DAU Professor of Contracting, Jennifer Jones, explains the dual use of the phrase, “Past Performance” by the Federal Government in contracting and the motivational aspects involved.
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“Contracting Concepts: Past Performance By Jeninfer Jones
This is third in a series of introductory articles on contracting. When attending contracting certification courses, students often are asked to perform exercises that relate to contracting issues they may not understand. They can do the exercises following the processes we teach them, but the best students want to know what it all means. Their inquiries inspired me to write this series of articles.
It can be confusing when an identical phrase is used for two different steps at separate times in a larger process. “Past performance evaluation” is one such phrase. It is used in contracting in two places at quite different points in the contracting life cycle.
Federal Acquisition Regulation (FAR) subpart 15.304(c)(3) requires the government to evaluate past performance before awarding a contract under competitive negotiations. Then FAR 42.1502(a) requires past performance evaluations on certain contracts after award. We will break this down in chronological order.
Pre-award Performance Evaluation
In our daily lives, when we buy something, especially a major purchase, we often consider things other than cost or price in making our selection. For example, when buying a car, in addition to price, we may consider such things as gas mileage, number of seats, luggage capacity, free inspections, and oil changes. You may also consider some measure of reliability or quality. As another example, when seeking someone to work on your house, you ask for references to make sure you do not get a bad job, even if the price is fair.
Well, DoD does the same. We do not want to get the “low bid” if that means we do not get what we need. That would be a false economy. FAR 9.103(c) states, “The award of a contract to a supplier based on lowest evaluated price alone can be false economy if there is subsequent default, late deliveries, or other unsatisfactory performance resulting in additional contractual or administrative costs.” Past performance is one of several items that we consider in selecting a contractor. These other considerations are called “evaluation factors” in DoD contracting.
FAR 15.304 establishes mandatory evaluation factors when contracting by negotiations. The mandatory factors are price or cost, some measure of quality, and past performance. (Other factors pertain in specific circumstances but are not pertinent here.) Today we will focus on past performance. For our purpose, “past performance” means an offeror’s or contractor’s performance on active and physically completed contracts” (FAR 2.101). Basically, how well has the contractor performed on recent, relevant contracts? Did they do a good job? Were they cooperative and responsive? Did they control costs? Did they fix problems that might have arisen?
When seeking someone to work on your house, you ask for references to make sure you do not get a bad job, even if the price is fair. Well, DoD does the same. We do not want to get the “low bid” if that means we do not get what we need.
A record of past success. The Federal Acquisition Streamlining Act of 1994 established a requirement for the government to create policies to encourage consideration of past contract performance in selecting contractors for future awards. As a result, FAR was updated to add past performance as an evaluation factor. The idea is that one of the best predictors of future success is a record of past success.
Simplified acquisition threshold. FAR 15.304(c)(3) states that past performance shall be evaluated in all source selections for negotiated competitive acquisitions expected to exceed the simplified acquisition threshold unless the contracting officer documents the reason past performance is not an appropriate evaluation factor for the acquisition. The simplified acquisition threshold is currently $250,000 in normal circumstances. Thus, one might think that we are required to evaluate past performance for all acquisitions valued at more than $250,000 using competitive negotiations under FAR part 15. Thankfully, that is not the case.
DoD has a class deviation (CD 2013-O0018) that adjusts this dollar threshold depending on what we buy. The following are the thresholds at which DoD contracting offices must evaluate past performance before award:
Systems and operations support acquisitions expected to exceed $5 million.
Services and information technology acquisitions expected to exceed $1 million.
Ship repair and overhaul acquisitions expected to exceed $500,000.
(For additional clarity on these categories, see Guidance for the Contractor Performance Assessment Reporting System [p. 29].)
Interestingly enough, a version of this class deviation has been around since at least 1997, with only minor changes to the business sectors that are covered, and no change to the dollar amounts in the major categories of systems or information technology/services.
Currency. When evaluating past performance before the award, we must consider such factors as currency. If the contract was performed four years ago, it might not be a good predictor of how well the company would do today. For this reason, we generally only consider past performance information that is 3 years old or less.
Trends. We look for trends. If the company was terrific three years ago but recent ratings have been only mediocre or poor, maybe something is wrong.
Relevance. We consider relevance. How similar is the past performance we are evaluating to the work required under our new requirement? This may involve the type of supply or service, the dollar value, levels of classification/security, type of contract (fixed price or cost reimbursement), where the work was performed (e.g., outside the United States), key personnel, etc.
Actual quality of prior work. And finally, we evaluate the actual quality of the prior work. Did the firm do a quality job? Did they control costs? Were they cooperative and businesslike? All of this is devised to help us select the best value for the government: the contractor with low or reasonable risk at a fair price.
As a contracting officer in Naples, Italy, in the late 1990s, I struggled with this new mandate with no idea of how to obtain the information. So, we included a provision in our solicitations requiring offerors to provide us with references—usually three to five similar, current contracts. We would then fax or email those contacts and wait days or weeks for a response—and follow up if none was forthcoming.
This added a great deal of time and effort to the acquisition process. It also was a burden on the references. The Contracting Officer Representatives or Administrative Contracting Officers who now had to reply to all of these queries found this process time-consuming and seemingly not pertinent to their current jobs.
Post-award Performance Evaluation
FAR 42.1502(b) requires that the government evaluate and report on past performance for contracts valued above the simplified acquisition threshold. As with pre-award evaluations, for DoD, class deviation 2013-O0018 also increases the post-award past performance reporting thresholds to the same level as those noted previously for pre-award past performance evaluation.
As discussed earlier, obtaining past performance information was onerous early in this mandate for both pre- and post-award personnel. Fortunately, that has changed.
As we became more technologically savvy, a combined database was created for collecting, documenting, sharing, and accessing past performance information where DoD (military and civilian agencies) are required to report evaluations: the CPARS, or Contractor Performance Assessment Reporting System. (For other resources on past performance evaluations, see the Federal Acquisition Institute website at https://www.fai.gov/.)
As the contracting officers in Naples, we eventually had to report information on our contractors in the predecessor system to CPARS. We had a major contract providing fleet support with multiple subcontractors. We discovered that one subcontractor was not complying with the contract by using an unfair exchange rate. We reported this serious problem in the past performance evaluation of the prime contractor.
Contractors consider their favorable past performance records a major asset and work hard to maintain positive ratings. This benefits the government because we obtain better supplies or services as a result.
In this system, the evaluator inputs their comments and ratings, which must be based on fact and documented. The contractor then has an opportunity to rebut any information perceived as inaccurate or incomplete. After the rebuttal is complete, the contracting officer performs the final assessment, which is then downloaded into CPARS.
When we recorded our initial assessment, the prime contractor took immediate remedial action and discontinued using that particular subcontractor. That allowed us to improve the prime contractor’s past performance rating. Though we had found an issue, the contractor promptly corrected the problem. This demonstrated the power of past performance evaluations. Contractors consider their favorable past performance records a major asset and work hard to maintain positive ratings. This benefits the government because we obtain better supplies or services as a result.
So how do these two come together? A contractor is selected for an award based, in part, on an evaluation of its past performance, often using information from CPARS. As the contractor fulfills the contract, their past performance is assessed and reported into CPARS. That information is used in turn to evaluate that contractor for potential future contracts.
Therefore, while it remains the government repository for collecting contractor performance information, CPARS also is a primary source of past performance data for source selection purposes. The guide states that “Source selection officials retrieve evaluations by using ‘View Performance’ in CPARS.” Thus, past performance evaluation and reporting create a loop or are, as we say, two sides of the same coin.”
JONES is a professor of Contract Management at DAU’s South Region. She has worked in the defense contracting field for 44 years and holds a B.S. from the College of William and Mary.
The author can be contacted at jennifer.jones@dau.edu“
For Additional information on this subject from a small business perspective please see the following article at SMALLTOFEDS:
Meeting The Small Business Federal Government Contracting “Past Performance” Challenge https://www.smalltofeds.com/2008/07/small-business-government-contracting.html
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