A negative past performance rating can have significant consequences on a contractor’s ability to obtain future contracts with the federal government.  The impact of such a negative rating is particularly great given that federal agencies are required to consider a prospective contractor’s past performance when making contract award decisions.  In view of the growing emphasis on past performance, the government’s evaluation system has come under ever-increasing scrutiny.  Government contractors often lament perceived inconsistencies in the evaluation process with mounting frustration over how these evaluations are weighted in the contract award process.  With these concerns in mind, the recent rule amending FAR sub-part 42.1500 seeks to provide greater clarity and consistency in the evaluation process.

Overview Of The Rule

On August 1, 2013, the Department of Defense (“DoD”), General Services Administration (“GSA”) and NASA jointly issued the new rule which seeks to standardize the evaluation process.  With regard to the frequency of performance evaluations, the rule provides that these evaluations must be performed at least annually (and also upon completion of any contract or purchase order with a total contract value over $150,000).  There are four main features of the new rule:

1)         the agencies must assign responsibility and management accountability for the completeness of past performance submissions;

2)         the agencies must include certain standardized evaluation factors (discussed in greater detail below);

3)         the agency must use a standardized rating scale to describe the contractor’s performance in each of the evaluation factors; and

4)         the agency must enter the information into the DoD Contractor Performance Assessment Reporting System (“CPARS”).

The CPARS system automatically transmits the information to the government-wide Past Performance Information Retrieval System (“PPIRS”).

Although the new rule imposes important (and needed) requirements geared towards greater fairness and consistency, the rule also maintains key aspects from the prior performance evaluation process.  Most notably, the new rule maintains a contractor’s right to submit comments, rebuttal, and additional information for consideration by the Contracting Officer.

Evaluation Factors To Be Considered And Ratings Systems

As part of the drive towards greater standardization, the revised rule establishes a standard set of Evaluation Factors that must be considered and addressed by the agency.  These standard Evaluation Factors must include:

(1)  Technical (quality of product or service);

(2)  Cost control (not applicable for firm-fixed-price or fixed-price with economic price adjustment arrangements);

(3)  Schedule/timeliness;

(4)  Management or business relations;

(5)  Small business subcontracting; and

(6)  Other (as applicable) (e.g., late or nonpayment to subcontractors, trafficking violations, tax delinquency, failure to report in accordance with contract terms and conditions, defective cost or pricing data, terminations, suspension and debarments).

FAR § 42.1503(b)(2).  The regulation also establishes a five scale rating system whereby each Evaluation Factor will be graded as either exceptional, very good, satisfactory, marginal, or unsatisfactory.  See id. § 42.1503(b)(4).

Contractor Comments On Performance Evaluations

Earlier versions of the revised rule had eliminated a contractor’s right to appeal from a negative performance evaluation; yet, the final version of the rule maintained this important safeguard.  In this regard, FAR § 42.1503(d) provides that:

Contractors shall be given a minimum of 30 days to submit comments, rebutting statements, or additional information.  Agencies shall provide for review at a level above the contracting officer to consider disagreements between the parties regarding the evaluation.  The ultimate conclusion on the performance evaluation is a decision of the contracting agency.

Although the FAR provides an initial avenue for seeking relief, a contractor faced with a negative performance evaluation has other options to the extent that it remains dissatisfied following the regulatory review process.  Specifically, a contractor can seek appellate review of a negative performance evaluation through the Contract Disputes Act (“CDA”) as described below.

Contractor Redress Of Past Performance Evaluations Through The Contract Disputes Act

Historically, disappointed offerors had little recourse at the Government Accountability Office or the Court of Federal Claims to challenge the federal government’s evaluation of its past performance in the context of a bid protest. In fact, with regard to sealed bids, the GAO will not review protests of non-responsibility determinations.  Challenges to performance evaluations in the context of negotiated procurements do not fare much better – i.e., an agency’s evaluation of an offeror’s past performance will not be disturbed unless it is shown to be unreasonable.  This holds true even where an agency selects an offeror with lower past performance ratings.  See Truetech, Inc., B-402536.2, 2010 CPD ¶ 129.  To be sure, the GAO has provided relief to protesters in limited situations – e.g., where there has been disparate treatment between offerors with similar performance history or where the agency has ignored relevant past performance information in the record.  See, e.g., Brican Inc., B-402602, 2010 CPD ¶ 141.  Yet, as a general matter, bid protests are not an effective avenue for correcting a problem with a past performance evaluation.

Fortunately, appellate review is available.  In this regard, the United States Court of Federal Claims and the Boards of Contract Appeals have both held that they have jurisdiction under the CDA over disputes regarding past performance evaluations.  Colonna’s Shipyard, Inc., ASBCA No. 56940, 10-2 BCA ¶ 34,494; Todd Constr. L.P., v. United States, 85 Fed. Cl. 34 (2008), aff’d, 656 F.3d 1306 (Fed. Cir. 2011).  The extent of available relief remains somewhat uncertain and the Court of Federal Claims has concluded that it lacks authority to order a performance evaluation to be stricken from the electronic reporting system.  At the same time, however, the Court of Federal Claims can remand the case to the agency with directions that the agency take “proper and just” steps to create an adequate record of the agency’s evaluation.

Although a contractor that has failed to obtain satisfactory recourse with the agency may seek judicial review under the CDA, two points merit emphasis regarding this process.  First, in order to seek judicial review, the contractor must first satisfy all of the prerequisites to seeking relief under the CDA.  For this reason, the contractor cannot seek review of a draft of a negative evaluation, but must wait instead for the final evaluation.  Similarly, the contractor must comply with the CDA’s requirements of a written demand seeking contract relief and request a contracting officer’s final decision.  Second, before undergoing the expense of an appeal regarding a negative performance evaluation, the disgruntled contractor should be aware that the agency’s actions in issuing such an evaluation will be evaluated under the highly deferential arbitrary and capricious standard.

Thus, the evaluation appeal process to the Contracting Officer retained in the final FAR Rule often presents the “best” alternative for dealing with a negative performance evaluation.