Failure to Meet Subcontracting Goals Could Result in Lost Opportunities

In Fiscal Year 2013, the federal government met, for the first time in eight  years, its small-business subcontracting goals (23 percent). Government contractors as a whole, did not meet their targets, and do not usually meet their targets. They often get close. In the last scorecard, Government contractors earned a "B" rating.

Goals are goals and there never seemed to be any consequence for contractors that failed to meet those goals. No one ever seemed to take seriously a contractor's failure to meet them. We can recall numerous meetings where contractors would project their flashy PowerPoint's in front of assembled Government officials with furrowed brows explaining why they didn't meet their goals and explaining all the corrective actions planned to rectify the situation. Those Government officials, dazzled by the glibness, would nod in understanding and return to their desks. But they would return the next year, and the next, and the year after that for the same razzle-dazzle.

A recent Comptroller General (GAO) bid protest decision suggests that there will be consequences for contractors failing to meet their subcontracting goals. Last month, the GAO published a decision where a contractor lost out on a $50 million contract because their past performance rating was downgraded as a result of not meeting its small business subcontracting goals.

SAIC (Science Applications International Corporation) protested the award of a major contract to its competitor based on various deficiencies in DLA's evaluation of its proposal. Among those deficiencies was DLA's evaluation of past performance.

The solicitation provided that each contract would be awarded on a best value basis, considering three evaluation factors: past performance, technical merit, and price. With respect to past performance, offerors were directed to submit information regarding up to six prior contracts and that DLA would evaluate both relevancy and contractor performance. Past performance ratings could be one of five levels, substantial confidence, satisfactory confidence, limited confidence, no confidence and unknown (or neutral) confidence.

The solicitation provided that past performance was more important than technical merit, and that the non-price factors were significantly more important than price.

In December 2013, proposals were submitted. In May 2014, DLA conducted discussions with the offerors. At the meeting with SAIC representatives, DLA advised SAIC that its failures to meet socio-economic and/or subcontracting goals on four prior contracts were viewed as weaknesses. The solicitation expressly put offerors on notice that DLA's evaluation of past performance would include consideration of the degree to which of offeror met socio-economic goals. Elsewhere, the solicitation advised offerors that DLA would rate how well the offeror met its subcontracting goals. Ultimately, the contract was awarded to another contractor.

SAIC protested the award asserting that it was unreasonable for the agency to assign it a "satisfactory confidence" rating, noting that DLA appears to have disregarded ratings of "exceptional" for many of its prior contracts. More specifically, SAIC complained that it was unreasonable for the agency to downgrade SAIC's past performance for what SAIC characterized as four minor weaknesses pertaining to SAIC's failure to meet its socio-economic and subcontracting goals. SAIC asserted that such failures should have been offset by other positive aspects of SAIC's past performance and SAIC's ongoing efforts to substantially increase small business participation.

The GAO disagreed. GAO stated that consistent with DLA's assessments, the evaluation record showed that SAIC failed to meet its socio-economic and/or subcontracting goals in four of the five contracts it submitted for past performance evaluation. DLA concluded that SAIC's multiple failures to meet its socio-economic and/or subcontracting goals were past performance weaknesses. Accordingly, DLA rated SAIC's performance as good" but not outstanding for four of the five contracts, and assigned an overall past performance rating of satisfactory confidence.

The GAO found no basis to question DLA's determination that SAIC's failure to meet its socio-economic and/or subcontracting goals in four of five prior contracts constituted weaknesses, nor did the GAO question DLA's overall rating of satisfactory confidence. The assessment was consistent with the solicitation's stated evaluation criteria, supported by the evaluation record, and reasonable.

The entire GAO decision is available here.