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GAO Protest Highlights Wide Discretion Given to the Agency When Considering Contractors’ Negative Past Performance
Every Federal contractor knows the importance of a good past performance record, but many fail to fully appreciate the dangers of negative past performance. A recent GAO decision, Sterling Medical Associates, Inc., serves as a useful warning.
Sterling involved a Department of Veterans Affairs (“the VA” or “the Agency”) contract for the operation of a community-based outpatient clinic in McKean County, Pennsylvania. The solicitation provided that contractors would be evaluated on following evaluation factors, listed in descending order of importance: (1) technical capability; (2) past performance; (3) socio-economic program participation; and (4) price. With regard to factor 2, past performance, the VA was to evaluate each contractor’s past performance under existing and prior contracts involving similar primary care services. The solicitation further specified that the VA would analyze the relevance of past performance, by “focus[ing] on information that demonstrates quality of performance relative to the size and complexity of the procurement under consideration.” As in many source selections, the solicitation allowed that, in addition to the past performance information specifically submitted by the competing contractors in their proposals, the Agency could also obtain additional information from the Past Performance Information Retrieval System (PPIRS), other systems, agencies other than VA, and any other source.
Four offerors responded to the solicitation, including Sterling Medical Associates (“SMA”) and Valor Healthcare, Inc (“Valor”). The VA ultimately awarded the contract to Valor. Sterling then protested. One of the challenges raised by Sterling involved the Agency’s evaluation of Sterling’s own past performance. The Agency had assigned Sterling a rating of “Satisfactory Confidence” (whereas the awardee, Valor, had received a rating of “Substantial Confidence”).
The GAO shot down all three of Sterling’s specific arguments relating to the Agency’s past performance evaluation. Most important for our purposes today are the second and third arguments raised by Sterling. (The first argument related to an error that the Agency appears to have admitted. But, reasoning that the error did not appear to impact Sterling’s ultimate past performance rating, the GAO found that that there was no competitive prejudice. As readers of this blog may remember, a lack of competitive prejudice – aka prejudicial error – is a sure-fire protest-killer.)
Sterling’s second argument was that the VA’s source selection decision document (SSDD) demonstrated that the Agency relied on a “statistical analysis” of contractors past performance, whereas the Solicitation had required the Agency to consider relevance of past performance. Sterling argued that the statistical analysis did not properly restrict the Agency from considering irrelevant CPARS. The Agency had assigned the contractors’ CPARS data complexity ratings of low, medium, or high; Sterling argued that because the instant procurement was considered “medium complexity,” the Agency should have limited its past performance review to only those CPARS relating to other medium-complexity projects. The Agency, on the other hand, countered that all of the CPARS it considered related to work done on the same primary service code and North American Industry Classification System code as the procurement at issue. Moreover, all of the CPARS considered involved the operation of CBOCs providing primary care for the VA, as did the project at issue. Consequently, the VA, argued, all of the CPARS it reviewed were comparable in scope and complexity to the current effort and were, therefore, relevant. The GAO agreed with the VA, stating “we have no basis to find the agency’s judgment unreasonable. The scope of past performance information to consider is a matter within the agency’s discretion, and the fact that the agency could have, but did not elect to, further focus its review to only those efforts the protester views as most similar does not render the evaluation unreasonable or inconsistent with the solicitation.”
Sterling’s second argument alleged that the Agency hyper-focused on Sterling’s negative past performance and did not pay enough attention to its positive past performance, while focusing on Valor’s positive past performance only. Again, the GAO found this argument unpersuasive. The GAO acknowledged that the Agency did “primarily focus on the protester’s negative past performance information and on the awardee’s positive past performance information.” Nevertheless, the GAO noted that the statistical analysis listed all relevant (as defined by the Agency, see above) past performance information, both negative and positive, for both Valor and Sterling. Therefore, GAO reasoned, “the record reflect[ed] that the [A]gency did not selectively consider only negative information about the protester, or only positive information about the awardee.” The implication being, of course, that as long as the Agency initially considered everything, it was allowed to focus on whatever it liked, within reason. (Of course, it didn’t hurt that Sterling had a substantial amount of negative past-performance data for the Agency to focus on, including as related to the incumbent contract.) So again, GAO deferred to the Agency’s judgment.
So what does this mean for you? Well, there are a couple lessons to be learned here (in addition, of course, to the competitive prejudice refresher). As a threshold matter, be aware that an agency’s past-performance evaluation is, most likely, not going to be limited the past performance projects you submit as part of your proposal. As in this case, many solicitations give the procuring agency the right to consider other CPARS/PPIRS information, or relevant information that they can obtain related to Past Performance. The agency will have wide discretion on how they define what is “relevant” and “recent”; the agency will also have wide discretion in what weight they give various relevant past performance evaluations. Indeed, as the GAO stated here, “the relative merits of an offeror’s past performance information is generally within the broad discretion of the contracting agency.” And it is this last piece that becomes critically important, because what it really means is this: Even if you have a fair amount of positive past performance, any amount of relevant negative past performance can drag you down, impact your ratings, and thereby your ability to secure future work, if the Agency decides that is what it wants to focus on. The key, therefore, is to take advantage of every opportunity and method you have to challenge unjustified or unfair CPARS. Don’t wait, a protest will be too late.
If you have questions about how to challenge a CPARS, or protestable issues relating to Past Performance, the Obermayer team is here to help.
The information contained in this publication should not be construed as legal advice, is not a substitute for legal counsel, and should not be relied on as such. For legal advice or answers to specific questions, please contact one of our attorneys.