Client Alert

Value Based Contracting - It's Not Just Price Anymore

10/22/2003

One of the most persistently studied concepts in Government contracting in recent years has been the idea of evaluating the past performance of contractors for use in competitive negotiated procurements. The idea is straightforward and based on common sense: Government contractors should be rewarded or penalized according to their past performance. Past performance is possibly the best indicator of future capability to perform. Yet, its use by Government buyers to discriminate between competitors in Government procurements has proven to be more difficult than anticipated, particularly when used in "best value" procurements.

If fully utilized by the Government, past performance as an evaluation criteria in source selections would more closely resemble the private sector, where past performance on previous contracts is frequently the major influence in the determination of future awards. Of course the private sector is virtually unfettered in considering past performance from previous contracts, while the Government is faced with the formidable task of incorporating past performance from previous contracts into the source selection process without violating the complex body of laws and regulations that tightly control Government procurement. One of the primary limitations on the Government using commercial-style buying practices is the Competition in Contracting Act with its requirements for full and open competition, and prohibitions against exclusion of sources who desire to compete.

Although often thought to be a recent innovation, the collection and use of past performance information in negotiated procurements has a long history of less than successful attempts to develop past performance systems that provide meaningful information on which awards decisions can be based. Previous past performance initiatives were criticized for being burdensome, resource intensive, overly subjective, and for failing to provide credible, objective past performance information that source selection officials were comfortable using as a selection discriminator. As discussed in the attached article, many of the same issues continue as impediments to the Government's effective implementation of the past performance initiative.

The article is available on our website and was originally written for the ABA Forum on Construction Industry on October 2-3rd in Washington, DC. It is in pdf format (45 pages).

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