Past Performance

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GAO has published its decision denying multiple protests of the Defense Health Agency’s decision to award the T-2017 managed care support contracts to Humana Government Business, Inc. and Health Net Federal Services, LLC. Humana won the TRICARE contract for the east region with a total evaluated price of $40.7 billion. Health Net won the west region contract with a total evaluated price of $17.7 billion.

One of the key issues addressed in GAO’s decision was the challenge to Humana’s past performance rating. Anthem subsidiary WellPoint Military Care Corporation argued that DHA placed so much weight on prior experience as a TRICARE prime contractor that incumbency amounted to an unstated evaluation criterion. In WellPoint’s view, incumbency was the “golden ticket to attaining the highest Substantial Confidence rating.”

GAO found no merit to WellPoint’s argument. There was nothing in the record to suggest that DHA treated incumbency as an unstated evaluation criterion. Indeed, DHA considered WellPoint’s own past performance superior to that of two other incumbent TRICARE contractors—Health Net and UnitedHealth Military & Veterans Services, LLC.

GAO also rejected the legal basis for WellPoint’s argument. While incumbency is not necessarily a golden ticket, GAO also found that it was reasonable to give credit to Humana for its prior experience managing a large TRICARE regional contract. In GAO’s view, “it is not unreasonable for an agency to place particular emphasis on a firm’s performance as an incumbent contractor, since such performance may be reasonably viewed as a more accurate indication of likely future performance . . . .”

Incumbency is not necessarily a golden ticket, but it certainly can’t hurt.

Contractors have the constitutional right to rebut past performance evaluations before they are stigmatized by the government’s assessments in the future. See Old Dominion Dairy Products, Inc. v. Secretary of Defense, 631 F.2d 953 (D.C. Cir. 1980). But full exercise of this right has the potential to conflict with the practical interest in efficient government procurement. The final revisions to the rules governing the process for reporting and appealing past performance evaluations demonstrate that the two ideals are not easily balanced. The Federal Register notice announcing the final revision to FAR 42.1503 can be found at 78 Fed. Reg. 46783 (Aug. 1, 2013) [pdf].

Helpful rules revisions

First the good news. The August 2013 final revisions to the rules requiring the government to evaluate past performance retain the existing requirement to allow contactor rebuttal and appeal. Commenters to the government’s proposal were unanimously against scrapping or substantially modifying the process. As summarized in the discussion of the final rule, commenters insisted that the appeals process “ensures that individual Government rater bias or lack of understanding of the complete program, not just contracting issues, can be brought out and addressed.” According to one commenter, at least 30 percent of past performance evaluation appeals result in substantive changes. The final rule maintains verbatim the language of former FAR 42.1503(b), now located at FAR 42.1503(d).

There is no doubt that contractors have the power to challenge an erroneous assessment of their performance on a government contract. FAR 42.1503 requires the government to issue past performance reviews in draft. Contractors are entitled to rebut any inaccuracies in the draft. Even if the government declines to make a requested change, contractors are entitled to have their comments included in the final report. Under the FAR disputes clause, contractors may submit a claim challenging a faulty past performance assessment. Denial of such a claim can be appealed to a Board of Contract Appeals or the United States Court of Federal Claims.

Of course getting a court decision reversing a poor past performance assessment presents a number of hurdles. One such hurdle is the requirement that a contractor submit a “claim” and that the contracting officer issue a final decision denying it. Without a claim and a final decision or sufficient passage of time to establish a “deemed denial,” there would be no jurisdiction allowing a Board or the Court to consider a contractor challenge to a poor past performance assessment.

But what happens when a negative past performance assessment is linked to unresolved disputes over delays, change orders, or government backcharges? Wouldn’t a resolution in the contractor’s favor necessarily require a reassessment of the contractor’s performance? As a matter of common sense, yes. Unfortunately common sense doesn’t create Contract Disputes Act jurisdiction. The recent decision in Extreme Coatings, Inc. v. United States, No. 11-895C (Fed. Cl. Oct. 3, 2012), concludes that a claim involving affirmative contractor claims or government counterclaims does not meet the jurisdictional requirement for a claim challenging past performance.

Since the Federal Awardee Performance and Integrity Information System opened to the public on April 15, 2011, contractors have been concerned that their trade secrets and other proprietary information might also become accessible. With good reason—the interim version of FAR 52.209-9 provided for the public availability of all newly submitted information other than “past performance reviews.”

The final rule on public access to FAPIIS specifically addresses the problem. Rather than simply ignoring Freedom of Information Act exemptions entirely as the interim rule did, the final form of FAR 52.209-9 (Jan. 3, 2012) [pdf] includes a mechanism that allows the contractor to identify information covered by a FOIA exemption.

Corrections to the proposed rewrite of FAR 42.1503 reinstate the contractor’s role in past performance evaluations. As published on June 28, 2011, the rewritten FAR provision omitted language from the existing clause that protects the contractor’s interests in the process. As corrected on August 9, the contractor protections have been restored.

Improving agency assessments of contractor past performance has been a priority since the Government Accountability Office published its 2009 report criticizing the system. A number of new FAR rules can be linked to GAO’s recommendations. For example, GAO pointed to the lack of reporting on default terminations and defective pricing. The FAR has now been amended to require default terminations and defective pricing be reported as part of a contractor’s past performance. See 75 Fed. Reg. 60258 (Sept. 29, 2010) [pdf]. The latest proposed revision to the FAR responds to GAO’s recommendation that there be greater uniformity in past performance reporting. See 76 Fed. Reg. 37704 (June 28, 2011). The proposed rule would revise FAR 42.1503 to include five minimum evaluation factors for which contractors are to be evaluated:  (i) Technical or Quality; (ii) Cost Control (as applicable); (iii) Schedule/Timeliness; (iv) Management or Business Relations; and (v) Small Business Subcontracting (as applicable).  The proposed rule would also impose a uniform ratings scale for use by past performance evaluators. As defined in the CPARS Policy Guide, past performance would have to be described as exceptional, very good, satisfactory, marginal, or unsatisfactory.

One response to the shortage of experienced federal contracting personnel and qualified DCAA auditors is to turn the job over to the public at large.  That seems to be the plan when it comes to the new federal contractor transparency initiatives, the most recent of which is the rule that will make the Federal Awardee Performance and Integrity Information System (FAPIIS) available to the public after April 15, 2011.  Like the business model adopted by Wikileaks, the concept appears be that posting selected contractor performance data on the internet will be like hiring 300 million inspectors general.  As with many government initiatives, the results are likely to cost more and achieve less than anticipated.