Past Performance Handbook: Applying Commercial Practices to Federal Procurement

CHAPTER 1

EVALUATING
PAST PERFORMANCE

The evaluation of past performance is not a new concept. It has been a long-established requirement that an offeror’s past performance be examined as part of the responsibility determination made just before contract award. ² Relatively new, however, are the requirements to consider an offeror’s past performance as an evaluation factor for source selection ³ and to evaluate a contractor’s performance annually and upon completion of a contract or order. ⁴

The requirement to use past performance as an evaluation factor in source selection was initiated by the Federal Acquisition Streamlining Act of 1994, which called for greater use of commercial practices in government procurement. In the private sector, good performers are rewarded with new business. Using past performance information in source selection, however, necessitates the availability of past performance information. Thus, the periodic evaluation of contractor performance is also required.

RELATED BUT DIFFERENT EVALUATIONS

Although the evaluation of an offeror’s past performance information for source selection and the evaluation of a contractor’s performance in executing a contract are related, they are very different kinds of evaluations. They have different purposes, are done at different times, and rely on different information sources. These two evaluations are linked, however, because they use the same evaluation criteria. Thus, the results of contractor performance evaluations provide the input-past performance information-for source selection evaluations.

Source Selection Evaluations

Purpose-The purpose of source selection evaluations is to assess the offeror’s ability to perform the prospective contract based on the offeror’s past performance on comparable contracts and then match it to the assessed ability of competing offerors as indicated by their past performance. An offeror’s past performance on other contracts is a good indicator of how well it might perform on future contracts. It can be a significant factor in the determination of the competitive range or in the source selection decision if the award is made without discussions. The evaluation results also can be a significant factor in tradeoff decisions and in the final source selection.

Timing-Evaluating past performance information for source selection is a solicitation activity primarily performed before establishing the competitive range or making an award without discussions. An offeror’s past performance also may be considered when making the source selection decision.

Information Sources-Information about an offeror’s performance on past contracts is obtained from contract references provided by the offeror, information gleaned from agency records or from third parties, and reports on contractor performance evaluations conducted by the contracting agency or other agencies.

Contractor Performance Evaluations

Purpose-The purpose of contractor performance evaluations is to obtain past performance information for use in source selection. The evaluations also motivate contractors to optimum performance because the results of the evaluation-past performance information-might be used in future award decisions.

Timing-Contractor performance evaluations must be conducted at the time the work under the contract or order is completed. In addition, interim evaluations must be conducted on contracts and orders exceeding one year.

Information Sources-Contractor performance evaluations are based on input from the acquisition team, which always includes representatives from the contracting and technical offices and, when appropriate, end users. The acquisition team also includes the financial, legal, audit, and other personnel involved with the contract, as well as the contractor that is furnishing the supplies or services.

SAME EVALUATION CRITERIA

Evaluation criteria are based on the same four assessment areas: quality of product or service, timeliness, cost control, and business relations. The first three of the areas-quality, timeliness, and cost control-are concerned with how well the contractor complied with the specific contractual requirements. The fourth assessment area, business relations, relates to the working relationship between the contractor and the government, as well as the contractor’s management in delivering the product or service.

In source selection, the evaluation criteria should be tailored to the specific elements of quality, timeliness, cost control, and/or business relations that are considered critical to successful completion of the proposed contract. The criteria (i.e., factors and significant subfactors) are stated in the request for proposals (RFP). ⁵ In contractor performance evaluations, the criteria are the requirements specified in the contract regarding quality, timeliness, and cost control, along with generally accepted professional standards for relating to the government and managing a contract.

MEASURABLE PERFORMANCE STANDARDS

The requirement to evaluate a contractor’s performance changes the way performance standards are written. In the past, performance standards were considered adequate if they served as the basis for a judgment regarding the acceptance or rejection of the contractor’s performance in furnishing a service or supply. Now, performance standards should facilitate a judgment regarding how well the contractor performed all aspects of contract execution, not just delivering the end results. This change places an added responsibility on the government to establish measurable performance standards that will enable an assessment, and not merely an acceptance or rejection, of a contractor’s performance.

The purpose of contractor performance evaluations is to provide past performance information for source selection. The more accurate and objective the past performance information, the more useful the information will be in source selection. The information will be accurate and objective to the extent that the evaluation was based on measurable performance standards.

Generally, it is not difficult to establish measurable performance standards for acquisitions that are expressed in terms of physical characteristics (e.g., construction and supply contracts). The physical characteristics-the description or specifications-contain measurable standards against which a contractor’s performance can be evaluated accurately and objectively.

Acquisitions that are expressed in terms of functions to be performed or performance required are a different story. The performance standards must be tailored to the instant acquisition, and their measurability varies depending on the nature of the acquisition. Using performance-based acquisition methods, ⁶ however, ensures that the performance standards are expressed to the highest degree of measurability for the instant acquisition. These methods include (1) expressing the requirements in terms of the results required and (2) establishing, to the extent practicable, measurable performance standards with respect to quality, timeliness, and quantity.

In summary, if the requirements are expressed in terms of physical characteristics, the performance standards are measurable and the contractor performance evaluation can result in an accurate and objective assessment of the contractor’s performance. If the requirements are expressed in terms of functions to be performed or performance required, the accuracy and objectivity of the evaluation of contractor performance depend on the extent to which the government was able to establish measurable performance standards. Thus, the usefulness (i.e., the accuracy and objectivity) of past performance information in the source selection depends on the measurability of the performance standards used in the contract.

ESTABLISHING THE BASIS FOR EVALUATION IN THE SOLICITATION AND CONTRACT

The basis for past performance evaluations for source selection is established in the solicitation. The basis for contractor performance evaluations is established in the contract.

Evaluation Basis for Source Selection

When using the uniform contract format, ⁷ the past performance evaluation criteria used for source selection are stated in the RFP’s Section M, Evaluation Factors for Award. Section M refers to the evaluation criteria as factors and significant subfactors. They must represent the key areas of importance and emphasis to be considered in the source selection decision and support meaningful comparison and discrimination between competing proposals. The rating method need not be disclosed, only the general approach for evaluating past performance information. The RFP must also state the relative importance of the non-cost evaluation factors in relation to cost or price.

Note that when acquiring commercial items, ⁸ a different contract format applies. Instructions to offerors on submitting past performance information are provided in solicitation provision FAR 52.212-1, and the past performance evaluation criteria are incorporated into solicitation provision FAR 52.212-2.

Evaluation Basis for Contractor Performance Evaluations

Performance standards are found in various parts of the contract. For example, in the uniform contract format, the performance standards are in Section C, Description/Specifications/Statement of Work; Section E, Inspection and Acceptance; Section F, Deliveries or Performance; and Section I, Contract Clauses. If the acquisition is for a commercial item, the performance standards are contained in the schedule of supplies/services (block 20 of the SF 1449) and in contract clauses 52.212-4 and 52.212-5.

Performance standards may be explicit, i.e., specifically stated in the contract, or implicit, i.e., implied in generally accepted professional or business practices regarding relations with the government. The contractor performance evaluation is an overall assessment of how well the contractor met its contractual commitment; it is not restricted to specifically identified evaluation criteria, as is the case with the evaluation for source selection.

The results of contractor performance evaluations are the best source of past performance information for use in source selection. The accuracy and objectivity of the past performance information depend on the measurability of the performance standards used in evaluating the contractor. The more measurable the performance standards, the more accurate and objective the past performance information. The more accurate and objective the past performance information, the more useful it will be in future award decisions.

PRE-AWARD AND POST-AWARD ACTIVITIES

Because the evaluation of past performance information in source selection and the evaluation of a contractor’s performance on current or completed contracts are two very different kinds of evaluations, each has its own policies and procedures. This book treats the evaluations separately. Source selection evaluations are a pre-award activity and are treated first in Chapters 2 through 6. Contractor performance evaluations, a post-award activity, are addressed in Chapters 7 through 12. The final chapter addresses legal rights that contractors can invoke to ensure fair evaluation of their past performance.

Note that disputes have arisen regarding the interpretation of past performance regulations. Such disputes are usually resolved through a formal bid protest filed with the Government Accountability Office (GAO) or the Court of Federal Claims. The resulting decision resolves the immediate protest on past performance. More important, however, these decisions, when considered as a body of law, fill in the “gaps” in the regulations and thereby serve both to inform federal contractors concerning their legal rights and to guide agency procurement officials’ actions in connection with future procurements.

GAO, in particular, has fostered consistent practices among agencies by issuing numerous decisions that provide guidance as to how the regulations should work in practice. At times, to support the discussion of past performance regulations, examples from GAO decisions are used in this handbook. The examples are presented in summary form, i.e., the issue and the rationale for the decision. Those who would like more information can find an abridged version of the GAO decision in Appendix B.

NOTES

1. Office of Federal Procurement Policy, Best Practices for Collecting and Using Current and Past Performance Information, May 2000, p. 1.

2. FAR 9.104-3(b). “Satisfactory performance record. A prospective contractor that is or recently has been seriously deficient in contract performance shall be presumed to be nonresponsible, unless the contracting officer determines that the circumstances were properly beyond the contractor’s control, or that the contractor has taken appropriate corrective action. Past failure to apply sufficient tenacity and perseverance to perform acceptably is strong evidence of nonresponsibility. Failure to meet the quality requirements of the contract is a significant factor to consider in determining satisfactory performance. The contracting officer shall consider the number of contracts involved and the extent of deficient performance in each contract when making this determination. If the pending contract requires a subcontracting plan pursuant to Subpart 19.7, The Small Business Subcontracting Program, the contracting officer shall also consider the prospective contractor’s compliance with subcontracting plans under recent contracts.”

3. FAR 15.304(c)(3)(i). “Except as set forth in paragraph (c)(3)(iii) of this section, past performance shall be evaluated in all source selections for negotiated competitive acquisitions expected to exceed the simplified acquisition threshold. (ii) For solicitations involving bundling that offer a significant opportunity for subcontracting, the contracting officer must include a factor to evaluate past performance indicating the extent to which the offeror attained applicable goals for small business participation under contracts that required subcontracting plans (15 U.S.C. 637(d)(4)(G)(Ii)). (iii) Past performance need not be evaluated if the contracting officer documents the reason past performance is not an appropriate evaluation factor for the acquisition.”

4. FAR 42.1502. “Policy
"(a) Past performance evaluations shall be prepared as specified in paragraphs (b) through (g) of this section at the time the work under the contract or order is completed. In addition, interim evaluations shall be prepared as specified by the agencies to provide current information for source selection purposes, for contracts or orders with a period of performance, including options, exceeding one year. These evaluations are generally for the entity, division, or unit that performed the contract or order. The content of the evaluations should be tailored to the size, content, and complexity of the contractual requirements.
"(b) Except as provided in paragraphs (e), (f) and (h) of this section, agencies shall prepare an evaluation of contractor performance for each contract that exceeds the simplified acquisition threshold.
"(c) Agencies shall prepare an evaluation of contractor performance for each order that exceeds the simplified acquisition threshold placed against a Federal Supply Schedule contract, or under a task order contract or a delivery order contract awarded by another agency (i.e. Governmentwide acquisition contract or multi-agency contract). This evaluation shall not consider the requirements under paragraph (g) of this section.
"(d) For single-agency task order and delivery order contracts, the contracting officer may require performance evaluations for each order in excess of the simplified acquisition threshold when such evaluations would produce more useful past performance information for source selection officials than that contained in the overall contract evaluation (e.g., when the scope of the basic contract is very broad and the nature of individual orders could be significantly different). This evaluation need not consider the requirements under paragraph (g) of this section unless the contracting officer deems it appropriate.
"(e) Past performance evaluations shall be prepared for each construction contract of $550,000 or more, and for each construction contract terminated for default regardless of contract value. Past performance evaluation may also be prepared for construction contracts below $550,000. (f) Past performance evaluations shall be prepared for each architect-engineer services contract of $30,000 or more, and for each architect-engineer services contract that is terminated for default regardless of contract value. Past performance evaluations may also be prepared for architect-engineer services contracts below $30,000. (g) Past performance evaluations shall include an assessment of contractor performance against, and efforts to achieve, the goals identified in the small business subcontracting plan when the contract includes the clause at 52.219-9, Small Business Subcontracting Plan.
"(h) Agencies shall not evaluate performance for contracts awarded under Subpart 8.7.”

5. FAR 15.304(b). “Evaluation factors and significant subfactors must- (1) Represent the key areas of importance and emphasis to be considered in the source selection decision: and (2) Support meaningful comparison and discrimination between and among competing proposals.”

6. FAR 37.102. “Policy
"(a) Performance-based acquisition (see Subpart 37.6) is the preferred method for acquiring services (Public Law 106-398, section 821). When acquiring services, including those acquired under supply contracts or orders, agencies must-
"(1) Use performance-based acquisition methods to the maximum extent practicable, except for- (i) Architect-engineer services acquired in accordance with 40 U.S.C. 1101 et seq.; (ii) Construction (see Part 36); (iii) Utility services (see Part 41); or (iv) Services that are incidental to supply purchases; and
“(2) Use the following order of precedence (Public Law 106-398, section 821(a)); (i) A firm-fixed price performance-based contract or task order. (ii) A performance-based contract or task order that is not firm-fixed price. (iii) A contract or task order that is not performance-based.”

7. FAR 15.204-1.

8. FAR 12.303. “Contract format. Solicitations and contracts for the acquisition of commercial items prepared using this Part 12 shall be assembled, to the maximum extent practicable, using the following format: (a) Standard Form (SF) 1449; …”