United States: Defense Department Inspector General Issues Summary Of Audits Assessing Contractor Performance

Lynne M. Halbrooks is a partner in Holland & Knight's Washington, D.C., office

HIGHLIGHTS:

• The Department of Defense Inspector General recently published a report summarizing four earlier audits that found DoD officials prepared contractor performance assessment reports – CPARs - late and without sufficient justification.
• DoD officials improved their compliance with past performance requirements in 2016 by preparing more performance assessment reports within the required timeframe than they prepared in 2008, however they did not consistently comply with the requirements for those evaluations, specifically with regard to the quality of the written narratives within these reports.
• DoD management has taken steps to address the IG's concerns and plans to issue a memorandum within 60 days implementing the IG's recommendations.  The guidance will emphasize the importance of contractor past performance evaluations, especially the quality of the written narrative.

The Department of Defense Inspector General (DoDIG) recently published audit report DoDIG-2017-081 entitled, "Summary of Audits on Assessing Contractor Performance: Additional Guidance and System Enhancements Needed."  This capstone report indicates there are still improvements that DoD needs to make to ensure that contractors' past performance is available for full and accurate consideration by contracting officers who use that information to make award decisions.

DoDIG first looked at the Defense Department's process for collecting and maintaining contractor past performance information in 2008. At that time the IG found that the database used by contracting officers to access performance assessment reports – CPARS - was not up to date and lacked the necessary information for selection officials needed to make informed decisions related to contract awards. In response, the Department promulgated additional guidance, and the Senate report for the 2011 National Defense Authorization Act directed DoDIG to conduct a follow-up review to determine if the guidance resulted in better compliance and a more complete and useful database of contractor past performance. 

This week's report summarizes four earlier DoDIG audits from 2015-2017 that reviewed 18 offices across the DoD, 1,264 contracts within those offices valued at $168.2 million, and 238 performance assessment reports for those contract. The audits reviewed contracts at the Navy, Air Force, Army and Defense Organization officials and in each case concluded that DoD officials did not consistently comply with requirements for assessing contractor performance.  These requirements are generally set forth in Federal Acquisition Regulation Subpart 42.15.

The four earlier audits each identify contracts where the IG concluded performance assessment reports were filed late and also prepared without sufficient written narratives to justify the adjectival ratings given. Of the 238 reports reviewed, 83 were on average 73 days late. The IG determined that 200 of the 238 performance assessment reports it reviewed in the four audits were not prepared in accordance with the requirements, i.e, DoD officials did not (1) prepare written narratives sufficient to justify the ratings given; (2) rate required evaluation factors; and (3) prepare sufficient contract description. 

The IG's overall finding in this summary report is that DoD officials' compliance with past performance reporting requirements needs improvement. The IG acknowledges that officials in the Military Services and Defense Organizations generally registered, or had a valid reason for not registering, contracts in the database and generally prepared performance assessment reports for contracts that required them. However, they did not consistently comply with requirements for evaluating contractor performance when preparing the evaluations. The IG report notes, "[a]s a result, Federal source selection officials did not have access to timely, accurate, and complete past performance assessment information needed to make informed decisions related to contract awards." 

One positive note in the IG's report is that DoD officials prepared more performance assessment reports on time in FY 2016 (74 percent) than in FY 2008 (21 percent). While the IG does not identify the reason for this increased compliance, it is a good sign that official are realizing the value of the reports; now they need to improve their completeness.

As happened in 2008, DoD management's response to the IG's findings will be to issue additional guidance. The IG recommended the guidance emphasize the importance of contractor past performance evaluations, specifically the quality of the written supporting narratives for each rating. The report also recommends upgrades to the system used to report the evaluations, which the Department has already done.

We can expect new guidance to be issued within 60 days. The impact on government contractors should be positive if the guidance is effective and accurate past performance narratives are more regularly available for consideration in awards. DoD contractors should be alert to the possibility that the narratives may become more detailed and carefully review them for accuracy. FAR 42.1503(d) allows contractors the opportunity to submit comments, rebut statements, or provide additional information when they disagree with a performance assessment report and those actions should be taken in appropriate circumstances. 

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