Past, Present, and Future Regulatory Guidance on Evaluation of Past Performance,

14 min

The Federal Acquisition Regulation (FAR) has been written and rewritten several times to provide guidance on evaluation of past performance. However, the rules for evaluation of past performance remain one of the most confusing and least understood areas of the FAR. The proposed rewrite of FAR Part 15 makes important and needed changes to the rules on evaluation of past performance. At the same time it adds to the confusion that has led to numerous protests in the past five years. As a consequence, the Public Contract Law Section of the American Bar Association and numerous other organizations have called for a rewrite of the proposed rewrite.

Past and Present Guidance on Evaluation of Past Performance

The present regulatory guidance on past performance can be found in Parts 15 and 42 of the FAR. FAR Part 15 now requires, for example, that past performance be evaluated in all competitive awards that are expected to exceed $1,000,000, unless the contracting officer determines that past performance is not an appropriate evaluation factor. The typical exception is made for competitive procurements where award is to be made to the low cost technically-acceptable proposal.

The present FAR guidance in FAR Part 42, Subpart 42.15, is based on the Office of Federal Procurement Policy ("OFPP") Letter 92-5, Past Performance Information, 58 Fed. Reg. 3573 (January 11, 1993) (hereinafter "OFPP Letter 92-5"). Although specific selection criteria were not defined, OFPP Letter 92-5 does provide that past performance information includes:

  • the contractor's record of conforming to specifications and to standards of good workmanship;
  • the contractor's record of containing and forecasting costs on any previously performed cost reimbursable contracts;
  • the contractor's adherence to contract schedules, including the administrative aspects of performance;
  • the contractor's history for reasonable and cooperative behavior and commitment to customer satisfaction; and
  • the contractor's business-like concern for the interest of the customer. See also FAR 42.1502.

In conjunction with the formulation of the policies in OFPP Letter 92-5 and the new emphasis on past performance, the larger federal procurement agencies have established formal systems for capturing and evaluating the past performance of contractors. One of these systems, used by the Air Force, the Contractor Performance Assessment Report Systems (CPARS), was the focus of a protest in H.J. Group Ventures, Inc., B-246139, February 19, 1992, 92-1 CPD ¶ 203. In that case, the Air Force's use of CPARS was endorsed for source selection in a competitive negotiation. See also Lockheed Aircraft Service Company, B-255305.2, February 22, 1994, 94-1 CPD ¶ 205. Numerous such systems now are in operation in several agencies.

The OFPP established a past performance pilot program in January 1994. The program was a cooperative effort between agencies and the OFPP to encourage agencies to test the effects of placing greater emphasis on past performance. Twenty agencies agreed to use past performance as major selection criteria for sixty contracts, with an aggregate cost of $2.6 billion. The program has succeeded in addressing problem areas, and in making use of past performance evaluations more effective.

The OFPP program led to the publication of an OFPP Guide to Best Practices for Past Performance that is used today by most agencies in evaluating past performance. The Guide is reprinted in the Commerce Clearing House's Government Contracts Reporter. See 2 CCH Government Contracts Reporter ¶ 7370.

Future Guidance on Evaluation of Past Performance

On September 12, 1996, OFPP issued Phase I of the proposed FAR Part 15 for public comment, See 61 Fed. Reg. 48380. The proposed rewrite of FAR Part 15 is a commendable effort. It answers a number of questions that have been raised with the OFPP policy letter and the current regulatory guidance on evaluation of past performance. However, the rewrite needs its own rewrite to provide more useful guidance to contractors on evaluation of past performance.

The American Bar Association Public Contracts Law Section ("PCLS") submitted its comments on the Phase I rewrite to the FAR Secretariat on November 27, 1996 ("PCLS Comments"). The PCLS statements on past performance highlight some of the problems with the current and proposed FAR provisions on past performance. They state in part:

Proposed FAR 15.405(a)(2)(iii) provides that "firms lacking relevant past performance history shall receive a neutral evaluation for past performance." The proposed regulation states further, "A neutral evaluation means any assessment that neither rewards nor penalizes firms without relevant past performance history." The Section believes that this "neutrality" provision requires further clarification. If an offeror lacks relevant past performance history, it is unclear whether the offeror (a) is not to be rated in this area, (b) is to receive a moderate rating or (c) is to be assigned the average rating of other offerors. If the offeror does not receive any rating in the past performance category, this would appear to violate the CICA requirement that agencies evaluate all offerors in accordance with the stated evaluation criteria.

Another problem area regarding past performance evaluations relates to the "relevance" of the information. Proposed FAR 15.405(a)(2)(i) states: "The age and relevance of the information, source of the information, subjectivity of the data and general trends in contractor's performance should be considered." Similarly, proposed FAR 15.405(a)(2)(iii) refers to a neutral evaluation for firms lacking "relevant" history. In several recent cases, GAO has sustained protests regarding the contracting agency's application of the term "relevant" information. For example, in Ogden Support Services, Inc., B-270012.4, October 3, 1996, GAO sustained for a second time a protest alleging that the Central Intelligence Agency improperly evaluated an offeror's past performance because it applied an unreasonably broad definition of "similar experience." GAO noted: "Since the RFP indicated that the proposals would be qualitatively evaluated, it follows that a proposal reflecting more relevant successful past performance should be rated higher than a proposal reflecting clearly less relevant past performance." Similarly, in PMT Services, Inc., B-270538.2, April 1, 1996, GAO sustained a protest where the agency determined the protester's past performance as marginal based on the erroneous conclusion that PMT had not performed contracts of similar complexity. In determining whether a contract identified by PMT was relevant with regard to is complexity, the agency considered only its size and ignored other critical factors. In light of these decisions, the Section urges that additional regulatory guidance be provided.

Comments p. 16-18.

In actual practice, clarification of the proposed rewrite is necessary because neutral evaluations may be very misleading and fraught with problems. For example, it is reasonable to ask if an offeror with negative past performance history on a complex and difficult contract should be penalized when it losses the award to an offeror that has no relevant past performance. More specifically under the proposed guidance, a contracting officer would have difficulty in favoring an offeror who has gained the requisite experience but, as a result of a difficult learning curve, has a poor record of past performance. Under those facts, the proposed FAR guidance would require that the neutral evaluation of an inexperienced offeror should be higher than the past performance evaluation of the offeror that has overcome the difficult learning curve.

Presently and under the proposed rewrite, a Contracting Officer has no obligation to discuss any past performance report during the evaluation if the offeror previously had an opportunity to comment on the report at some time prior to the evaluation. Furthermore, even if the contracting officer obtains other disparaging information that has not been discussed with the offeror, the contracting officer can still use the information either to award on initial proposals or to exclude the offeror from the competitive range.

Both the National Security Industrial Association and the Aerospace Industries Association have requested that two changes be made to the proposed FAR rewrite to allow for discussions of past performance. The first change is that the offerors be informed of all past performance information that the Contracting Officer considers. The second change is that offerors be provided an opportunity to respond to such information.

An overriding concern with the present and proposed future guidance arises out of claims, requests for equitable adjustments and overruns on past contracts. For example, Bob Antonio, a GAO employee, made the following comment during the debate on the FAR rewrite:

How are ongoing requests for equitable adjustments and disputes going to be dealt with in the `interim' periods when contractor's history of reasonable and cooperative behavior, commitment to customer satisfaction, and business-like concern for the interest of the customer is evaluated for future procurement?

Comment in Acquisition Reform Network, February 28, 1996.

Many procurement agencies are already addressing the limitations of the current guidance. It is common, for example, for agencies to require the submission of extensive past performance information by offerors and for agencies to conduct surveys of contractors' past performance. Attachment 1 to this paper is a portion of a recent solicitation issued by the Navy that requires offerors to provide detailed information on past performance including, in particular, the specific problem identified by Mr. Antonio. The following extract from Attachment 1 highlights the focus on claims, requests for equitable adjustment and contract overruns. It contains the following requirements:

Offerors will provide the following information for each contract/major subcontract identified under categories 1. through 6. above:

  • Name of Contracting Agency/Commercial Activity
  • Contract Number/Identification Number
  • Contract Type (FFP, FPIF, CPIF, etc.)
  • Name, mailing address, and telephone number of the PCO and ACO for each Government contract, or the contract administrator for each major subcontract/commercial contract.
  • A brief description of the contract effort, including whether it was development, production, or both. The description should also identify any integration effort.
  • Original contract period of performance.
  • Any claims or requests for equitable adjustment submitted including: (a) The period (in months) covered by the claim/equitable adjustment. (b) The date the problem was first identified to the Government/commercial customer by the contractor. (c) The date the claim/request for equitable adjustment was submitted to the Government/commercial customer (as appropriate). (d) The amount of the claim/request for equitable adjustment. (e) Reason for the claim/request for equitable adjustment.
  • Any cost overrun/underruns including: (a) The amount of the overrun/underrun. (b) The date the Government was notified of the overrun/underrun, who was notified and the method of notification. (c) The period covered by a the overrun/underrun. (d) The reason for the overrun/underrun.
  • The original contract price.
  • The current or final contract price (as appropriate).
  • Any disputes or litigation under the contract/major subcontract.
  • Any special achievements noted by the Government or commercial customer in writing.
  • The original delivery schedule.
  • The current delivery schedule or date of completion, including reasons for changes, if changed.
  • A requirement for government agencies to seek additional information is only part of the answer to the past performance evaluation issue. While some limited help is provided in OFPP's Guide to Best Practices for Past Performance, the harder problem, on which specific guidance is needed, is how to evaluate this information fairly. The Ogden Support Services, Inc. decision, discussed in the ABA comments, supra, highlights this problem.

    GAO Decisions on Past Performance

    OFPP policy letter 92-5 encourages discussion of past performance information during contract negotiations, and many RFPs provide that offerors be given an opportunity to address unfavorable past performance reports. Agencies have not always followed this guidance and several decisions sustained protests because the agency failed to hold meaningful discussions with the protestor. Daun-Ray Casuals, Inc., B-255217.3, July 6, 1994, 94-2 CPD ¶ 42; Ashland Sales & Services, Inc., B-255159, February 14, 1994, 94-1 CPD ¶ 108; American Development Corp., B-251876.4, July 12, 1993, 93-2 CPD ¶ 49.

    The trend now is decidedly toward conducting meaningful discussions of negative past performance reports. A successful protester must demonstrate the possibility of prejudice as a result of past performance evaluations and lack of discussions of these evaluations. Several GAO decisions hold that there is no prejudice where a protestor fails to allege that its past performance rating could have been improved if given the opportunity for discussion. See e.g. Appalachian Council, Inc., B-256179, May 20, 1994, 94-1 CPD ¶ 319. Likewise, vague or unsatisfactory explanations as to why a past performance rating was erroneous demonstrates a lack of prejudice.Dragon Services, Inc., B-255354, February 25, 1994, 94-1 CPD ¶ 151; JCI Environmental Services, B-250752.3, April 7, 1993, 93-1 CPD ¶ 299.

    Several protests have also challenged agency tradeoffs between price and past performance. The GAO, however, has generally denied such protests as long as the agency determination is reasonable and consistent with the stated evaluation criteria. See Corvac Inc., B-254222, December 2, 1993, 93-2 CPD ¶ 294 (Corvac I); Corvac Inc., B-254757, January 11, 1994, 94-1 CPD ¶ 14 (Corvac II); Brunswick Defense, B-255764, March 30, 1994, 94-1 CPD ¶ 225.

    In Corvac I, the protester argued that the agency elevated past performance above price in the evaluation scheme. Id. at 3. Although the evaluation scheme specified that past performance was less important than price, the agency determined that Corvac's 3.5 percent price premium was outweighed by Entech's past performance. Id. at 4. The GAO held that the agency's determination was consistent with the RFP and that "[t]he fact that the key discriminator between two offers turns out not to be the most important factor under the evaluation scheme does not render an award decision unreasonable." Id.

    In Corvac II, the RFP provided that award would be made on the basis of price and past performance, with price being the more important factor.Id. at 2. The solicitation also specified that past performance references on contracts of a similar nature would be considered. Id. at 4. Corvac was the low offeror, with a price of $1,093,400 and Mocheat was the second low offeror at $1,183,090.Id. at 3. Corvac only provided one reference, and that contract concerned environmental consulting work rather than waste removal work, the subject of the contested procurement. The agency concluded that Mocheat's offer, although eight percent higher in price, represented the best value since Mocheat had satisfactorily performed more comparable contracts than Corvac. Id. Corvac protested the agency's evaluation because it failed to consider its reference contract. Id. The GAO, however, found that the agency's tradeoff analysis to be reasonable and consistent with the solicitation, which required similar waste removal contracts as past performance references.Id. at 4. Accordingly, the agency's determination that Mocheat's contract presented the best value to the Government, even though both offers were initially both rated as technically acceptable, was found to be a rational price/past performance tradeoff.

    The protestor in Brunswick Defense contended that the agency should have used a higher percentage of successful flights in calculating its flight reliability rate, a primary past performance discriminator in the solicitation.Id. at 8. In recognition of the broad discretion given source selection officials in making cost/technical tradeoffs, the GAO found that the agency was justified in calculating the protester's flight reliability in the chosen manner, even though calculating it in a different manner might have turned the selection decision in favor of the protester. Id. at 9. The GAO therefore found that the agency relied on all information then available and that the record amply supported the protester's unacceptable performance rating and the agency's tradeoff decision, selecting a more reliable, higher priced proposal. Id. at 10.

    With the increased use of past performance in evaluations, protest decisions of the General Accounting Office (GAO) have become more and more sophisticated in their treatment of past performance issues. The GAO, for example, originally held that, as general principle, an agency need not discuss those aspects of past performance that are historical facts because discussions cannot change such facts.See JCI Environmental Services, supra. In Daun-Ray,supra, however, GAO has somewhat modified this principle. Daun-Ray holds that the agency must discuss materially adverse historical and factual information with an offeror and give that offeror an opportunity to discuss this information where the solicitation indicates that an agency will discuss past performance if negotiations are conducted.

    In Alliant-Techsystems, Inc., B-260215.4, August 4, 1995, 95-2 CPD ¶ 79, GAO further extended its limitation on the general rule. InAlliant, the Army had assessed a weakness for Alliant that was based on the performance of BEI, a key subcontractor on an earlier contract. The GAO held that since Alliant could have changed or modified its proposal to correct the problems associated with the poor past performance of BEI, the Army was required to advise Alliant of its specific concerns with the past performance of the Alliant subcontractor.

    In another important aspect of the Alliant decision, GAO also determined that:

    Alliant's knowledge that BEI had performance problems under the prior contract does not abrogate the agency's obligation to inform Alliant of its serious concerns regarding BEI's involvement in the Alliant "team."

    This holding is consistent with the clear trend in GAO decisions to encourage meaningful discussions of past performance.

    Without discussions of past performance, there is a potential for significant prejudice to an offeror that has corrected a past performance problem or that can offer a reasonable explanation of the problem. The GAO decisions that require discussions of past performance reflect the concerns raised by many in the procurement community about the subjective and prejudicial nature of past performance evaluation.

    The need to assure that relevant past performance history is considered is another fertile area for protests. The GAO's 1996 decisions in theOgden Support Services, Inc. and PMT Services, Inc. cases, discussed in the ABA comments, supra, highlight this problem.

    Two other 1996 GAO decisions are noteworthy. In Omega World Travel, Inc., B-271262.2, July 25, 1996, 96-2 CPD ¶ 44, GAO held that evaluatorsmay downgrade an offeror's proposal on the basis of negative past performance information that was known to the evaluators. In Safeguard Maintenance Corp., B-260983.3, October 13, 1995, 96-2 CPD ¶ 116, GAO held correspondingly that an evaluatormust upgrade an offeror's proposal on the basis of positive past performance information that was known to the evaluators.


    The FAR rewriters should consider the past performance evaluation problems raised by the commentators and by the GAO. Past performance is an important evaluation factor and unless changes are made in the current regulatory guidance the value of this factor could be greatly diminished.