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a contract did not factor into federal procurement. Strangely enough, it was considered unfair to reward or punish a contractor for its past performance, and ignoring it was seen as a way to help ensure a level playing field.
However, in 1995, a provision was added to the Federal Acquisition Reg- ulation stating that past performance shall be evaluated in source selections.
At the time, I held the job Rung does now, and I was hopeful that the new emphasis on past performance might produce a revolution in pro- curement by dramatically increasing incentives for contractors to perform well. Twenty years later, it is fair to say that inclusion of past performance has had some effect on encouraging con- tractors to perform better, but there certainly has been no revolution.
That is largely because when the past-performance system was intro- duced, a provision was included that allows contractors to have disap- pointing past-performance ratings reviewed by the next level up in the organization that made the assess- ment. The problem this creates should be apparent: Government officials are concerned that if they give a contrac- tor a bad rating, they are nominating themselves for spending tens of hours defending their decision to a higher- level official. The easy way out is to give a high rating.
Not surprisingly, this reduces can- dor. In one discussion of past per- formance a few years ago at a gov- ernment-organized event, a number of contracting officials expressed the view that the contractor’s abil- ity to request a review of a rating it didn’t like undermined honesty in the ratings.
A downward spiral
That higher-level review thus set in motion a downward spiral for the
effectiveness of past-performance rat- ings. Grades are inflated, and there is too little variance. Accordingly, past performance seldom serves as a dis- criminator when procurement officers are evaluating bidders. Government officials, in turn, see past-performance ratings not being used, and so they lose interest in seriously contributing to the system. As a result, the quality of contributions continues to decline over time.
In my view, the Federal Acquisi- tion Regulation should be amended to eliminate the rating reviews, though contractors should have the right to add their version to the contract record. When the past-performance system was developed, there was no capacity to put contractor rebut- tals online into the government’s own report card. That capability now exists, which makes it easy for the contractor to have its version of events available to third parties.
Eliminating the higher-level review is not a cure-all for what ails evalua- tion of past performance in govern- ment, of course. Some officials will still find it psychologically painful to give bad news. Understaffing and underemphasizing contract manage- ment have reduced the resources and attention devoted to preparing past- performance report cards. And some government officials might believe that saying a contractor performed poorly will reflect badly on them as well.
The government could solve all those problems. But if the incentives against candor that the current pro- cess creates are left untouched, it is unlikely the system will improve much.
In fact, ending the higher-level review provision could improve the use of past performance even without other changes. OFPP could then build
on that achievement through other improvements in training around past performance and management of the system.
Paving the way for real improvement
The problem has been festering for 20 years. Interestingly, past performance continues to be a topic that engages government contracting officials. In the past few years, it has been one of the most frequent issues on the agenda of the Frontline Forum, which is a sounding board for government contracting officials.
Also in the past few years, OFPP has paid periodic attention to improv- ing the system, but much of the effort has concentrated on trying to improve compliance with the reporting require- ment. This is a sort of “eat your broc- coli” approach, which hardly engen- ders enthusiasm about the importance of using past performance in govern- ment contracting.
Instead, a change in this regulation should be positioned in a positive, upbeat way as a key part of an effort to reset past-performance policy and open the way for real improvement in vendor performance. Rung and her colleagues could use the regulatory change to inspire those in the work- force who are eager to do a good job and signal to them that something new is on the way.
If OFPP were to take this issue on, it would be a bold demonstration of a departure from business as usual and a sign of the government’s inter- est in dramatically improving federal contracting. n
Steve Kelman is professor of public management at Harvard Univer- sity’s Kennedy School of Government and former administrator of the Office of Federal Procurement Policy.
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