance looks at the record of the persons selected to manage contract performance and to perform key aspects of the contract work.
The PAST PERFORMANCE guide properly abjures use of past performance as a minimum mandatory requirement, i.e., one that establishes the field of competition and its parameters as a “go/no-go” proposition: those vendors who qualify can compete, and those vendors who do not are excluded. Past performance, a traditional responsibility factor within the province of the Small Business Administration under 15 U.S.C. § 637(b)(7), may be used as a technical evaluation factor only if there is a comparative evaluation of the competing proposals, i.e., only if the proposals are rated on a scale compared with each other. Docusort, Inc., B-254852, Jan. 25, 1994, 94-1 CPD ¶ 38, at 6.
OFPP's PAST PERFORMANCE guide suggests that to “be meaningful in the source selection process and to ensure that contractors are aware that actual contract performance will be a significant factor in future awards,” past performance should be weighted at least equal in significance to any other non-cost evaluation factor. OFPP points out that past performance could be the only non-cost factor in acquisitions where the contract that is proposed is similar to contracts performed in the past by many contractors, and that doing so would save proposal preparation expenses and agency evaluation resources.
Past performance on commercial or state or foreign government contracts can be rated lower than past performance on federal contracts if, as the PAST PERFORMANCE guide suggests, a reason for this can be articulated, and if this is announced in the solicitation. When agency past performance reporting systems are established, information will be retained for three years; thus the PAST PERFORMANCE guide says that agencies should ask for past performance references only on current contracts and on contracts completed within the last three years. Within this period, the PAST PERFORMANCE guide further suggests that offerors not be allowed to “cherry pick,” that offerors furnish references on all current contracts and on all completed contracts. To ensure the anonymity of references, the PAST PERFORMANCE guide says that agencies should ask for at least two references on each contract.
Although FASA requires that offerors may not be evaluated favorably or unfavorably on past contract performance where there is no such information, or the information is unavailable, the PAST PERFORMANCE guide says that neutral treatment of past performance can be accomplished by giving new firms the average score of the remaining competitors, and evaluating only other stated technical or management factors. For best value selections, this would not comply with the FASA requirement that offerors not be evaluated unfavorably; it would deprive an offeror of the advantage promised in the announced evaluation criteria. It could be sustained only if it were not protested well before the date set for submission of initial proposals, a point illustrated in Espey Manufacturing & Electronics Corp., B-254738.3, Mar. 8, 1994, 94-1 CPD ¶ 180.
At issue here was a solicitation for power supplies. The announced selection criteria provided for a best value selection decision, a trade-off of an evaluation of past performance against low offered price. If past performance were unavailable, the solicitation announced that the selection decision would be made only on evaluated price. As it turned out, past performance information was not available for the firm that submitted the lowest evaluated price. The Navy decided that the firm was responsible based on preaward survey information, and awarded it the contract proposed by the solicitation. A firm that had not submitted the low proposal, but whose past performance was evaluated, protested the selection. The General Accounting Office (GAO) denied the protest, holding that the selection decision was consistent with the solicitation.
The PAST PERFORMANCE guide suggests that the process of conducting reference checks begin immediately on receipt of initial competitive proposals, giving agencies the opportunity to immediately eliminate from the competition proposals from those offerors whose reference checks reveal a history of poor performance. If the proposal of a small business offeror is eliminated, this elimination, based as it is on a technical evaluation, rather than on a responsibility determination, need not be referred to the Small Business Administration. Pearl Properties, B-253614.6, May 23, 1994, 94-1 CPD ¶ 357, at 6-7; Advanced Resources International, Inc.-Reconsideration, B-249679.2, Apr. 29, 1993, 93-1 CPD ¶ 348, at 2-3.
To avoid complaints about the process, the PAST PERFORMANCE guide says that a questionnaire should be developed with standard questions, and that evaluators should be instructed to state the questions precisely as they are worded on the questionnaire. OFPP proposes that the questionnaire include spaces to record responses.
Recognizing that individual references can be idiosyncratic and biased, the PAST PERFORMANCE guide suggests that many references be obtained, and that evaluators look for patterns in the descriptions of performance. OFPP goes on to say that it is important to look for patterns that show high performance, and not just unfavorable performance, this “to get away from the old responsibility determination mode of just looking at performance problems.” Evaluators should ask enough questions to discriminate between “good” and “excellent” performance, and when concluding interviews, should ask references for a summary opinion, i.e., a rating of the offeror's overall performance and whether the reference would again like to do business with the offeror.
The PAST PERFORMANCE guide describes a confirmation process. That is, it suggests that either a narrative or the completed questionnaire be sent to the reference, and that the reference be told that absent a timely objection, the content will be accepted as correct. References should be afforded the opportunity to submit corrections, and if these cannot be agreed, then the information should be disregarded for evaluation purposes.
The case law makes it clear that evaluation of past performance can include the past performance of proposed subcontractors, Cleveland Telecommunications Corp., B-257294, Sept. 19, 1994, 94-2 CPD ¶ 105, at 5, or the past performance of affiliated corporations, Fluor Daniel, Inc., B-262051, Nov. 21, 1995, 95-2 CPD ¶ 241, at 12. Likewise, it is proper to downgrade a competitive proposal on past performance where a subcontractor's past performance references report performance problems (relocation of technical staff shortly after contract award, lack of management responsiveness, and cost overruns). TRW, Inc., B-260968.2, Aug. 14, 1995, 95-2 CPD ¶ 101, at 8.
Agencies generally can limit past performance evaluations to the contracts identified by each offeror, and they may assume that offerors have presented all of their relevant prior contracts. Moore Medical Corp., B-261758, Oct. 26, 1995, 95-2 CPD ¶ 204, at 7. Nonetheless, agencies cannot ignore other relevant information on past performance, including performance information with which the evaluators are familiar, Executive Security & Engineering Technologies, Inc., B-270518, Mar. 15, 1995, at 2, or performance information known to the agency, Maytag Aircraft Corp., B-259653.4, July 19, 1995, 95-2 CPD ¶ 37, at 4.
OFPP suggests that awards be made on initial proposals, particularly so when the only evaluation factors are past performance and evaluated price/cost. If discussions are needed, then OFPP says, as per FAR 15.610(c)(6), that offerors must be afforded an opportunity to discuss past performance information obtained from references on which offerors have not had a previous opportunity to comment. OFPP points out that once past performance evaluation and reporting systems are fully in place, discussions, if any, need cover only references obtained from private sector or other government entities.
When the evaluation of past performance makes a difference in the outcome of the selection decision, it is unlikely, despite OFPP's contrary suggestion, that agencies can properly make awards on initial competitive proposals until final establishment, in 1998, of agency past performance evaluation and reporting systems. Recall that FASA requires that offerors be “afforded an opportunity to submit relevant information on past contract performance,” 41 U.S.C. § 405(j)(1)(C)(i), and that “such information submitted by offerors [be] considered,” 41 U.S.C. § 405(j)(1)(C)(ii). Only when agency past performance evaluation and reporting systems are in place will offerors routinely have opportunities to comment on evaluations by federal agencies, and even then there will be no opportunities to comment on other references.
Delta Data holds that agencies must give offerors an opportunity to comment when negative ex parte information is received, i.e., from a reference identified for proposal evaluation purposes, 744 F.2d at 203, and Delta Data is still good law, as it was recently followed in Elcon Enterprises, Inc. v. Washington Metropolitan Area Transit Authority, 977 F.2d 1472, 1481-82 (D.C. Cir. 1992).
GAO does not follow Delta Data, a point that it first made clear in Saturn Construction, Inc., B-236209, Nov. 16, 1989, 89-2 CPD ¶ 467, at 4-5, there holding that in GAO's view an evaluation of past performance essentially involves historical information not subject to change, and thus neither discussions nor an opportunity to comment on negative references is required. More recently, GAO has held that “[r]eports from references are routinely relied on in commercial transactions . . . [and we] fail to see why the government cannot follow ordinary commercial and consumer practices in selecting the most capable contractor.” SDA, Inc., B-256075, May 2, 1994, 94-2 CPD ¶ 71, at 7 n. 9. GAO does not accept that which OFPP has recognized in the PAST PERFORMANCE guide, that individual references can be idiosyncratic and biased.
GAO has not so far ruled in a case where 41 U.S.C. § 405(j)(1)(C)(i) applies and award is made on initial proposals, or where award is made on best and final offers after discussions have been conducted, but not on past performance evaluations. Where past performance is a stand-alone evaluation factor, agencies that proceed to award on initial proposals, or to award on best and final offers without providing discussions on past performance evaluations, risk an adverse decision if offerors have not been afforded the opportunity to comment that is promised by FASA. And even if GAO decides not to change its position on evaluation of past per-formance, there is still Delta Data.
Regardless of GAO's position on the effect of 41 U.S.C. § 405(j)(1)(C)(i), it is not certain, when the selection decision is based on a past performance evaluation, that GAO would sustain an award on initial proposals, or an award on best and final offers, without providing discussions.
Consider The Jonathan Corp., B-251698.3, May 17, 1993, 93-2 CPD ¶ 174. Here GAO set aside a Navy decision to make an award on initial proposals. The contract proposed by the solicitation was a cost-plus-award-fee contract to perform phased maintenance on three amphibious assault ships, and the Navy had decided that the initial competitive proposals were technically equal, and that the selection decision would thus be based on evaluated cost. The Navy did not consider the specifics of any offeror's cost proposal, and instead mechanically adjusted proposed costs for cost realism purposes. GAO decided that the decision to make an award on initial proposals without discussions was arbitrary.
GAO held that agency discretion to make an award on initial proposals is not unfettered, and that the decision “must be reasonably based on the particular circumstances of the proposals received and the basis for the selection decision.” In this case, there were substantial questions about the cost evaluation, the questions “would have generated answers which could have significantly changed the nature and extent of the cost adjustments,” and a revised cost evaluation “could have changed the outcome of the procurement.” Id., at 14.
A selection decision based on a past performance evaluation and a contract award on initial proposals could likewise be questioned if an offeror's rating is affected by references about which the offeror has not had the opportunity to comment, the offeror's comments might have resulted in a higher rating, and the selection decision is sufficiently close.
The same thing can happen when award is made on best and final offers, without discussions on significant weaknesses in past performance. In Alliant Techsystems, Inc., B-260215.4, Aug. 4, 1995, 95-2 CPD ¶ 79, at 8-9, a proposed subcontractor's past performance problems were considered such a significant weakness that they offset other proposal strengths in the evaluation and source selection. GAO recognized other decisions holding that discussions are not normally required on evaluated weaknesses in past performance (since this information is typically historical information that cannot be changed), but in this case it granted the protest, since it appeared that the evaluated weaknesses could have been eliminated by substituting another subcontractor.
Use of past performance as an evaluation factor may well achieve acquisition streamlining goals. But its use pending establishment of agency past performance evaluation and reporting systems, or its use without regard to the particular circumstances of competitive proposals, or to the basis of the selection decision, carries with it significant risks. Agencies must ensure that the streamliner does not derail.
— Cy Phillips
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