Corrective Action Will Improve An Adverse Past Performance Rating in Source Selection
Past performance is a significant aspect of source selection in negotiated procurement. When faced with an adverse performance review that is being considered by an agency in a new procurement, what should be the contractor’s approach? A recent Government Accountability Office (“GAO”) bid protest gives a concrete answer: effectively implement and document corrective measures that will change the past performance assessment for the instant procurement. DynCorp Int’l LLC, B-414647.2, .3, Nov. 1, 2017. In that source selection, both the protester and the awardee had documented instances of adverse past performance, but only the awardee had effectively implemented corrective measures, and improved its evaluation score because of those measures.
The Significance of Past Performance in Negotiated Procurement
The Federal Acquisition Regulation (“FAR”) states that “[p]ast performance  shall be evaluated in all source selections for negotiated competitive acquisitions expected to exceed the simplified acquisition threshold,” except where the contracting officer documents a specific reason why past performance is not an appropriate evaluation factor for the acquisition. FAR 15.304(c)(3)(i). This section implements the U.S. Code, which covers evaluation factors for both military and civilian procurements as follows:
Military-10 USC § 2305(a)(3)(A)(i)--In prescribing the evaluation factors to be included in each solicitation for competitive proposals, the head of an agency shall  clearly establish the relative importance assigned to the evaluation factors and subfactors, including the quality of the product or services to be provided (including technical capability, management capability, prior experience, and past performance of the offeror)…
Civilian-41 U.S.C. § 3306(c)(1)(A) (c)--In prescribing the evaluation factors to be included in each solicitation for competitive proposals, an executive agency shall establish clearly the relative importance assigned to the evaluation factors and subfactors, including the quality of the product or services to be provided (including technical capability, management capability, prior experience, and past performance of the offeror)…
The DynCorp protest involved an Air Force procurement of contractor logistic support for its fleet of 29 C-12 aircraft. The Request for Proposals (“RFP”) stated that a best value procurement would be conducted, and technical risk and past performance would be significantly more important than price. In the past performance area, the RFP advised offerors to clearly demonstrate management actions that showed improvements achieved or problems rectified, that could result in an offeror being considered a “higher confidence” candidate with respect to past performance.
The two final proposals evaluated were those of DynCorp and L-3 Communications, Vertex Aerospace. After an initial protest and a re-pricing, DynCorp’s price was $287 million, while L-3’s price was $300 million. All of the technical evaluation factors were scored the same, except for Past Performance, where DynCorp was rated “Satisfactory Confidence” and L-3 was rated “Substantial Confidence.” The Source Selection Authority concluded that L-3’s stronger performance quality provided a higher confidence that it would be successful with few performance issues, and that L-3’s superior performance quality warranted a 4.65 percent price premium. The Air Force awarded the contract to L-3.
DynCorp protested both the agency’s evaluation of its own past performance, as well as the agency’s evaluation of L-3’s overall higher confidence rating on past performance.
The GAO examined the past performance of DynCorp and the evaluation rating. The Air Force looked at DynCorp’s corrective actions, but concluded that they had not overcome “adverse issues in supply chain management” that resulted in a marginal rating for supply support. There was no indication in the record that DynCorp had ever resolved its past performance issues.
The GAO also examined L-3’s past performance and the Air Force’s rating thereof. DynCorp had argued that L-3 had “significant adverse past performance issues,” primarily on its C-12 support contract with the Army. Despite problems that L-3 had experienced in its program management, the evaluators noted that L-3 “took effective corrective action” for all problems encountered. The issues were from 2013 or earlier, and L-3 had taken successful corrective measures on all the issues identified.
The GAO found that the Air Force Source Selection authority had, in its discretion, properly concluded that DynCorp’s overall performance quality was not as strong as L-3’s, and further, that DynCorp was not as effective as L-3 in implementing successful corrective action measures. The benefits provided by L-3’s superior performance quality warranted a tradeoff for the additional $13.3 million, which was 4.65 percent higher than DynCorp’s price.
The Takeaway: Although a contractor’s past performance may be downrated or criticized, the solution is either to correct it (if the agency has improperly evaluated it), or the take effective corrective actions to change the future performance if there is a valid problem. Even though you may not be able to expunge the negative past performance rating, you can demonstrate in future source selections how your actions have improved, and why that poor rating is no longer applicable to your company. That is precisely why L-3 won this award, and GAO denied the protest.
For other helpful suggestions on government contracting, visit:
Richard D. Lieberman’s FAR Consulting & Training at https://www.richarddlieberman.com/, and Mistakes in Government Contracting at https://richarddlieberman.wixsite.com/mistakes.