1. Value of Federal Past Performance
Overview
Federal agenciesare generallyrequiredtoevaluate contractors’performance oncontractsor orders
valuedinexcessof:
DollarAmount Contract Type
$30,000 Architector Engineer
$650,000 Construction contracts“at least
annuallyandat the time the
workundera contract or orderis
completed.”
$150,000 All Other
Priorto 2013 evaluation waslargely atthe agency’sdiscretion withthe onlyrequirementplacedon
agencieswasthe contractorsabilityto achieve itssmall businesssubcontractinggoals. Now the FARhas
beenamendedto require thatotherfactorsbe evaluated:
Assessments/Evaluations generallyinclude,ata minimum, the following:
(i) Technical (qualityof productorservice)
(ii) Cost control
(iii) Schedule/timeliness
(iv) Managementor businessrelations
(v) Small businesssubcontracting,social economicrequirements
(vi) Othersuch as late or nonpaymenttosubcontractors,traffickingviolations,tax delinquency,
failure toreportinaccordance withcontract terms and conditions,defectivecostorpricing
data, terminations,suspensionanddebarments).
Federal contractsare awardedbaseduponthe “bestvalue”forthe government. Thisisnotnecessarily
the vendorwhose proposal hasthe lowestprice,butratherthe vendorwhose proposal representsthe
greatestoverall benefittothe governmentgivenitsprice,technicalmerit,andrelationshiptoother
evaluationcriteriaspecifiedinthe requestforproposals(RFP). Considerationof pastperformance in
source selectiondecisions isseenasanalternative toreliance on RPFs,especiallybythose agencies
whose experience hasbeenthat pastperformance isthe bestindicatorof a contractor’s future abilityto
provide qualitygoodsandservicesatareasonable cost.
How the RegulationsTranslates into Practice
I had a conversation withahighrankingUS Naval office inthe LogisticsDepartment.Iaskedhimif he
couldquantifythe value of pastperformance.
QUESTION: Howmuch doesit trulyaddto the bottomline ona bid?
ANSWER: “A lot!” butto clarify“Firstof all the Navybelievesinabsolutetransparency,withthatsaid,
people ora firm’sabilityto developrelationships fordoinggoodworkisimportantas trust is very

2. importantto us. He sharedwithme the selectioncriteriafora$50 milliondollarbidthatwasrecently
awarded.
The bid was narrowed downbetween twovendors,bothwithahighlevel of expertise inthe contract
area. The proposalswere verysimilar,butthe bidsandperformance ratings were the twovariablesthat
were the differentiators. The Federal RatingSystemallowsforthe following5to6 grades(there isa
grade above Excellentwhichishardlyeverused). InthisparticularbidCompanyA had an “Excellent
Rating”and CompanyB had a “Good Rating”. CompanyA’sbidwas 3% higherthanCompanyB’s bid
and thisiswhere the challenge inthe awardcame infor the NAVY.
Rating Company Bid
Above Excellent(6)
Excellent(5) CompanyA $51,500,000 (+3%)
Good (4) CompanyB $50,000,000
Fair (3)
Poor(2)
Unsatisfactory(1)
On a $50 milliondollarcontract3% = $1,500,000 is the premiuminthe bidchargedbetweenCompanyA
and CompanyB. The Navy’sfinal decisionwasthat the premiumpaidforgoingwiththe “Excellent
Supplier”warrantedthe 3%premium.ThisNaval officer’simpressionwasthat3-4% more wasthe
maximumthreshold forusinganExcellentratedsupplieroveraGood ratedsupplier.Furthermore he
quantifiedthe overall difference between“Good” and“Fair” to be another3-5%.
The takeawaywasthat a firmwithan “Excellent”performance ratingcanbid6-10% more and still
receive the contractovera “Fair” contractor and a “Fair” contractor is still afirmthat the NAVYbelieves
has the abilitytocomplete the contact.
Therefore itiscritical whenbuildingyourpastperformance toobtain“Excellent”ratingsbecause it
providesthe firmwithafar greatercushiononfuture bidsto have the moneytodo whatit takesto
make the contractingofficershappy,whichisthe cycle yourfirmwantsto get intowhendoingbusiness
withthe Federal Government.