Pondering Past Performance

Once upon a time, price was the primary--some would say the only--consideration when federal agencies bought goods and services. Now agencies are scrutinizing contractors' past performance to make sure the government's getting the best value for its dollars.

Past performance became a major consideration in 60 contract awards in 1994, when 21 agencies pledged to use it as a test of procurement innovations. After surveying participants in 40 of the contracts, Office of Federal Procurement Policy Administrator Steven Kelman pronounced the experiment a success in a Jan. 27 memorandum.

Satisfaction increased 21 percent for 31 recompeted contracts; the average rating of the new contracts was 8.7 on a 10-point scale as compared to 7.2 on the previous contracts. Sixteen of the newly inked deals received higher ratings than the former contracts, while 14 won equal ratings and only one fell short of its predecessor.

Nine brand-new contracts averaged 7.6 on the rating scale, with eight performing as expected or better and just one falling short of expectations.

The average satisfaction rating for the 40 contracts was 8.23, well above the 6.9 average Kelman found in the late 1980s when researching his book, Procurement and Public Management (AEI Press, 1990).

The Federal Acquisition Regulation now requires the use of past performance information in awarding contracts for $1 million or more and the preparation of past performance evaluations for contracts at or above $500,000. In a Dec. 18 memorandum to procurement executives, Kelman suspended mandatory use of past performance information for contracts worth between $500,000 and $1 million.

Kelman said OFPP and agencies needed time to work out the type and amount of information needed and to determine whether using past performance data is cost effective for smaller contracts. In particular, the Defense Department sought extra time to assimilate a study by the Arthur D. Little company recommending that collection of past performance information should be oriented by business area as opposed to dollar threshold.

Despite the suspension, Kelman wrote, "Feedback from agencies indicates that our concerted efforts to increase the use of past performance is motivating contractors to improve their performance."