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

By: Edward T. DeLisle

For those who regularly read our blog, you know that we have followed the government’s recent concern about fraud and abuse in the federal procurement process.  The GAO has issued reports that recite such abuse relative to the 8(a), HUBZone and SDVOSB programs.  As those reports indicate, companies have been awarded set-aside contracts through those programs, but were not qualified to receive them.  In certain circumstances, the apparent fraud was so blatant that the hubris, which certainly existed to think such abuses would go unnoticed, puts Charlie Sheen to shame.  Yet, as the GAO reports state, even when the abuses were uncovered, many of these contractors continued to receive government awards.  It appears that some contractors performing work overseas in places like Iraq and Afghanistan may also be receiving awards that they do not deserve.

As reported by Govexec.com, government agencies responsible for overseas contracts are not properly recording past performance history in the CPAR and PPIR electronic databases.  The biggest offenders appear to be the State Department, the Department of Defense and the U.S. Agency for International Development (USAID).  Based upon information supplied to the Commission on Wartime Contracting, congressionally mandated to investigate overseas contracting activities, these agencies have failed to properly report past performance history in up to 90% of the contingency contracts they have issued.  While the failure to report this information is problematic for many reasons, it certainly exposes the government to contractors who are less than ideal for important government contracts.  This is especially an issue as it relates to contractors in line for suspension or debarment.  As former Connecticut Congressman Christopher Shays, who is the chairman of the Commission, stated: “[I]f suspensions and debarments are impeded by bureaucratic decisions or inertia, then companies that have committed fraud may continue receiving taxpayer funds.  In either case, untrustworthy contractors can continue profiting from government work, responsible businesses may be denied opportunities, and costs to taxpayers can climb.”

Over the years, the government has increasingly relied upon “best value” procurement to let contracts.  Past performance is almost always an important factor in determining “best value.” In fact, in most cases, it is the most important factor.  If federal agencies intend to continue issuing contracts in this fashion, a practice that is highly questionable for the purchase of certain services, such as construction, then they must make it a point to create a system that allows those deserving of awards to receive them. In the case of small business set aside contracts, the government has started to slowly move in this direction.  The VA, for example, is now vetting those contractors on its on-line SDVOSB registry to verify eligibility.  If this function is performed correctly, it will greatly enhance the probability that contracts will be let to those who deserve them. With respect to past performance history, there is a system in place.  Federal agencies simply need to use it.  Hopefully, the findings exposed by the Commission on Wartime Contracting make this a reality.

Edward T. DeLisle is a Partner in the firm and a member of the Federal Contracting Practice Group.

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By: Michael H. Payne & Elise M. Carlin

As recently reported in Washington Technology, on July 29, 2010, President Obama signed the Supplemental Appropriations Act for 2010 into law. This legislation amends the Clean Contracting Act of 2008, and allows the public to access the Federal Awardee Performance and Integrity Information System (FAPIIS), previously off-limits to anyone other than chairmen and ranking members of congressional committees. Under the new law, with the exception of contractors’ past performance evaluations, all information will be available for viewing online.

What Is FAPIIS?

Effective April 22, 2010, FAPIIS was established as part of the 2009 Defense Authorization Act. FAPIIS is managed by the General Services Administration, and was launched as “part of an ongoing initiative by the Administration to increase consideration of contractor integrity and the quality of a contractor's performance in awarding Federal contracts.” The final rule enacting FAPIIS is found in the Federal Register.

The FAPIIS database contains a wide range of information about contractors’ past performance, and aids contracting officers in selecting contractors who will perform well in order to avoid wasting taxpayer money. According to the Contractor Performance Assessment Reporting System (CPARS) website, FAPIIS “contains information to support award decisions as required by the Federal Acquisition Regulation (FAR). FAPIIS is a web-enabled application that collects information on Terminations for Default, Terminations for Cause, Terminations for Material Failure to Comply, Defective Pricing Actions, Non-Responsibility Determinations, and Recipient Not-Qualified Determinations. Use of FAPIIS promotes awards to entities with a history of proven performance and business integrity.” As stated in the Federal Register, “FAPIIS is designed to improve the Government's ability to evaluate the business ethics and expected performance quality of prospective contractors and protect the Government from awarding contracts to contractors that are not responsible sources.”

The legislation which brings to light the information contained in FAPIIS was sponsored by Vermont Senator Bernie Sanders. In a recent interview with Government Executive, Sanders supported his position that the public should have access to the same information as contracting officials. “The American people have every reason to expect that their tax dollars are well-spent . . . For this reason, I am pleased that with this new legislation every contractor’s history of illegal behavior will be posted on a publicly accessible online database. I strongly expect that this new public awareness will put an end to handing out taxpayer-financed contracts to corporations with a history of fraud.”

While it is good news to many that the database is now publicly available, the move to make this information easily accessible is a concern to some in the industry. In a public statement, the Professional Services Council (PSC), the self-defined “national trade association of the government professional and technical services industry,” expressed concern that the new law “could create a politically motivated blacklist of vendors and improperly limit the government’s ability to access the best qualified vendors in the marketplace.”  Alan Chvotkin, Executive Vice President and Counsel for PSC recently stated that, “While firms are accountable for their past performance, opening portions of the database that are not now already publicly available elsewhere could risk improperly influencing the evaluation and selection of otherwise qualified bidders because of public pressure to ‘blacklist’ certain vendors.” Mr. Chvotkin continued, “Furthermore, public posting risks the inappropriate and potentially damaging disclosure of company proprietary information while doing nothing to further government oversight or decision making.” He also promised that, “Given this major modification to FAPIIS, PSC will be working with GSA and other federal agencies to ensure the proper and fair implementation of the public posting requirement.”

When Will The Information Be Available For Viewing?

The GSA is currently working on putting the new law into action, while also striving to alleviate the concerns of those in the industry. Diane Merriett, spokeswoman for the GSA, recently stated, “We are aware of some industry concerns regarding the disclosure of proprietary data and will address those.” At this time, no firm date has been established for the release of the information to the public.

The Federal Contracting Group at Cohen Seglias Pallas Greenhall & Furman will follow this story and keep you informed of any developments as the implementation of the law progresses. 

Michael Payne is a Partner and is the Chairman of the firm's Federal Practice Group.
 

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Contractors continue to be concerned about the impact that the filing of protests or claims will have on their past performance evaluations in negotiated procurements.  While it is never a good idea to file a frivolous protest or claim, it is improper for procurement officials to downgrade past performance evaluations simply because a contractor has exercised a right afforded by law and regulation.  In fact, the Office of Management and Budget issued a Memorandum for Senior Procurement Executives on April 1, 2002, and stated that “. . . the filing of protests, the filing of claims, or the use of ADR, must not be considered by an agency in either past performance evaluations or source selection decisions.”  The Memorandum went on to provide that contractors may not be given “downgraded past performance evaluations for availing themselves of their rights by filing protests and claims or for deciding not to use ADR; and Contractors may not be given more positive past performance evaluations for refraining from filing protests and claims or for agreeing to use ADR.”

The Under Secretary of Defense endorsed the Memorandum and circulated it on December 16, 2002.  The cover letter stated that “We should continue to work with our contractors to avoid or minimize unnecessary protests and claims and encourage the use of ADR, where appropriate, while not discouraging contractors from availing themselves of the rights provided to them by law. The policy embodied in the Memorandum has not changed and contractors should challenge any past performance evaluation that is downgraded because of previous protests or claims.  It must be recognized, moreover, that the reason for a lower than expected evaluation may not always be revealed during a debriefing.  If a contractor suspects that an inappropriate downgrading has occurred, the only way to prove it may be to file a protest so that the agency’s Administrative Record may be reviewed by the protester’s attorney. (Note: In a negotiated procurement, the Administrative Record is almost always subject to a Protective Order that prohibits disclosure of the information to anyone other than the protester’s attorney).

Michael Payne is a Partner and is the Chairman of the firm's Federal Practice Group.
 

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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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