Prospective federal contractors have long been calling for more uniformity and consistency in the collection and application of contractor past performance evaluations. Insufficient and unreliable data have had the unwanted effect of reducing the significance of contractor past performance in awarding federal contracts, a result that undermined the letter and spirit of the public contracting system. On August 1, 2013, the federal government issued a new rule amending the Federal Acquisition Regulation (“FAR”) to address those weaknesses. But does it?
The Changes
The new rule, issued jointly by the Department of Defense, the General Services Administration, and NASA, creates government-wide, standardized contract performance rating and evaluation factors for federal government contractors and establishes a centralized system for collecting, maintaining, and updating the data. Under the new rule, contracting officers (COs) must complete performance evaluations annually and after completing all contracts over $150,000.
The new rule has three primary features. First, it standardizes contractor performance evaluations, by requiring agencies to use a specified set of evaluation criteria and ratings in contractors’ past performance evaluations. All contractors must now be evaluated according to a minimum of five factors: (1) Technical or Quality; (2) Cost Control; (3) Schedule/Timeliness; (4) Management or Business Relations; and (5) where applicable, Small Business Subcontracting. COs may also rate contractors on additional factors, including a contractor’s “late or non-payment to subcontractors.” Each evaluation must contain a “clear, non-technical description of the principal purpose of the contract or order.” COs must complete contractor evaluations annually and after contract completion, which represents an increase in the frequency of evaluations over previous requirements.
Second, the new rule creates a standardized rating system that requires COs to rate contractors under each evaluation category according to a five-level scale, comprising Exceptional, Very Good, Satisfactory, Marginal, or Unsatisfactory, all of which are defined in the DoD Contractor Performance Assessment Reporting System (“CPARS”) Policy Guide.
Third, the new rule designates CPARS as the sole conduit of contractor performance information. Government agencies are now required to enter all information into CPARS, which automatically transmits the information to the government-wide Past Performance Information Retrieval System (“PPIRS”).
The Good News
The most obvious advantage of the new rule is the creation of a standardized evaluation system that in theory will level the playing field for competing contractors in contract performance evaluations. Another notable benefit stems not from any newly added provisions but from the decision not to retract existing ones. The new rule as initially drafted would have excised several key components and procedures related to confidentiality and the process for appealing adverse evaluations. Under the old rule, contractors were entitled to receive their evaluations “as soon as practicable” – legal speak for as soon as reasonably possible – and had 30 days to respond or rebut evaluations determinations to the evaluating agency. If a dispute arose between a contractor and an agency regarding a past performance evaluation, the contractor was entitled to have the evaluation reviewed at a level above the CO.
The old rule also required agencies to keep evaluations confidential, in that they could be disclosed only to government personnel and the contractor whose evaluation was at issue. As initially proposed, the new rule would have eliminated both of these provisions altogether. After a period of robust comment – and protest – the federal government withdrew these proposed changes and restored the appeal process and confidentiality provisions in the old rule. The retention of these key procedural safeguards, while not exactly cause for celebration, is at least a small victory for the contractor community.
The Bad News(?)
When “good news” is merely that parts of an old rule remain unchanged, a new rule is bound to contain elements viewed as bad news by some of those affected. The most significant downside to the new rule may be one borne of missed opportunity: the federal government in revising the rule wasted a chance to create a system of past performance evaluation that would be less susceptible to the subjective whims of its human evaluators, including by failing to install enhanced procedural safeguards for challenging unfair or unreasonable performance ratings. As before, performance ratings under the new rule rise or fall with the almighty discretion of individual Contracting Officers; and as before, adverse ratings may be appealed to only one level above the CO, after which the decision becomes final and irreversible, barring costly and time-consuming litigation.
Another potential disadvantage is the lack of clear requirements for preserving the confidential nature of contractors’ information. As before, the rule prohibits disclosure of past performance evaluations to non-government personnel and requires agencies to put appropriate controls in place to ensure that “only authorized personnel have access” to such information. But the rule says virtually nothing about how these mandates will be accomplished or enforced.
Contractors bidding on qualifying federal projects must be wary of the potential for negative or unreasonable past performance evaluations and stay apprised of their options for mitigating the effects of negative information. For some contractors, the “one-level” appeal process will be insufficient to rectify the damage. All contractors subject to the new rule should try to ensure their proposals fully address negative performance ratings and explain the actions taken to correct the issues involved. They also must remain vigilant about the accuracy and integrity of their evaluations by actively promoting the dissemination of all relevant past performance data, including the most recently available information. Regardless of the extent to which the federal government might claim the new rule to have been carefully crafted, an evaluation system that is fully fair, accurate, and self-policing likely is a bridge too far.