Federal Construction Contracting Blog : Federal Construction Contracting Law Firm : Cohen Seglias Pallas Greenhall & Furman PC : Construction Law, Dredging and Claims

We recently reported (see our earlier blog article) the decision of the United States Court of Federal Claims in BLR Group of America, Inc. v. United States, issued on November 25, 2008, in which the Court opened the door to contractor challenges of unfair or incorrect performance evaluations.  Coming literally on the heels of the BLR case, the Court issued another decision on December 9, 2008, Todd Construction Co., Inc. v. United States, denying a government motion to dismiss and holding that the Court had the jurisdiction to consider a challenge to a contracting officer’s decision regarding a contractor’s performance evaluation.  The Court held that Todd had submitted a “claim” within the meaning of the Contract Disputes Act of 1978 because, on March 22, 2006, the Government issued its proposed final evaluations of Todd’s work, and on April 20, 2006, Todd submitted its comments protesting those evaluations.  The Government issued final evaluations on July 21, 2006, and Todd submitted both a claim and a supplemental claim to the Department of the Army, asserting regulatory violations in the preparation of the evaluations and lack of factual accuracy. On April 25, 2007, the contracting officer wrote to Todd, indicating the letter “serves as my final decision regarding your performance on the above Task Order” with a subject line “Final Contracting Officer Decision.”  Based upon these facts, the Court held that “this is a final decision of the contracting officer upon a written demand.”

In 2003, Todd Construction received two task orders from the United States Army Corps of engineers (“Corps”) for roof repair of buildings at the Seymour Johnson Air Force Base in North Carolina, and the work was completed in September of 2005. On March 26, 2006, the Corps issued proposed final evaluations rating Todd’s overall performance on the work as unsatisfactory.  Todd submitted comments to the contracting officer explaining why, in its view, those ratings were unmerited, but the contracting officer nonetheless issued final unfavorable evaluations on July 23, 2006.  In August of 2006, Todd appealed the contracting officer’s decision to Ms. Rita Miles of the Department of the Army, alleging that the Government (1) violated the applicable performance review procedures set forth in Army Corps of Engineers Regulation 415-1-17 and (2) arbitrarily issued evaluations unsupported by the facts.  Ms. Miles apparently provided some documents to a vice-president of Todd, and Todd responded to that communication on October 2, 2006.  Ms. Miles rejected Todd’s appeal on April 25, 2007.  The negative evaluations were then made part of the Construction Contractor Appraisal Support System (“CCASS”).

The government’s motion to dismiss contented that the Court lacked jurisdiction because Todd’s challenge to the accuracy and procedural propriety of performance evaluations was not a “claim” within the meaning of the Contract Disputes Act because it is not made “as a matter of right” and does not arise from or relate to the contract. Specifically, the government contended that [w]here, as here, the contractor’s claim is that the Government breached its internal policies, rather than the provisions of the contract, such a claim cannot properly be considered a claim ‘relating to the contract.’” The Court disagreed and concluded that “this is a ‘final decision’ of the contracting officer upon a ‘written demand,’ and the Court further concluded that Todd made that written demand ‘as a matter of right.’” 

The Court further stated that Federal regulations require that for construction contracts the “contracting activity shall evaluate contractor performance and prepare a performance report” “in accordance with agency procedures,” and that the report must be “reviewed to ensure that it is accurate and fair.” FAR 36.201.  The Corps has set forth detailed procedures to be followed in assessing contractor performance, with additional steps to be taken when the rating will be unfavorable.  Army Corps of Engineers Regulation 415-1-17(5)(c)(1).  In this case, Todd alleges that those procedures were not followed and that the evaluations it received were not, in fact, accurate and fair.  To the extent plaintiff asserts that when the Government prepares a performance evaluation that will be made part of the record upon which its future submissions will be judged, it is entitled to an accurate and fair performance evaluation prepared in accordance with the regulations, it makes that request “as a matter of right.” Alliant Techsystems, Inc. v. United States, 178 F.3d 1260, 1265 (Fed. Cir. 1999) (observing that the “claim must be a demand for something due or believed to be due rather than, for example, a cost proposal for work the government later decides it would like performed”); BLR Group of Am. v. United States, No. 07-579C, at 10 (Fed. Cl. Nov. 25, 2008).

While the Court has scheduled further briefing by the parties as to what should be the appropriate remedy, the decision comes as yet another welcome advance in the willingness of the Court to look into the fairness of contractor performance evaluations. In the past, government agencies have acted with impunity and have leveraged their power to issue poor performance ratings in order to extract concessions from contractors during performance. There is no question, moreover, that the power to reduce a performance rating has had a chilling effect on the filing of claims – a right that is granted by law and regulation. The Court further noted that “the creation of mandatory performance reviews, databases archiving those reviews, and the requirement to consider those archived materials in future contract awards means that a negative review is potentially devastating to a contractor, who may have no opportunity—or very little opportunity—to mitigate the impact that review will have on future awards.”  Accordingly, “there are sound reasons, as Judge Sweeney recently explained, to address performance evaluations as issues of contract performance rather than as part of a bid protest when the contractor seeks future government contracts.”  See BLR Group of Am. v. United States, No. 07-579C, at 17 (Fed. Cl. Nov. 25, 2008).

The BLR and the Todd cases make it clear that contractors do not have the right to simply challenge a performance evaluation by filing an appeal directly to the Court. There must first be a “claim” that is submitted to the contracting officer challenging the decision and explaining why the contractor believes that the performance rating should be changed. If the contracting officer then issues a decision denying the “claim,” or if the contracting officer fails or refuses to respond within a reasonable time, the contractor may then appeal the contracting officer’s decision to the Court of Federal Claims. (The jurisdiction of the boards of contract appeals is not as broad as the Court’s and the boards have not been as receptive to contractor challenges to performance evaluations). Because this is an evolving area of the law, however, and because there are procedural hurdles that must be overcome, it is strongly suggested that contractors seek legal counsel before undertaking an appeal of this nature.

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In an interesting decision issued by the United States Court of Federal Claims on November 25, 2008, in a case entitled BLR Group of America, Inc. vs. United States, the Court ruled that it had jurisdiction to consider a contractor’s claim that a Contractor Performance Assessment Report (“CPAR”) was “false and highly prejudicial.” The case arose because the Air Force had assigned a final performance rating of “Marginal” to the contractor in several categories, and had refused to amend the rating pursuant to a rebuttal presented by the contractor. Instead, the Air Force disseminated the rating by posting it on the Past Performance Informational Retrieval System (“PPIRS”), a database of performance ratings accessed by contracting officers while making contractor responsibility determinations and while conducting past performance evaluations during the source selection process on negotiated procurements. At a time when contractors are experiencing the rapidly growing use of “best value” negotiated procurements, the accuracy and fairness of contractor performance evaluations can be critical to a contractor’s ability to successfully compete for government contracts.

The Court did not address the merits of the contractor’s contention that the performance rating was “false and highly prejudicial,” but simply ruled that the Court had jurisdiction to consider the case. The government had filed a motion to dismiss and cited a number of Armed Services Board of Contract Appeals decisions where the Board had declined to consider appeals based on challenges to performance evaluations. The Court refused to follow the Board’s decisions (the Court of Federal Claims is not bound by the decisions of the various boards of contract appeals) and concluded that a contractor could file a claim under the Contract Disputes Act of 1978. In doing so, the Court focused on the Federal Acquisition Regulation (“FAR”), which provides that a claim is “a written demand or written assertion by one of the contracting parties seeking, as a matter of right, the payment of money in a sum certain, the adjustment or interpretation of contract terms, or other relief arising under or relating to this contract.” See FAR 52.233-1. The Court also noted that the contractor was not appealing the performance evaluation itself, and concluded that a contractor’s claim requesting a change to a performance evaluation is a proper mechanism, and provides the proper jurisdictional predicate, to challenge an adverse performance evaluation in the Court of Federal Claims. 

In addition, even though the contracting officer had not issued a final decision, the Court ruled that the contractor had made its claim to the contracting officer for a fair and accurate CPAR on January 12, 2007, and that the contracting officer, more than twenty-two months later, had failed to issue a final decision in conformance with 41 U.S.C. 605(a).  The Judge then stated that “Because twenty-two months exceeds the length of time that the court considers “reasonable” for the contracting officer to issue a decision in this case, the court deems the claim denied by operation of 41 U.S.C. § 605(c)(5), which allows plaintiff to pursue the instant appeal.” In other words, the failure of the contracting officer to issue a decision within a reasonable time was treated as a “deemed denial” entitling the contractor to file an appeal.

The Court not only held that it had the jurisdiction to consider the case, but it also stated that a contractor is legally entitled to a fair and accurate performance evaluation. In view of what has frequently been the use of performance evaluations as a tool to unfairly punish contractors, and to intimidate them into not filing claims for fear that they will receive lower performance ratings, this decision comes as a welcome leveling of the playing field. We have always felt that the statutory right that contractors have to file claims and appeals should not be diminished by fear of reprisal. All claims should be evaluated on their merits. 

Please see the Federal Construction Project Manager’s Bulletin, November 2008, a publication of Construction Contract Specialists, Inc., for an excellent article entitled "The Contractor Performance Evaluation System (Revisited)," authored by Paul Perkins, that addresses the BLR decision and revisits an earlier article. Mr. Perkins presents interesting background information on the contractor performance evaluation system and provides the author’s perspective as a former contracting officer, project manager, and construction consultant.

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The Federal Acquisition Regulation, at FAR 36.201, requires government personnel to be fair and accurate in the evaluation of a construction contractor’s performance, but there is the inherent potential for an unfair and overreaching evaluation. Government personnel are required to use DD Form 2626 for performance evaluations. This form lists five major factors to be evaluated: quality control, effectiveness of management, timely performance, compliance with labor standards and compliance with safety standards.  If, for example, a contractor’s employee has an accident and sustains an injury, a government evaluator could rate the contractor as unsatisfactory for violation of the safety standards, marginal in effectiveness of management (jobsite supervision, compliance with regulations (safety), and marginal in the implementation of its quality control plan. All of this would stem from a single incident. 

     In prosecutorial circles, this is known as “stacking the charges,” meaning that every possible charge is listed so that the prosecutor may plea bargain a deal on a lesser included charge.  However, in the case of a performance evaluation, there is little, if any, “bargaining” with the evaluator. The potential exists for the government evaluator to magnify a single incident into three deficiencies on the contractor’s part, as shown by the real life example above. 

     The consequences of this approach are serious for a government contractor. The regulations permit a contracting officer to review a contractor’s past performance evaluations in making a responsibility determination in a pending contract award. Therefore, it is important for contractors to insure that their performance evaluations are fair and accurate, particularly since the government is required to retain these evaluations for six years. One of the ways that a contractor may address its performance evaluation is by the submission of written comments to the evaluator. The evaluator must review these written comments, include them with the evaluation, and revise the evaluation, if the evaluator believes such a revision is necessary. However, this process is only available to those contractors who receive an overall “Unsatisfactory” performance rating. According to the regulations, the government is not under any obligation to advise a contractor of a “marginal” performance rating.

Because of the retention and use of the performance evaluations, we recommend that every contractor obtain a copy of its performance evaluation when it completes a project over $550,000.00. If the overall evaluation is either marginal or unsatisfactory, the contractor should submit a written rebuttal within thirty days of receipt and request that the evaluating official review and include these written comments with the performance evaluation. The goal, obviously, is to present a fair and accurate representation of the contractor’s performance and to lessen, if not eliminate, the impact of “stacking the charges” in the evaluation.

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