By: Joseph A. Hackenbracht

For many years, the boards of contract appeals have considered challenges to performance evaluations and declined, for various reasons, to hear those cases. Then, in 2008, the U.S. Court of Federal Claims held that it possessed jurisdiction to address a contractor’s challenge of the performance rating it had been given by the Corps of Engineers. Todd Construction Company, Inc. v. U.S., 85 Fed.Cl. 34, 2008. (see our earlier blog article) Todd had submitted a “claim” pursuant to the Contract Disputes Act (CDA) challenging its performance rating and the Court concluded that submission of the claim satisfied its “jurisdictional prerequisite.”

In 2010, after the Todd decision was issued by the Court of Federal Claims, the Armed Services Board of Contract Appeals decided that it also could address challenges to performance ratings based on the board’s jurisdiction to determine the rights and obligations of parties under the terms and conditions of their contract. Appeal of Versar, Inc., ASBCA No. 56857, 10-1 BCA ¶ 34437, May 6, 2010. Also in 2010, in a case where the contractor submitted a CDA claim challenging the performance rating, the Board held that under the CDA, it has jurisdiction to “decide any appeal” involving a claim “relating to a contract.” Appeal of Colonna’s Shipyard, Inc., ASBCA No. 56940, 10-2 BCA ¶ 34494, June 24, 2010.

Last month, the Board issued a follow-up decision in Versar addressing the merits of claimant’s position that its performance rating was issued in error. The Board found that Versar had failed to show that its performance rating was arbitrary and capricious, the requisite standard, and, therefore, denied Versar’s claim. In so doing, the Board stated that “bare or insufficient allegations cannot sustain a claim that the government issued an unjustified performance rating.”Appeals of Versar, Inc., ASBCA Nos. 56857 et al., 2012 WL 1579539, April 23, 2012. In its discussion, the Board referenced a decision of the United States Court of Appeals for the Federal Circuit, Todd Const. L.P. v. U.S., 656 F.3d 1306, C.A. Fed. 2011, where the Circuit Court affirmed the decision of the Court of Federal Claims to dismiss a challenge to a performance rating on the basis that the contractor failed to state a claim upon which relief could be granted. In its decision, the Circuit Court affirmed the lower court’s determination that it had jurisdiction to hear cases involving challenges of performance ratings issued by the government.

Decisions of the Court of Appeals for the Federal Circuit are precedent for both the Court of Federal Claims and the boards of contract appeals. Going forward, therefore, contractors can expect that both the boards and the Court of Federal Claims will address challenges of performance ratings in accordance with the Circuit Court’s decision in Todd Const. L.P. v. United States. Contractors can be encouraged that it is now settled that both the boards and the court have jurisdiction to hear challenges of adverse performance ratings.

Upon receipt of an unacceptable performance rating, a contractor should submit a claim under the Contract Disputes Act challenging the rating as arbitrary and capricious. The contractor needs to raise specific objections to individual ratings and demonstrate the errors in the government’s evaluation. After receiving a decision, or in the event a decision is not issued, the contractor should file an action in either the appropriate board of contract appeals or the Court of Federal Claims.

Contractors must be prepared to plead the facts specifically and in detail, and identify individually, which ratings are arbitrary and capricious and why they are erroneous. Contractors also need to be sure to allege what the ratings should have been and that the outcome would have been different if the errors had not been made. In order to avoid dismissal based on standing, it may also be necessary to establish that the negative rating has caused injury, and has prejudiced the contractor. One way to demonstrate the prejudice and injury may be to present facts that the negative rating resulted in the contractor not receiving a contract.

As the ASBCA noted in Versar, the contractor did not provide the board with “specifics of the rating, ratings process, categories, and details,” as well as evidence of what the rating should have been. If contractors want the court to step into the fray, they must furnish the court with the specifics to establish that the government’s evaluations are erroneous and the subsequent ratings are arbitrary and capricious. Unsupported allegations and conclusory statements will not win the day.

Joseph A. Hackenbracht is a Partner in the firm and a member of the Federal Contracting Practice Group.