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Testimony before the Subcommittee on Government Management, 
Organization, and Procurement, Committee on Oversight and Government 
Reform, House of Representatives: 

United States Government Accountability Office: 

GAO: 

For Release on Delivery Expected at 2:00 p.m. EDT: 

Wednesday, July 18, 2007: 

Federal Contracting: 

Use of Contractor Performance Information: 

Statement of William T. Woods, Director: 
Acquisition and Sourcing Management: 

GAO-07-1111T: 

GAO Highlights: 

Highlights of GAO-07-1111T, a testimony before the Subcommittee on 
Government Management, Organization, and Procurement, Committee on 
Oversight and Government Reform, House of Representatives 

Why GAO Did This Study: 

The federal government is the largest single buyer in the world, 
obligating over $400 billion in fiscal year 2006 for a wide variety of 
goods and services. Because contracting is so important to how many 
agencies accomplish their missions, it is critical that agencies focus 
on buying the right things the right way. This includes ensuring that 
contracts are awarded only to responsible contractors, and that 
contractors are held accountable for their performance. Use of 
contractor performance information is a key factor in doing so. 

This testimony covers three main areas concerning the use of contractor 
performance information: (1) the various ways in which a contractor’s 
performance may be considered in the contracting process; (2) how 
information on past performance is to be used in selecting contractors, 
as well as the various mechanisms for how that occurs; and (3) some of 
the key issues that have arisen in considering past performance in 
source selection, as seen through the prism of GAO’s bid protest 
decisions. 

GAO has previously made recommendations for improving the use of 
contractor performance information, but is not making any new 
recommendations in this testimony. 

What GAO Found: 

The government contracting process provides for consideration of 
various aspects of contractor performance at multiple points:
* Source selection: Past performance is required to be an evaluation 
factor in selecting contractors, along with factors such as price, 
management capability, and technical approach to the work.
* Responsibility determinations: Once a contractor is selected for 
award, the contracting officer must make a responsibility determination 
that the prospective awardee is capable and ethical. This includes, for 
example, whether the prospective awardee has a satisfactory performance 
record on prior contracts.
* Surveillance under the current contract: Once a contract is awarded, 
the government monitors a contractor’s performance throughout the 
performance period, which may serve as a basis for performance 
evaluations in future source selections.
* Debarment: To protect the government’s interests, agencies can debar, 
that is preclude, contractors from receiving future contracts for 
various reasons, including serious failure to perform to the terms of a 
contract. 

Agencies are required to consider past performance in all negotiated 
procurements above the simplified acquisition threshold of $100,000 and 
in all procurements for commercial goods or services. Although past 
performance must be a significant evaluation factor in the award 
process, agencies have broad discretion to set the precise weight to be 
afforded to past performance relative to other factors in the 
evaluation scheme. Whatever they decide about weights, agencies must 
evaluate proposals in accordance with the evaluation factors set forth 
in the solicitation, and in a manner consistent with applicable 
statutes and regulations. In evaluating an offeror’s past performance, 
the agency must consider the recency and relevance of the information 
to the current solicitation, the source and context of the information, 
and general trends in the offeror’s past performance. The key 
consideration is whether the performance evaluated can reasonably be 
considered predictive of the offeror’s performance under the contract 
being considered for award. 

Although a seemingly simple concept, using past performance information 
in source selections can be complicated in practice. GAO bid protest 
decisions illustrate some of the complexities of using past performance 
information as a predictor of future contractor success. Some of the 
questions raised in these cases are:
* Who: Whose performance should the agencies consider?
* What: What information are agencies required or permitted to consider 
in conducting evaluations of past performance?
* When: What is the period of time for which agencies will evaluate the 
past performance of contractors?
* Where: Where do agencies obtain contractor performance information? 

[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-071111T]. 

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact William T. Woods at (202) 
512-4841 or woodsw@gao.gov. 

[End of section] 

Mr. Chairman and Members of the Subcommittee: 

Thank you for inviting me here today to discuss the use of contractor 
performance information. The federal government is the largest single 
buyer in the world, obligating over $400 billion in fiscal year 2006 
for a wide variety of goods and services. Spending on contracts across 
the government has increased significantly in recent years and 
currently represents about a quarter of discretionary spending 
governmentwide. Because contracting is so important to how many 
agencies accomplish their missions, it is critical that agencies focus 
on buying the right things the right way. This includes ensuring that 
contracts are awarded only to responsible contractors, and that 
contractors are held accountable for their performance. 

Today I would like to cover three main areas concerning the use of 
contractor performance information. First, I will discuss the various 
ways in which a contractor's performance may be considered in the 
contracting process. Second, I will discuss in more detail how 
information on past performance is to be used in selecting contractors, 
as well as the various mechanisms for how that occurs. And third, I 
will highlight some of the key issues that have arisen in considering 
past performance in source selection, as seen through the prism of 
GAO's bid protest decisions. 

In preparing this statement, we analyzed federal statutes, regulations, 
and government-wide guidance, as well as more specific guidance from 
the Departments of Defense (DOD), Energy (DOE), and Homeland Security 
(DHS) concerning the use of contractor past performance information in 
awarding contracts. We selected these agencies because they were the 
three largest agencies in terms of federal contracting dollars 
obligated during fiscal year 2006. We also reviewed prior GAO reports 
on related topics, as well as relevant bid protest decisions. This 
statement is based primarily on prior GAO work that was conducted in 
accordance with generally accepted government auditing standards. 

Contractor Performance Is to Be Considered at Multiple Points in the 
Contracting Process: 

The government contracting process provides for consideration of 
various aspects of contractor performance at multiple points: 

* Past performance as source selection factor: Only relatively recently 
have federal agencies been required to consider past performance in 
selecting their contractors. In 1997, the Federal Acquisition 
Regulation (FAR) was modified to require that agencies consider past 
performance information as an evaluation factor in source selection. 
Past performance is now required to be an evaluation factor in 
selecting contractors, along with factors such as price, management 
capability, and technical approach to the work. 

* Responsibility determinations: Once a contractor is selected for 
award, the contracting officer must make an affirmative determination 
that the prospective awardee is capable and ethical. This is known as a 
responsibility determination, and includes, for example, whether a 
prospective awardee has adequate financial resources and technical 
capabilities to perform the work, has a satisfactory record of 
integrity and business ethics, and is eligible to receive a contract 
under applicable laws and regulations.[Footnote 1] As part of the 
responsibility determination, the contracting officer also must 
determine that the prospective awardee has a "satisfactory performance 
record" on prior contracts. This determination of the prospective 
awardee's responsibility is separate from the comparison of the past 
performance of the competing offerors conducted for purposes of source 
selection.[Footnote 2] 

* Surveillance of performance under the current contract: Once a 
contract is awarded, the government should monitor a contractor's 
performance throughout the performance period. Surveillance includes 
oversight of a contractor's work to provide assurance that the 
contractor is providing timely and quality goods or services and to 
help mitigate any contractor performance problems. An agency's 
monitoring of a contractor's performance may serve as a basis for past 
performance evaluations in future source selections. GAO reported in 
March, 2005 on shortfalls at DOD in assigning and training contract 
surveillance personnel, and recommended improvements in this area. 

* Suspension and debarment: Contractor performance also comes into play 
in suspensions and debarments. A suspension is a temporary exclusion of 
a contractor pending the completion of an investigation or legal 
proceedings, while a debarment is a fixed-term exclusion lasting no 
longer than 3 years. To protect the government's interests, agencies 
can debar contractors from future contracts for various reasons, 
including serious failure to perform to the terms of a contract. 
Suspensions and debarments raise a whole set of procedural and policy 
issues beyond past performance, not the least of which is the question 
of whether these are useful tools in an environment in which recent 
consolidations have resulted in dependence on fewer and larger 
government contractors. Questions have also been raised about whether 
delinquent taxes or an unresolved tax lien should result in suspension 
or debarment. A proposed revision to the FAR would list these tax 
issues as grounds for suspension or debarment.[Footnote 3] In July 
2005, GAO reported on the suspension and debarment process at several 
federal agencies and recommended ways to improve the process. 

Past Performance Should Play a Key Role in Source Selection: 

In the Federal Acquisition Streamlining Act (FASA) of 1994, Congress 
stated that in the award of contracts, agencies should consider the 
past performance of contractors to assess the likelihood of successful 
performance of the contract. FASA required the adoption of regulations 
to reflect this principle, and the FAR now requires the consideration 
of past performance in award determinations. The Office of Federal 
Procurement Policy (OFPP) has issued guidance on best practices for 
using past performance information in source selection, and individual 
agencies have issued their own guidance on implementing the FAR 
requirements. 

For agencies under the FAR, a solicitation for a contract must disclose 
to potential offerors all evaluation factors that will be used in 
selecting a contractor. Agencies are required to consider past 
performance in all negotiated procurements above the simplified 
acquisition threshold of $100,000 and in all procurements for 
commercial goods or services. Although past performance must be a 
significant evaluation factor in the award process, agencies have broad 
discretion to set the precise weight to be afforded past performance 
relative to other factors in the evaluation scheme. Whatever they 
decide about weights, agencies must evaluate proposals in accordance 
with the evaluation factors set forth in the solicitation, and in a 
manner consistent with applicable statutes and regulations. Agencies 
must allow offerors to identify past performance references in their 
proposals, but also may consider information obtained from any other 
source. In evaluating an offeror's past performance, the agency must 
consider the recency and relevance of the information to the current 
solicitation, the source and context of the information, and the 
general trends in the offeror's past performance. Offerors who do not 
have any past performance may not be evaluated favorably or 
unfavorably. That is, they must receive a neutral rating. 

In addition, the OFPP has issued guidance on best practices for 
considering past performance data.[Footnote 4] Consistent with the FAR, 
OFPP guidance states that agencies are required to assess contractor 
performance after a contract is completed and must maintain and share 
performance records with other agencies. The guidance encourages 
agencies to make contractor performance records an essential 
consideration in the award of negotiated acquisitions, and gives 
guidelines for evaluation. It also encourages agencies to establish 
automated mechanisms to record and disseminate performance information. 
If agencies use manual systems, the data should be readily available to 
source selection teams. Performance records should specifically address 
performance in the areas of: (1) cost, (2) schedule, (3) technical 
performance (quality of product or service), and (4) business 
relations, including customer satisfaction, using a five-point rating 
scale.[Footnote 5] 

Agencies may also issue their own supplemental regulations or guidance 
related to past performance information. All of the three largest 
departments in federal procurement spending - the Department of 
Defense, the Department of Energy, and the Department of Homeland 
Security - provide at least some additional guidance in the use of past 
performance data, addressing aspects such as the process to be followed 
for considering past performance during contract award and what systems 
will be used to store and retrieve past performance data. Below are 
some examples that illustrate the types of guidance available. 

* DOD offers instruction on using past performance in source selection 
and contractor responsibility determinations through the Defense 
Federal Acquisition Regulation Supplement and related Procedures, 
Guidance, and Information. DOD's Office of Defense Procurement and 
Acquisition Policy also has made available a guide that provides more 
detailed standards for the collection and use of past performance 
information, including criteria applicable to various types of 
contracts. 

* DOE also provides additional guidance to contracting officers in the 
form of an acquisition guide that discusses current and past 
performance as a tool to predict future performance, including 
guidelines for assessing a contractor's past performance for the 
purpose of making contract award decisions as well as for making 
decisions regarding the exercise of contract options on existing 
contracts. 

* At DHS, the department's supplemental regulations outline which 
systems contracting officers must use to input and retrieve past 
performance data. Specifically, contracting officers and contracting 
officer representatives are required to input contractor performance 
data into the Contractor Performance System, managed by the National 
Institutes of Health, and use the Past Performance Information 
Retrieval System (PPIRS) - which contains contractor performance 
ratings from multiple government systems - to obtain information on 
contractor past performance to assist with source selection. 

Issues in Using Past Performance in Source Selection: 

Although a seemingly simple concept, using past performance information 
in source selection can be complicated in practice. GAO has not 
evaluated the practices that agencies use regarding contractor past 
performance information in source selection or whether those practices 
promote better contract outcomes. Our bid protest decisions, however, 
illustrate some of the complexities of using past performance 
information as a predictor of future contractor success. Some of these 
issues are listed below. In all of these cases, the key consideration 
is whether the performance evaluated can reasonably be considered 
predictive of the offeror's performance under the contract being 
considered for award. 

* Who: One issue is whose performance agencies should consider. Source 
selection officials are permitted to rate the past performance of the 
prime contractor that submits the offer, the key personnel the prime 
contractor plans to employ, the major teaming partners or 
subcontractors, or a combination of any or all of these. For example, 
in one case, GAO found that the agency could consider the past 
performance of a predecessor company because the offeror had assumed 
all of the predecessor's accounts and key personnel, technical staff, 
and other employees.[Footnote 6] In another case, GAO held that an 
agency could provide in a solicitation for the evaluation of the past 
performance of a corporation rather than its key personnel.[Footnote 7] 

* What: Also at issue is what information agencies are required or 
permitted to consider in conducting evaluations of past performance. 
The issue is one of relevancy. Agencies must determine which of the 
contractor's past contracts are similar to the current contract in 
terms of size, scope, complexity, or contract type. For example, is 
past performance building single family homes relevant to a proposal to 
build a hospital? Agencies do not have to consider all available past 
performance information. However, they should consider all information 
that is so relevant that it cannot be overlooked, such as an incumbent 
contractor's past performance. In one case, GAO found that an agency 
reasonably determined that the protester's past performance on small 
projects was not relevant to a contract to build a berthing wharf for 
an aircraft carrier.[Footnote 8] 

* When: Agencies also have to determine the period of time for which 
they will evaluate the past performance of contractors. Agencies are 
required to maintain performance data for 3 years after the conclusion 
of a contract[Footnote 9] although agencies have discretion as to the 
actual length of time they consider in their evaluation of past 
performance and could, for example, choose a period longer than 3 
years. In one case, GAO held that although the solicitation required 
the company to list contracts within a 3-year time frame, the agency 
could consider contract performance beyond this timeframe because the 
solicitation provided that the government may "consider information 
concerning the offeror's past performance that was not contained in the 
proposal."[Footnote 10] 

* Where: Once agencies determine who they will evaluate, what 
information they will consider, and the relevant time frame, they still 
may have difficulties obtaining past performance information. Agencies 
can obtain past performance information from multiple sources, 
including databases such as PPIRS - a centralized, online database that 
contains federal contractor past performance information. However, in 
2006, the General Services Administration noted that PPIRS contains 
incomplete information for some contractors. Agencies may also obtain 
information from references submitted with proposals and reference 
surveys. One case illustrates how an agency evaluated a company based 
on limited past performance information. The agency assigned the 
company a neutral rating because the agency did not receive completed 
questionnaires from the company's references listing relevant work and 
the solicitation provided that it was the company's obligation to 
ensure that the past performance questionnaires were completed and 
returned.[Footnote 11] 

These are just some of the many issues that have been the subject of 
protests involving the use of past performance. Our cases are not 
necessarily representative of what may be occurring throughout the 
procurement system, but they do provide a window that allows us to get 
a glimpse of how the issue is handled across a number of agencies. At a 
minimum, however, our cases suggest that the relatively straightforward 
concept of considering past performance in awarding new contracts has 
given rise to a number of questions that continue to surface as that 
concept is implemented. 

Mr. Chairman, this concludes my statement. I would be happy to respond 
to any questions you or other Members of the Subcommittee may have at 
this time. 

For further information regarding this testimony, please contact 
William T. Woods at (202) 512-4841 or woodsw@gao.gov. Individuals 
making key contributions to this testimony included Carol Dawn 
Petersen, E. Brandon Booth, James Kim, Ann Marie Udale, Anne McDonough- 
Hughes, Kelly A. Richburg, Marcus Lloyd Oliver, Michael Golden, 
Jonathan L. Kang, Kenneth Patton, and Robert Swierczek. 

FOOTNOTES 

[1] FAR § 9.104-1. 

[2] FAR § 15.305(a)(2)(i). 

[3] For more information on contractor tax compliance, see Tax 
Compliance: Thousands of Federal Contractors Abuse the Federal Tax 
System, GAO-07-742T (Washington, D.C.: April 19, 2007). 

[4] Federal law gives the Office for Federal Procurement Policy the 
authority to prescribe guidance for executive agencies regarding 
standards for (1) evaluating past performance of contractors, and (2) 
collecting and maintaining information on past contract performance. In 
May of 2000, OFPP published discretionary guidance entitled "Best 
Practices for Collecting and Using Current and Past Performance 
Information." 

[5] The guidance also addresses the evaluation of affiliates, the 
contractor comment process, and the retention of performance evaluation 
records. 

[6] Al Hamra Kuwait Co., B-288970, December 26, 2001. 

[7] Olympus Bldg. Svcs., B-282887, August 31, 1999. 

[8] Marathon Constr. Co., B-284816, May 22, 2000. 

[9] FAR §42.1503(e). 

[10] BST Systems, Inc., B-298761, B-298761.2, December 1, 2006. 

[11] American Floor Consultants, Inc., B-294530.7, June 15, 2006. 

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