American University Law Review
August, 1998
PAST PERFORMANCE AS AN EVALUATION FACTOR IN PUBLIC CONTRACT SOURCE SELECTION
William W. Goodrich*
INTRODUCTION
One of the major changes in recent memory affecting U.S. Government contractors has been the mandate for Federal agencies to accumulate "past performance information" on contractor performance, and to use that information as a mandatory comparative evaluation factor for award in nearly all competitively negotiated acquisitions. As of January, 1999, end of contract performance reviews and the evaluation of that information in making source selection decisions are required for all contracts exceeding $100,000.
Contracting agencies have long been required to consider past performance information concerning an offeror in determining whether the offeror is qualified to perform the contract as a "responsible prospective contractor." A responsible prospective contractor must have, at a minimum, adequate financial resources, the ability to comply with the delivery schedule, a satisfactory performance record, a satisfactory record of business integrity and ethics, the necessary organizational and administrative resources, sufficient production facilities, and must be otherwise qualified to receive an award. However, responsibility determinations normally occur only after identifying the otherwise apparently successful offeror. Responsibility determinations deal only with whether the offeror's past efforts have been "satisfactory." They do not involve comparisons of the relative capabilities of the competing offerors based on past work efforts completed for government or commercial customers. The Office of Federal Procurement Policy's ("OFPP") initiatives concerning contractor past performance have not supplanted responsibility determinations. Rather, they have incorporated past performance considerations in the comparative process of proposal evaluation in the source selection process as an original matter.
With the best of intentions, OFPP is leading executive agencies toward government-wide implementation of its policy pronouncements concerning past performance. OFPP's purpose has been simply stated: "[T]o further the exercise of good business judgment and improve contractor performance." Yet, in the author's view, implementation of these policies creates risks that should be identified. Chief among the author's concerns are: (1) the potential for de facto debarment of contractors, particularly small businesses, as a result of unfavorable past information accumulated in decentralized databases; (2) the potential for undermining the statutory requirement for full and open competition as a result of the intensely subjective nature of contractor performance evaluations; and (3) a certain potential for unjust retaliation against contractors who choose to pursue legitimate requests for equitable adjustment or claims.
The potential for de facto debarment arises from a number of converging factors. Among these are the highly informal nature of routine contractor performance evaluations, OFPP's stated policy objective that past performance should be a heavily weighted award factor for all new contracts of any size, a sharply limited standard of review in the General Accounting Office ("GAO") and in the courts, and GAO's unwillingness in the cases decided thus far to question the validity of the underlying past performance information that agency procurement officials must utilize in making their many source selection decisions.
The potential for undermining full and open competition arises from the obvious opportunity these fundamentally new practices create for government personnel to affect future source selection decisions. Through reference check replies, past performance questionnaire responses, and highly subjective contractor performance assessments placed in past performance databases, government personnel can now have a profound impact upon the outcomes of contract awards, both in their own agencies and in others. The potential for misuse becomes more apparent when one observes GAO's liberal acceptance of past performance/cost tradeoffs, its extreme deference to agency point scoring of past performance evaluation criteria, its unwillingness to require procuring agencies to check all references provided by offerors in their proposals, and its refusal to look behind the written record to test the validity of the past performance information itself. Also somewhat troublesome in terms of undermining competition is the very concept of an evaluation scheme which envisions a "tradeoff" between past performance and cost.
The concern regarding retaliation for a contractor submitting equitable adjustment requests and claims derives initially from OFPP's guidance that past performance reports should consider contract change proposals. Further, no provision is made for excluding such information from past performance files or databases while disputes are resolved through the contract appeals process.
Government officials are presumed to have acted properly and in accord with the applicable laws and regulations. That presumption only may compound the problem. How can an offeror be assured that the government's files or databases contain only correct and objectively presented past performance information? If an offeror becomes aware of erroneous information, what can be done about it?
The first objective of this Article is to summarize the law as it currently exists in the area of past performance. The second and more important objective is to offer observations-and a word of caution-concerning the direction in which the past performance initiative could take the competitive procurement system. This Article begins by surveying the applicable OFPP guidance, statutory requirements, and applicable provisions of the FAR. It then discusses agencies' efforts to compile past performance data. Next, this Article considers the emerging principles of past performance law as enunciated in the relevant decisions. The Article then considers, in detail, those relatively few decisions thus far where GAO and one U.S. Court of Appeals have ruled in favor of an offeror challenging a government source selection decision based upon problems in the agency's evaluation of past performance information. Finally, this Article proposes a modest revision to the FAR to provide contractors with a more meaningful opportunity to correct inaccurate or unfair reports of past performance through Alternative Dispute Resolution.
* Member, Arent Fox Kintner Plotkin & Kahn, PLLC, Washington, D.C.
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