Fair Performance Evaluations Revisited

Transcription

1 Fair Performance Evaluations Revisited BY JACK HORAN and JOHN ZIEGLER Contractors are justifiably concerned about errors that have direct financial consequences, of which there are many. To name a few, in the February 2012 column, we noted that poor contract management may cost a contractor millions of dollars. 1 We discussed in the August 2012 column that a contractor s bid mistake might cost them hundreds of thousands of dollars. 2 Most troubling, as noted in the August 2009 column, is performance that is so poor that it results in a termination for default. 3 Performance, short of default, that results in a poor performance evaluation from the U.S. government should also be of concern. A poor performance evaluation may have no immediate financial consequence, but could affect the contractor s chances of securing future federal government contracts. Since July 2009, federal agencies have been required to report performance evaluations in the Contractor Performance Assessment Reporting System (CPARS). CPARS is then used to collect and post all contractor performance evaluations in the Past Performance Information Retrieval System (PPIRS). When making contract award decisions, contracting officers will look to the PPIRS to evaluate an offeror s past performance. In short, a poor performance evaluation in the PPIRS will likely affect a contractor s future government business not an immediate consequence, but potentially devastating financially. What is a contractor to do when it receives a poor performance evaluation? We told you in the June 2009 column about the first path to redress an unwarranted poor per- 84 Contract Management October 2012

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3 formance evaluation: a claim at the Court of Federal Claims. Examining BLR Group of America v. United States, this column addressed how the Court, for the first time, held that it had jurisdiction to redress an unfair or inaccurate performance evaluation. 4 We also noted that a contractor would face a far different result when appealing a contracting officer s final decision to the Armed Services Board of Contract Appeals (ASBCA) an appeal seeking a remedy for the government s unfair or inaccurate performance evaluation brought to the ASBCA would be dismissed for lack of jurisdiction. Fortunately for contractors, this is no longer the case. The ASBCA now recognizes that it has jurisdiction over disputes regarding unfair performance evaluations, so long as those disputes arise from some contract term related to the evaluation. The case, Colonna s Shipyard, Inc., ASBCA No , 10-2 BCA (June 24, 2010), serves as a basis to predict how the ASBCA will exercise its jurisdiction over such disputes, and the extent to which the ASBCA can provide relief to contractors. On January 11, 2008, the Department of the Navy, Mid-Atlantic Regional Maintenance Center (MARMC), awarded a repair availability contract for the USS Hawes (FFG-53) to Colonna s Shipyard, Inc. (hereinafter Colonna ). Colonna was obligated to repair and upgrade a number of the ship s components, including its fan coil unit, bilge sprinkling system, and oil distribution box. Colonna s contract contained a clause titled RMC C Past Performance Assessment, which read, in part: The contractor will be subject to a past performance assessment in accordance with [Federal Acquisition Regulation (FAR)] The assessment will be conducted upon redelivery of the vessel. The final CPARS assessment adjective ratings/colors will be the unilateral determination of the reviewing official. The contract also contained a number of adjectival ratings for the performance assessment, including: Dark blue ( exceptional ): Performance meets contractual requirements and exceeds many to the government s benefit; Purple ( very good ): Performance meets contractual requirements and exceeds some to the government s benefit; Green ( satisfactory ): Performance meets contractual requirements; and Yellow ( marginal ): Performance does not meet some contractual requirements. The contracting officer was to use these ratings to assess performance in specific categories, such as management, technical, and schedule. The contract also incorporated a FAR clause that stated: Each performance report shall be reviewed to ensure that it is accurate and fair. Finally, the contract included a standard FAR Disputes clause, which provided that a claim is a written demand 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. In October 2008, MARMC issued CPARS ratings that rated Colonna s performance as yellow/ marginal in the technical and management categories and green/ satisfactory in the schedule category. MARMC issued final CPARS ratings on January 26, 2009, giving Colonna s performance green/ satisfactory ratings in the technical and schedule categories and a yellow/ marginal rating in the management category. On April 21, 2009, Colonna sent a letter to the contracting officer asserting that its CPARS ratings, subject to the contract s Performance Assessment clause, were erroneous, unfair, and did not reflect Colonna s high-quality performance. The letter requested a final decision from the contracting officer addressing the issues of: Erroneous scoring of Colonna s performance, Redetermination of such score, Modification of the CPARS to reflect the above-average performance, and Correction of the U.S. Navy s failure to issue fair and accurate CPARS ratings. The contracting officer denied Colonna s claim. Colonna subsequently appealed the contracting officer s decision to the ASBCA. Colonna s claim, citing the contract s Past Performance Assessment clause, alleged that Colonna received improper, erroneous, arbitrary, and capricious scoring. Colonna alleged that the government breached the contract by violating its incorporated FAR and CPARS principles and procedures and failing accurately to score [Colonna s] performance, to its harm. Colonna asked the ASBCA to declare the scores erroneous and a violation of the contract and its incorporated procedures, and to revise the scores. Alternatively, if the ASBCA determined it did not have jurisdiction to revise the scores, Colonna requested that the ASBCA remand the matter to the [contracting officer] with instructions or advice to permit the [contracting officer] to review the scoring and to correct or amend it. In responding to Colonna s appeal, the government moved to dismiss for lack of jurisdiction. The government argued that the ASBCA lacked jurisdiction to entertain appellant s claim on the alleged grounds that the performance evaluation and appellant s request for revision do not constitute cognizable [Contract Disputes Act] claims. Colonna s claim does not seek adjustment of a contract term, an interpretation of the contract, relief under a remedy-granting clause, or relief for a breach of contractual duty. Rather, the performance evaluation was done pursuant to statute and implementing regulations, was not related to the contract, and was therefore outside the ASBCA s jurisdiction. The government also argued that the ASBCA had no authority to issue injunctive relief, order specific performance, or direct the contracting officer to amend a performance evaluation. Colonna ultimately acknowledged that the 86 Contract Management October 2012

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5 Importantly, the ASBCA stated further that it lacks jurisdiction to decide appeals from unsatisfactory performance ratings when contract terms are not at issue. The ASBCA also held, as Colonna conceded, that it had no authority to change a CPARS score or to direct the contracting officer to change it. The ASBCA granted the government s motion to dismiss Colonna s claim to the extent that the claim sought such relief. instructions. It will not, however, order the agency to retract a certain evaluation, nor will it order the agency to institute a certain evaluation. Therefore, even if a contractor were to prevail on a performance evaluation dispute at the ASBCA, the contracting officer might assign the contractor an identical, yet better documented, rating that would withstand a challenge. CM ASBCA did not have the power to change a CPARS score or to direct the contracting officer to change it. Colonna continued to argue, however, that the ASBCA has jurisdiction to remand the matter to require the contracting officer to follow applicable regulations and provide [Colonna] with a fair and accurate performance evaluation. The ASBCA agreed with Colonna that it had jurisdiction to entertain Colonna s breach claim based on the performance assessment. Specifically, the ASBCA noted that it had jurisdiction under the Contract Disputes Act to entertain a performance rating dispute that arises under a contract s terms, such as Colonna s claim that alleged a breach of the contractual duty stated in the Past Performance Assessment clause. The ASBCA stated: When a performance rating claim is based upon a contract s disputed terms, we have jurisdiction to determine the rights and obligations of the parties under those terms. Therefore, the ASBCA decided that it would review Colonna s performance rating under an abuse of discretion standard, examining whether the contracting officer s rating was arbitrary and capricious. The ASBCA would look to whether the rating was rationally based, but would not determine what rating would be correct. The ASBCA s decision in Colonna is generally good for contractors. Contractors will be able to challenge unfair performance assessments at the boards of contract appeals so long as terms addressing those assessments are present in the contract at issue. The ASBCA stopped short of saying that it would review a claim if an explicit clause, such as the Past Performance Evaluation clause in Colonna, is not present in the contract. Thus, the Court of Federal Claims likely remains the only forum for contractors that do not have an explicit contractual right to a fair performance evaluation. Even when the ASBCA will review a performance evaluation, it will review the evaluator s decision under an abuse of discretion standard. The ASBCA will not attempt to determine whether the evaluator s performance evaluation was right or wrong. Rather, it will only determine whether the evaluation was arbitrary or capricious. The standard of review likely stems from the language in most performance assessment clauses that provide the contracting officer with discretion in making the assessment. In Colonna, the clause stated that the final performance assessment would be the unilateral determination of the reviewing official. The abuse of discretion standard sets a high bar for contractors and, as we have noted in the past, chances of victory under this standard are slim. In addition, the remedy available at the ASBCA (and the Court of Federal Claims, for that matter) for a performance assessment dispute will be extremely limited. The ASBCA will only issue declaratory relief. For example, the ASBCA might remand the performance assessment decision back to the agency for redetermination with proper About the Authors JACK HORAN, JD, is the general counsel for NCMA. He also practices in the Government Contracts and White Collar Crime practice groups at McKenna Long & Aldridge, LLP. JOHN ZIEGLER is an associate in McKenna Long & Aldridge s Government Contracts practice. Send comments about this article to cm@ncmahq.org. Endnotes 1. See Jack Horan and John Ziegler, Contractor Management and Performance Failures Cannot be Blamed on Bad Faith by the Government, Contract Management (February 2012): (referencing Nu-Way Concrete Co., Inc. v. Dep t of Homeland Sec., CBCA No. 1411, 11-1 BCA (December 16, 2010)). 2. See Jack Horan, Sometimes Mistakes are Forgiven, Contract Management (August 2012): (referencing Red Gold, Inc. v. Dep t of Agric., CBCA No. 2639, 2012 WL (July 6, 2012)). 3. See Jack Horan, Identifying Contract Risk and Contingency Planning, Contract Management (August 2009): (referencing New Era Contract Sales, Inc., ASBCA No , 09-2 BCA (April 23, 2009)). 4. See Jack Horan, Certified Claims Are Not a Contract Negotiation Strategy, Contract Management (June 2009): (referencing BLR Group of America v. United States, 84 Fed. Cl. 634 (November 25, 2008)). 88 Contract Management October 2012