The Federal Acquisition Streamlining Act of 1994 requires “standards for evaluating past performance with respect to cost (when appropriate), schedule, compliance with technical or functional specifications, and other relevant performance factors that facilitate consistent and fair evaluation by all executive agencies,” 41 U.S.C. § 405(j)(1)(A); requires that agencies rate past performance under a system established for collection and maintenance of past performance information, 41 U.S.C. § 405(j)(1)(B); requires that offerors be afforded an opportunity to submit ad hoc past performance information and that ad hoc past performance information is considered, 41 U.S.C. § 405(j)(1)(C); and requires that “[i]n the case of an offeror with respect to which there is no information on past contract performance or with respect to which information on past contract performance is not available, the offeror may not be evaluated favorably or unfavorably on the factor of past contract performance,” 41 U.S.C. § 405(j)(2). Federal Acquisition Regulation 15.305(a)(2)(i) requires that “[t]he currency and relevance of the information, source of the information, context of the data, and general trends in contractor's performance shall be considered.” Federal Acquisition Regulation 15.305(a)(2)(ii) commands that “[t]he source selection authority shall determine the relevance of similar past performance information.”
Federal Acquisition Regulation 15.305(a)(2)(iv) requires that “[i]n the case of an offeror without a record of relevant past performance information or for whom information on past performance is not available, the offeror may not be evaluated favorably or unfavorably on past performance.” This language, “may not be evaluated favorably or unfavorably,” defines the neutral evaluation that is required by 41 U.S.C. § 405(j)(2):
Use of neutral past performance evaluations. Some respondents expressed concerns that neutral past performance evaluations are not adequately defined, and that the rule does not contain sufficient implementing guidance. One respondent suggested that, to avoid abuses of neutral rating, offerors granted such ratings should be required to submit a record of their lack of opportunity to acquire a record of relevant past performance. The second proposed rule contained a definition of neutral rating, and asked respondents to provide suggestions for a better definition. We received only one such suggestion, and, upon analysis, we found that the suggestion did not actually provide a definition of neutral rating but, rather, provided a way to limit the application of neutral ratings. Instead, the final rule includes language based on 41 U.S.C. 405(j)(2) providing offerors, without a previous performance history, a rating that neither rewards nor penalizes the offeror. We selected this alternative to allow the facts of the instant acquisition to be used in determining what rating scheme would satisfy requirements of the statute.
Federal Acquisition Circular Number 97-02, 62 Fed. Reg. 51226 (1997). Prior to the effective date (October 10th, 1997) of Federal Acquisition Circular Number 97-02, Federal Acquisition Regulation 15.608(a)(2)(iii) provided, inter alia, that “[f]irms lacking relevant past performance history shall receive a neutral evaluation for past performance.”
There is a difference. If one offeror is rated “outstanding” on relevant past performance, and another offeror has no relevant past performance information, then a “neutral” evaluation, one that results in a best value contract award to the offeror whose relevant past performance is rated, is hardly the “not be evaluated favorably or unfavorably” evaluation that is required by 41 U.S.C. § 405(j)(2) and is now promised by Federal Acquisition Regulation 15.305(a)(2)(iv). Just how will this difference play out in future protests? This is where we’re going with this article.
This story begins with Excalibur Systems, Inc., B-272017, July 12, 1996, 96-2 CPD ¶ 13. There a solicitation had provided two evaluation factors: (a) past quality performance, and (b) price, and it specified that past quality performance was “essentially more important.” The solicitation also provided that offerors lacking relevant past performance information would be evaluated solely on the basis of price, and, in such an instance, that a lack of past quality performance would not be considered.
The protester was the incumbent, and the awardee was an offeror that had never produced the required items, an offeror lacking relevant past performance information. The agency rated both offeror’s past performance as “green/low risk,” and then made an award based on price. The United States General Accounting Office (GAO) denied the protest, just as it should have done, based on the solicitation language providing for an evaluation based solely on price for offerors lacking past performance information. But it went on, for GAO held:
That is, we think that the use of a neutral rating approach, to avoid penalizing a vendor without prior experience and thereby enhance competition, does not preclude, in a best value procurement, a determination to award to a higher-priced offeror with a good performance record over a lower-cost vendor with a neutral past performance rating. Indeed, such a determination is inherent in the concept of best value.
Excalibur Systems, 96-2 CPD ¶ 13, at 3.
GAO was later able to find a case that could support its dictum in Excalibur. At issue in Phillips Industries, Inc., B-280645, Sept. 17, 1998, 98-2 CPD ¶ 74, was a proposed contract for 3,000 “roach motels.” The protester submitted the lowest-priced offer, and although it had no relevant past performance history, it argued that the roach motels were dealer-supplied items shipped directly from the manufacturer to end-users. The agency was out of stock, inventory was back-ordered, and the roach motels were a high-demand item. The solicitation provided that the “lack of performance history is not grounds for disqualification for award but may cause the offeror to be considered less favorably than an offeror with favorable performance history.” GAO upheld a best value award to a higher-priced offeror with relevant past performance history. The protester contended that the best value award was not a “neutral” evaluation of past performance. Rather than a narrow decision premised on the solicitation language that authorized unfavorable evaluations of offerors lacking relevant past performance history, GAO applied the rule from Excalibur Systems to deny the protest. Id., at 5.
In a later case from the same agency, and under a solicitation with the same provisions, GAO sustained a protest where the contracting officer failed to make a best value determination, and instead decided that an award to a higher-priced offeror, one that had offered a longer delivery schedule, “represented a lesser risk of nonperformance.” National Aerospace Group, Inc., B-281958, May 10, 1999. This, per GAO, was tantamount to rejecting the lower-priced offer based on that offeror’s lack of past performance history. GAO discussed the predecessor Phillips case, and decided that it could not apply because there was “nothing in the record to show that the contracting officer performed a comparative assessment of the vendors.”
It is much easier to argue that a “neutral” evaluation of past performance may be considered in a best value selection than it is to argue that consideration of past performance in a best value selection is not an “unfavorable” evaluation. Now the Federal Acquisition Regulation, as well as 41 U.S.C. § 405(j)(2), requires a “not be evaluated favorably or unfavorably evaluation.” Other than perpetuation of GAO’s dictum in Excalibur, what are the prospects for different outcomes from the change from a “neutral” evaluation for firms lacking relevant past performance history to the “not be evaluated favorably or unfavorably” evaluation for firms lacking relevant past performance history?
There is a hint as to the effect of this change in the Department of Defense Past Performance Integrated Product Team’s A GUIDE TO COLLECTION AND USE OF PAST PERFORMANCE INFORMATION. Federal Acquisition Circular Number 97-02 implements the Federal Acquisition Regulation Part 15 rewrite, and it is significant that members of the Federal Acquisition Regulation Part 15 rewrite had a role in the preparation of the GUIDE. Here is what the GUIDE has to say about evaluations of offerors lacking relevant past performance history:
Occasionally, however, an evaluation group may not find any relevant information. In those cases, you must treat an offeror’s lack of past performance as an unknown performance risk, having no positive or negative evaluative significance. This allows the government to evaluate past performance in a manner that is fair to newcomers. The method and criteria for evaluating offerors with no relevant past performance information should be constructed for each specific acquisition to ensure that such offerors are not evaluated favorably or unfavorably on past performance.
You may use a variety of rating methods to evaluate offerors with no past performance history. Regardless of the method selected, the solicitation must clearly describe the approach that will be used for evaluating offerors with no relevant performance history. . . .
Rating schemes articulated in the solicitation, may allow agencies to drop the past performance evaluation factor when making its award decision, after discovering that one of the competitors has no past performance history.
GUIDE, at 11.
The bare language of 41 U.S.C. § 405(j)(2) suggests that lack of relevant past performance information has no place in a best value selection. But the GUIDE’s point about the need for solicitation language describing the evaluation of offerors lacking relevant past performance history is a good one under GAO’s timeliness rules, complaints about particular solicitation language must be filed prior to the date set for receipt of initial competitive proposals. 4 C.F.R. § 21.2(a)(1). Thus before GAO, an offeror that does not timely challenge solicitation language will not be heard to complain when a solicitation provides for consideration of lack of relevant past performance information in a best value selection. Whether the same result would obtain in a protest filed in a federal district court or in the United States Court of Federal Claims under 28 U.S.C. § 1491(b)(1) is another question, and one for which we will have to look for a decision.
— Cy Phillips
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