Past performance returns

After years of benign neglect from the Office of Federal Procurement Policy, it looks like the use of past-performance data in contractor selection might be back on the agenda. On July 1, the administration published an amendment to the Federal Acquisition Regulation that requires agencies to file past-performance report cards on their contractors in a central location, the Past Performance Information Retrieval System. The administration plans to spot-check some of the cards for completeness.

Past performance, I have frequently noted, is one of the most fundamental ways that free markets work to satisfy consumers: Providers who perform well get repeat business; those who don’t, don’t.

Past performance began to emerge as a topic of congressional interest about two years ago. Unfortunately, though not surprisingly, Congress was most concerned about the punitive element of past performance — punishing bad contractors — and not the other side, rewarding good ones for performing well.

If the new administration plans to shine a spotlight on improving use of past performance, that would be great news. It works well in cases when its use is informal and nonbureaucratic, such as when agencies choose suppliers from whom to solicit bids from for task orders under a General Services Administration schedule contract.

The problem has been with the formalized system embedded in the FAR. Let’s be honest about the fundamental problem: Evaluators aren’t honest. Government customers seldom say negative things about contractors, and they too seldom say wildly positive things. Thus, report cards aren’t enough of a differentiator in source selection to influence outcomes often, thus vitiating their incentive effect.

Putting flawed past-performance reports in the same place will just centralize flawed documents. If the administration is serious, two broader reforms are needed. The first is to eliminate the right of the contractor to appeal a negative rating, or any negative information, to a level above the organization that issued the report card. Frontline staff members rightly conclude that negative comments constitute an invitation to spend hundreds of hours defending their judgments, so they skip the hassle. The current system should be replaced by a simple right for contractors to place their versions of events in the file, but nothing else. The extra layer of due process is harmful.

To get the details of outstanding performance on important contracts, the government should conduct verbal interviews of program and contracting officials. Trained interviewers can get information that doesn’t come out through current practices, and that would improve the quality of information in past-performance reports.

Past performance has a lot of potential as a tool to produce better supplier performance. It’s worth the effort to do it right.