Contractor Responsibility Determinations

The Government will award contracts to responsible prospective contractors only and no award can be made unless the contracting officer makes an affirmative determination of responsibility (see FAR 9.103(a) and (b)). Why is contractor "responsibility" so important? Because the award of a contract to a supplier based on lowest evaluated price alone can be false economy if there is a subsequent default, later deliveries, or other unsatisfactory performance resulting in additional contractual or administrative costs (see FAR 9.103(c)).

When making responsibility determinations, contracting officers can and will consider a number of sources of information about bidders and/or offerors. The common sources of information alread collected and readily available to the contracting officer includes the Federal Awardee Performance and Integrity Information System (FAPIIS), System for Award Management (SAM), and Past Performance Information Retrieval System (PPIRS).

Information in FAPIIS will identify affiliates, immediate owners, subsidiaries, and predecessors that have held previous Government contracts. It contains comments on how the contractor (or subcontractor) performed on previous contracts and whether there has been any administrative actions such as debarment or suspension. It contains information regarding criminal or civil proceedings, terminations for default or cause, and determinations of non-responsibility because the contractor does not have a satisfactory performance record or a satisfactory record of integrity and business ethics.

In addition to consulting the FAPIIS, contracting officers, when making responsibility determinations have other sources of information to help make those determinations. These include

• Records and experience data, including verifiable knowledge of personnel with the contracting office, audit offices, contract administration offices and other contracting officers. In other words, contracting officer will often query those around them for whatever information they might hold on a particular contractor or offeror.
• The prospective contractor - including bid or proposal information, questionnaire replies, financial data, information on production equipment and personnel information.
• Commercial sources of supplier information of a type offered to buyers in the private sector.
• Preaward survey reports - usually performed by DCMA (Defense Contract Management Agency) or DCAA (Defense Contract Audit Agency) - including accounting system adequacy and financial capability reviews.
• Other sources such as publications, suppliers, subcontractors, and customers of the prospective contractor, financial institutions, Government agencies, and business and trade associations.

Contractors and prospective contractors should never underestimate the impact of negative information or a negative perception by someone within the Government. Sometimes all it takes is an off-hand comment bubbling up to the contracting officer to influence award decisions.

Validating Self-Certifications of No Outstanding Tax Liabilites

It is well established that Government contractors must be "responsible" and there is a self-certification requirement to indicate that there are no outstanding income tax liabilities. This self-certification has been abused because everyone knows that there is no way to positively validate such a certification. The Defense Department, for example, cannot run over to the IRS to validate a self-certification.

But can an IRS contracting officer obtain information available only to the IRS?

Now they can.

It is in the interest of the Government to only award contracts to entities that are responsible and law abiding. FAR 9.104 requires contracting officers to perform a responsibility determination prior to each contract award by using the standards listed in FAR 9.104-1, as well as consider information submitted by the contractor and information they research or acquire from other sources.

The IRS (Internal Revenue Service) administers the Internal Revenue Code. Since fiscal year 2012, language in various appropriations acts have prohibited the Government under various conditions from using appropriated funds to enter into a contract with a prospective contractor unless the prospective contract certifies in writing that it has not been notified of any unpaid Federal tax assessment.

For purposes of tax administration, the IRS has access to taxpayer return information that is not otherwise available to other Federal Agencies. The Treasury Department has determined that an IRS contractor's compliance with the tax laws is a tax administration matter. The tax code authorizes the IRS to disclose a taxpayer's return information to such person(s) as the taxpayer may designate in a consent to such disclosure. In many cases, however, the official signing a contract proposal on behalf of an offeror will not be an official to whom the IRS is authorized to disclose the offeror's tax information. Thus, in order to ensure that the IRS is authorized to discuss the offeror's own tax information with an authorized official of the offer, a consent to disclosure is required. This consent to disclosure must be in the form of a separate written document pertaining solely to the authorized disclosure and must be signed and dated by an authorized person.

With this in mind the Treasury Department has amended its regulations (DTARs or Department of the Treasury Acquisition Regulations) to establish policies and procedures that facilitate successful, timely, and economical execution of IRS contractual actions in compliance with the FAR and various appropriation restrictions. Specifically, the interim rule established an express requirement for IRS contracting officers to use taxpayer return information that is available only to IRS to perform a tax check on the apparent successful offeror for purposes of determining eligibility to enter into a contract with the IRS.

Treasury Department To Pull Your Tax Returns Prior to Awarding a Contract

The Treasury Department has issued an interim rule to its Acquisition Regulations (DTARs) to permit contracting officials to obtain taxpayer tax return information as part of their responsibility determination - to determine whether prospective contractors are in compliance with tax laws or have unpaid liabilities. While this pertains only Treasury Department right now, these requirements could spread to other Executive Agencies. In fact, there are probably a bunch of regulators asking themselves right now, "why didn't we think of that?"

The Treasury Department determined that IRS information is needed for determining an offeror's eligibility to receive an award, including, but not limited to implementation of the statutory prohibition of making an award to corporations that have unpaid Federal tax liabilities.

This new regulation will be implemented through the Representations and Certifications section regarding responsibility matters identified by the term "Tax Check". Essentially, offerors will be authorizing the Treasury Department to pull income tax information.

Contractors (and prospective contractors) might find it beneficial to take steps to confirm that it does not have a delinquent Federal tax liability prior to submission of a proposal and/or obtain information to positively demonstrate to the contracting officer that it has no such liability. Its probably only a matter of time before faulty information is transferred from the IRS to a contracting officer somewhere and that information could jeopardize an offeror's chances for securing a contract.

Read more about the new interim rule here.

The SBA's Certificate of Competency (COC) Program

The SBA's Certificate of Competency (COC) program allows a small business to appeal a contracting officer's determination that it is unable to fulfill the requirements of a specific Government contract on which it is the apparent low bidder. When the small business applies for a COC SBA specialists conduct a detailed review of the firm's capabilities to perform on the contract. If the business demonstrates the ability to perform, the SBA issues a COC to the contracting officer requiring the award of that specific contract to the small business. The COC program helps ensure that the small business, especially those which are newly entering into the Federal procurement arena, are given a fair opportunity to compete for and receive Government contracts.

Note here that the COC focus is on a firm's ability to perform. The contracting officer might be concerned about the firm's technical expertise, its financial capability, or its capacity. Whatever the responsibility related concern might be, the small business has the right to appeal a contracting officer's determination.

A recent bid protest decision illustrates the difference between being responsible and not complying with the requirements of a solicitation.

Sea Box, a small business, protested the award of a contract to a competitor under a RFP (Request for Proposal) issued by GSA (General Services Administration) for relocatable simulator shelters (RSS) for the Air Force. GSA considered Sea Box's proposal to be unacceptable. Sea Box argued that GSA was required to refer its unacceptable proposal to the SBA (Small Business Administration) because the basis for eliminating Sea Box's bid from competition was related to responsibility.

The solicitation contained two pass/fail criteria. One of those criterion specified that GSA would reject any proposal that did not include a statement confirming that the RSS solution had been rated to operate at a secret classification level in accordance with characteristics specified in the solicitation. In order to demonstrate that they met the criterion, bidders were required to submit documentation that demonstrated in writing how the offerors' solution complied with the standards and documentation that demonstrated that its product had been previously certified/accredited by a Government security agency.

After reviewing Sea Box's proposal, the contracting officer determined that it failed to satisfy the pass/fail requirement because Sea Box did not submit a statement that confirmed its solution had been rated to operate at a secret classification level. As a result, GSA did not give further consideration to Sea Box's proposal.

Sea Box protested arguing that GSA eliminated its proposal from consideration based on a responsibility-related criteria, such that its unacceptable proposal should have been referred to the SBA. GSA argued that its rejection of Sea Box's proposal was not based on Sea Box's responsibility, but was instead based on whether Sea Box's product met the requirements of the solicitation.

The Comptroller General (CG) agreed with GSA finding that Sea Box did indeed fail to provide the required certification. As for Sea Box's contention that GSA was required to refer the proposal to SBA, the CG disagreed.

Where an agency finds the proposal of a small business to be unacceptable under a responsibility-related factor, that is, a factor pertaining to its ability to perform, such as whether it has adequate corporate experience or production equipment and facilities, the determination is essentially one of non-responsibility, meaning that referral to the SBA, which has the ultimate authority to determine the responsibility of small business concerns, is required. Where an agency rejects a proposal as technically unacceptable on the basis of factors not related to responsibility, however, referral to the SBA is not required. Likewise, where an agency rejects a proposal as technically unacceptable on the basis of a factor that is arguably responsibility related, but the finding of unacceptability is based on the offer's failure to submit specific documentation required by the solicitous, referral to the SBA is not required.

You can read the entire GAO decision here.

Responsibility Determinations - Refresher

Yesterday we discussed the U.S. Court of Federal Claims decision to essentially vacate a contracting officer's responsibility determination because it was not based on factual data. The decision actually called the contracting officer's decision arbitrary and capricious (i.e. impulsive or unpredictable). Being called arbitrary and capricious is not a tag to have associated with one's name, especially a contracting officer who, above all else, strives to be fair and objective in all matters pertaining to Government contracting. Those are fighting words.

Now we've discussed several times over the years the components of a responsibility determination. Perhaps the most comprehensive coverage was a seven-part series in November 2013. But by way of review, we'll summarize them here. The requirements to be deemed "responsible" come from FAR (Federal Acquisition Regulations) 9.104-1 which reads:

To be determined responsible, a prospective contractor must:

1. have adequate financial resources to perform the contract, or the ability to obtain them; 
2. be able to comply with the delivery or performance schedule; 
3. have a satisfactory performance record; 
4. have a satisfactory record of integrity; 
5. have the necessary organization to perform the work; 
6. have the necessary production, and technical equipment, and facilities; and 
7. be otherwise qualified and eligible to receive an award under applicable laws. 

If you recall yesterday's write-up on the Remington bid protest, the Court was particularly skeptical that Colt qualified under items 1 and 6; financial resources and production facilities.

Concerning the production facilities, FAR 9-104-3 defines evidence to support the existence of necessary production facilities to include commitments or explicit arrangements that will be in existence at the time of contract award, to rent, purchase, or otherwise acquire the needed facilities, equipment, other resources, or personnel. So, a prospective bidder need not actually have the facilities but must be able to show a firm commitment to acquire the needed resources. In the Remington case, the availability of the production facilities was in doubt at the time of the award due to uncertainties surrounding Colt's bankruptcy proceedings.

Predecessor and Successor Contractors Identified when Making Responsibility Determinations

The FAR Councils published a final rule that requires FAPIIS (Federal Awardee Performance and Integrity Information System) to include, to the extent practicable, identification of any immediate owner or subsidiary, and all predecessors of an offeror that held a Federal contract or grant withing the last three years. The objective of this new rule is to provide a more comprehensive understanding of the performance and integrity of the corporation before awarding a Federal contract (or grant).

The information required to populate the FAPIIS is already required by FAR 52.204-17, Ownership and Control of Offeror, which offerors provide when maintaining their SAM (System for Award Management) registration. This process simply moves that information from SAM to the FAPIIS system.

In making responsibility determinations, the contracting officer is required to consider information available through FAPIIS (see FAR 9.104-6) with regard to the offeror and any immediate owner, predecessor, or subsidiary identified for that offeror in FAPIIS.

FAPIIS collects certain information on contractors that could lead to nonresponsibility determinations. These include

• Terminations for default
• Terminations for cause
• Terminations for material failure to comply
• Non-responsibility determinations
• Recipient not qualified determinations
• Defective pricing determinations
• Administrative agreements
• DoD determinations of contractor fault reported to FAPIIS by federal government personnel.

Obviously, contractors do not want to appear in a FAPIIS report but the idea behind the new rule is to identify contractors that are guilty by association (so to speak). That's why its already being referred to as the "Guilty by Association" rule. Predecessor and successor contractors are defined as follows:

Predecessor means an entity that is replaced by a successor and incudes any predecessors of the predecessor.

Successor means an entity that has replaced a predecessor by acquiring the assets and carrying out the affairs of the predecessor under a new name (often through acquisition or merger).

This may be a start but it will not solve the problem where principles of companies who somehow get in trouble with the Government, simply create new companies and continue on with their bad practices.

You can read the full text of the new rule by clicking here.

Responsibility Determinations of Prospective Subcontractors

When submitting proposals to the Government, there are two things a prospective contractor must concern itself when proposing subcontract costs; cost/price reasonableness and subcontractor "responsibility". This post is about the latter, subcontractor responsibility.

Prospective prime contractors are responsible for determining the responsibility of their prospective subcontractors (see FAR 9.104-4). Determinations of prospective subcontractor responsibility may affect the Government's determination of the prospective prime contractor's responsibility. Accordingly, a prospective contractor's deficient subcontractor responsibility determination procedures and practices may influence the Government's responsibility determination of the prime contractor. The logic goes something like if the prime cannot or will not determine whether its proposed subcontractors are responsible, then how can the prime contractor be responsible since FAR requires such determinations. Sometimes, the Government will require a prospective contractor to provide written evidence of proposed subcontractor's responsibility. If that happens, prime contractors must be prepared to furnish such evidence and not wait until requested before compiling such evidence.

So how does a contractor (or prospective contractor, or higher-tier subcontractor, or higher-tier prospective subcontractor) go about determining a subcontractor's "responsibility". Essentially, the prime contractor must perform the same steps that the Government performs when determining whether the prime contractor is responsible. These seven considerations are also found in FAR at 9-104.1. To be determined responsible, a prospective subcontractor must

1. Have adequate financial resources to perform the contract, or the ability to obtain them.
2. Be able to comply with the required or proposed delivery or performance schedule, taking into consideration all existing commercial and governmental business commitments.
3. Have a satisfactory performance record.
4. Have a satisfactory record of integrity and business ethics.
5. Have the necessary organization, experience, accounting and operational controls, and technical skills, or the ability to obtain them.
6. Have the necessary production, construction, and technical equipment and facilities, or the ability to obtain them.
7. Be otherwise qualified and eligible to receive an award under applicable laws and regulations.

Sometimes contractors (or prospective contractors) succumb to the temptation to perform superficial responsibility determinations. We've seen some that take the form of negative assurance, i.e. nothing came to our attention that would lead us to believe the prospective subcontractor is not responsible. After all, it takes a lot of time and effort to request supporting data and document the review steps and conclusions. And, in many cases, the Government never asks for the data anyway. While such a gamble may have been worth the risk up until a few years ago, contracting officers are coming under increased scrutiny (by the Inspector Generals and other oversight) to document their own responsibility determinations and that will include steps to ensure that prospective contractors have performed their own required responsibility determinations.

Done Something Bad? Come Up With a Corrective Action Plan and Everything Will Be Okay Again

It seems like daily we read about another Government contractor embroiled in some kind of legal disputed. Yesterday we discussed Lockheed and the payment it made to settle a False Claims Act investigation by the Government. Whistleblowers are prolific - some out of a sense of duty and others hoping for a big payday. Then there are hiring practices and workplace issues to contend with or defend against. It's enough to make any attorney smile.

So, if there is an on-going investigation of a contractor concerning fraud, false claims, or some other illegal activity, how (and why) does the Government continue to award contracts? FAR 9.104 requires that contractors have a satisfactory record of integrity and business ethics and the contracting officer is required to make an affirmative determination that the prospective contractor is responsible. One company decided to answer this question by appealing the award of a contract to a competitor who was under investigation for two significant FAC (False Claims Act) violations.

In this case, DynCorp claimed that the Army failed to consider the impact of two pending False Claims Act (FCA) cases against its competitor KBR and argued that those cases demonstrate that KBR lacks the requisite satisfactory record of integrity and business ethics to justify an affirmative responsibility determination. Specifically, DynCorp argued that the contracting officer failed to review copies of the complaints filed by the US Government in the two FCA cases and relied exclusively on KBR's general, self-serving reports to the Army Suspension and Debarment Office about those fraud claims.

The Army disagreed. It contended that its affirmative responsibility determination reasonably considered the pending FCA litigation within the broader context of the totality of KBR's present responsibility.

The GAO agreed with the Army. The GAO found that the Army had convened a team that was responsible for researching and collecting data regarding the LOGCAP IV contractors. The team prepared a Contractor Responsibility Report analyzing KBR's present responsibility under each of the FAR 9.104.1 factors and documented its review with source materials including a DCMA (Defense Contract Management Agency) pre-award survey and business system review.

Regarding KBR's record of integrity and business ethics, the team found that a September 2014 DCMA pre-award survey, which was prepared after DoJ filed complaints in the two FCA cases, concluded that KBR's record during the time frame of the survey was satisfactory and reflected no areas of concern, and that KBR was proactive in this area. The team also found that KBR had enhanced its government compliance program, including requiring training and implementing a voluntary disclosure program.

The GAO found that the Army contracting officer was aware of and reasonably considered the pending litigation relied upon by the protestor. For this reason, the GAO concluded that there was no basis to review the contracting officer's affirmative determination of KBR's responsibility.

The key take-away here is that the Government only needs to consider the negatives within the "totality" of the prospective contractors "present responsibility".

You can read the entire (lengthy) GAO decision here.

Contractors Must Identify the "Place" of Contract Performance

Contracts awarded under sealed bidding (FAR Part 14) and by negotiation (FAR Part 15) both require prospective contractors to identify the place of contract performance and owner of the plant or facility at which the work will be performed. It is also necessary to identify the place of contract performance when determining and applying SCA rates (Service Contracting Act). Most prospective contractors disclose this information when making their certifications and representations as part of the SAM (System for Award Management) process.

Why is such information necessary? What will the Government do with it?

Information relative to the place of performance and owner of plant or facility, if other than the prospective contractor, is a basic requirement when contracting for supplies or services (including construction). A prospective contractor must affirmatively demonstrate its responsibility. Hence, the Government must be apprised of this information prior to the award.

The contracting officer must know the place of performance and the owner of the plant or facility to

1. determine bidder responsibility
2. determine price reasonableness
3. conduct plant or source inspections, and
4. determine whether the prospective contractor is a manufacturer or a regular dealer.

Back in 2011, we wrote a six part series describing how the Government conducts "responsibility" determinations on prospective contractors. That series can be viewed here.

The information is used to determine the prospective contractor's eligibility for awards and to assure proper preparation of the contract. Prospective contractors are only required to submit place of performance information on an exceptional basis; that is, whenever the place of performance for a specific solution is different from the address of the prospective contractor as indicated in the proposal.

Responsibility Determinations - Other

Today we conclude this series on responsibility determinations. FAR requires that contracting officers make affirmative determinations on seven criteria with respect to prospective contractors' ability to perform work responsibly. So far we've covered financial, schedule, performance, integrity, resources, and equipment and facilities. The seventh, and final criteria is a catch-all for any concerns about prospective contractors' responsibility that doesn't fall within one of the other six criteria.

The seventh criteria, found in FAR 9-104.1(g) simply states that to be determined responsible, a prospective contractor must be otherwise qualified and eligible to receive an award under applicable laws and regulations. In reviewing comptroller general appeals cases and perusing the FAPIIS database, we were unable to locate any cases where prospective contractors were determined non-responsible based on this criteria. Perhaps ineligible contractors bidding on contracts set aside for small businesses, minority-owned, woman-owned, or HUBZONE firms would fall in this category. Prospective contractors refusing to comply with statutorily required certifications (e.g. TINA) might be another possibility.

It is important for contractors to understand that not only will their proposals be evaluated for price, technical merit, or any number of other evaluation factors, but various aspects of the company will be evaluated as well in order for the Government to ensure they are dealing with responsible contractors. Knowing these evaluation factors ahead of time allows prospective contractors to be better prepared.

Responsibility Determinations - Equipment and Facilities

We have been discussing the requirement for contracting officers to make affirmative determinations on prospective contractors' responsibility prior to awarding contracts. Affirmative determinations are differentiated from passive determinations. A passive determination would read something along the lines of "we are not aware of any information that would lead us to believe this particular company is not responsible". An affirmative determination requires that the contracting officer develop and document support for each of the seven responsibility criteria. Today we are discussing the sixth of the seven criteria, equipment and facilities.

According to FAR 9-104-1(f), prospective contractors must have the necessary production, construction, and technical equipment and facilities, or the ability to obtain them. This criteria could almost be coded a "not applicable" for service contracts, where, for example, the scope of work called for the contractor to provide labor in support of base services and does not require any investments in capital facilities or equipment. But for manufacturing, construction, and certain research and development, the need for facilities and equipment is paramont.

If a company does not have the requisite facilities or equipment, they are not necessarily disqualified from the competition. The standard allows for prospective contractors to demonstrate that they have the ability to obtain resources. This demonstration must include "acceptable evidence" in the eyes of and the opinion of the contracting officer. Acceptable evidence normally consists of a commitment or explicit arrangement, that will be in existence at the time of contract award, to rent, purchase, or otherwise acquire the needed facilities, equipment, other resources, or personnel. If you fall into this category, it is extremely important to prepare and submit (or have ready to submit) documentation that will satisfy this requirement.

Responsibility Determinations - Resources (non financial)

Today we continue our series on responsibility determinations. FAR (Federal Acquisition Regulations) requires that contracting officers make an affirmative determination of a prospective contractors "responsibility" prior to awarding any contract. There are seven areas that the contracting officer must address. These seven standards are listed in FAR 9.104-1. Last week we covered the first four. Today we discuss the fifth standard; organization, experience, accounting and operational controls, and technical skills.

A prospective Government contractor must have the necessary organization, experience, accounting and operational controls, and technical skills, or the ability to obtain them. This listing includes EVMS (earned value management system), production control procedures, property control systems, quality assurance measures, and safety programs when appropriate and required by the solicitation. 

The Government often uses the Preaward Survey series of forms to document its assessment. These forms (Standard Forms 1402 through 1409) cover general aspects, technical production, quality assurance, financial capability and accounting systems. We've discussed the accounting system form (SF 1408) previously on this blog. The contracting officer typically assigns these surveys to different organizations. For example, DCAA typically performs the accounting system survey, while DCMA performs the financial capability and probably some of the technical aspects.

For companies that do not have the required systems in place at the time it submits its proposal, this standard includes the provision "...ability to obtain resources". If a prospective contractor does not currently have sufficient resources in place (and is not proposing to subcontract out that work), the contracting officer will require acceptable evidence of the ability to obtain those resources. Acceptable evidence normally consists of a commitment or explicit arrangement, that will be in existence at the time of contract award, to rent, purchase, or otherwise acquire the needed facilities, equipment, other resources, or personnel. If you fall into this category, it is extremely important to prepare and submit (or have ready to submit) documentation that will satisfy this requirement.

Responsibility Determinations - Integrity

Before awarding any contract, the contracting officer must make an affirmative determination of responsibility with respect to the prospective contractor. FAR 9-104-1 contains seven standards that a contracting officer must address in making the determination. Today we discuss the fourth standard; integrity and business ethics.

The fourth standard simply states that prospective contractors must have a satisfactory record of integrity and business ethics. Generally, the contracting officer will rely on information readily available in its files and Government databases  and the various certification requirements that prospective contractors must sign. FAR 52.213-3 requires a number of certifications regarding integrity matters that prospective contractors must complete for every contract over the simplified acquisition threshold (currently $150 thousand).

These certifications include representations that the contractor and its principals

• Are not presently debarred, suspended, proposed for debarment or declared ineligible for the award of contracts by any Federal agency.
• Have not, within a three-year period preceding this offer, been convicted of or had a civil judgment rendered against them for: commission of fraud or a criminal offense in connection with obtaining, attempting to obtain, or performing a Federal, state or local government contract or subcontract; violation of Federal or state antitrust statutes relating to the submission of offers; or commission of embezzlement, theft, forgery, bribery, falsification or destruction or records, making false statements, tax evasion, violating Federal criminal tax laws or receiving stolen property.
• Are not presently indicted for, or otherwise criminally or civilly charged by a Government entity with, commission of any of these offenses enumerated above.
• Have not, within a three-year period preceding this offer, been notified of any delinquent Federal taxes in an amount that exceeds $3 thousand for which the liability remains unsatisfied.

Contractors that cannot certify to these matters, need to provide explanations to the contracting officer so that an assessment can be made regarding its significance to the solicitation in question. Prospective contractors are not automatically disqualified, they'll just have to submit more paperwork. Contractors that submit false certifications, face potentially greater sanctions. The Government's databases are getting better, more comprehensive, and commonly shared among Agencies. The chances of flying under the radar when a company has "issues" (e.g. income tax liens) is very slim these days.

Responsibility Determinations - Performance

Before awarding any contract, the contracting officer must make an affirmative determination of responsibility with respect to the prospective contractor. FAR 9-104-1 contains seven standards that a contracting officer must address in making the determination. Today we discuss the third standard; satisfactory performance record.

A prospective contractor must have a satisfactory performance record. It is for the purpose of determining contractor compliance with this standard that the Government collects past performance information. FAR 42.15 states:

Past performance information is relevant information, for future source selection purposes, regarding a contractor’s actions under previously awarded contracts. It includes, for example, the contractor’s record of conforming to contract requirements and to standards of good workmanship; the contractor’s record of forecasting and controlling costs; the contractor’s adherence to contract schedules, including the administrative aspects of performance; the contractor’s history of reasonable and cooperative behavior and commitment to customer satisfaction; the contractor’s record of integrity and business ethics, and generally, the contractor’s business-like concern for the interest of the customer.

Although the Government's past performance database is not available to the public, contractors have the right to examine the information concerning themselves. If you haven't seen it, ask your contracting officer for a copy of information he/she wrote about you. Be sure to correct any erroneous or misleading information.

A prospective contractor that is or recently has been seriously deficient in contract performance shall be presumed to be nonresponsible, unless the contracting officer determines that the circumstances were properly beyond the contractor's control, or that the contractor has taken appropriate corrective action. Past failure to apply sufficient tenacity and perseverance to perform acceptably is strong evidence of nonresponsibility. Failure to meet the quality requirements of the contract is a significant factor to consider in determining satisfactory performance.

A prospective contractor shall not be determined responsible or nonresponsible solely on the basis of a lack of relevant performance history.

Responsibility Determinations - Schedule

Before awarding any contract, the contracting officer must make an affirmative determination of responsibility with respect to the prospective contractor. FAR 9-104-1 contains seven standards that a contracting officer must address in making the determination. Yesterday, we looked at the first of these seven, the contractors financial capability to perform. Today we will discuss the second standard, the ability to meet the delivery or performance schedule.

A prospective contractor must be able to comply with the required or proposed delivery or performance schedule, taking into consideration all existing commercial and governmental business commitments. Obviously, businesses should not overextend themselves because when they do, quality and timeliness suffers - maybe not for the particular contract in question but in other areas, perhaps on other governmental business commitments.

Most companies respond to multiple solicitations, knowing that they won't win them all. If they were to be successful at a higher than normal "win" rate, they could face a situation of too much work for their available capacity. 

We do not sense that this is a significant issue in the contracting community. In reviewing the GAO protest cases involving responsibility determinations, we found no instances where a prospective contractor appealed a negative determination based on its failure to meet this standard. Indeed, it would be unlikely for a contracting officer to have sufficient detailed contractor information to make a determination one way or another. The best they can do in these situations is write something to the effect that no information came to their attention that would indicate the prospective contractor would be unable to comply with the standard. 

In making responsibility determinations, contracting officers are vested with a wide degree of discretion and, of necessity, must rely upon his or her business judgment in exercising that discretion. Although the determination must be factually supported and made in good faith, the ultimate decision appropriately is left to the agency since it must bear the effects of any difficulties experienced in obtaining the required performance.

Responsibility Determinations - Financial

Yesterday we led off this series with a listing of the seven criteria that potential contractors much meet in order for the Government to consider them "responsible" and therefore eligible to receive work from the Government. Beginning today, we will be looking into more detail on those seven attributes, beginning with "financial capability".

Potential contractors need to demonstrate that they have sufficient financial resources to perform the contract from beginning to end. So, what does this mean in practical terms? It means that contractors must have enough cash to pay its bills from the time the bills become due, until payment is received from the Government. Consider a cost-reimbursement contract. A contractor pays bills during the month, submits a voucher at the end of the month, and receives payment from the Government in 30 days or less. That works out to a two month float. If the contract has a burn rate of $100 thousand per month, the contractor should have $200 thousand ($100 thousand times two months) in working capital earmarked for the contract. Its that easy.

The Government, as is their bent, will make a much bigger deal out of performing financial capability reviews. They'll ask for historical financial statements, cash flow projections, org charts and reams of other data but at the end of the day, they're simply trying to figure out if the contractor has enough working capital to see the contract through to completion. Contractors can sometimes expedite the review process by helping Government analysts (DCMA employees for DoD contracts) focus on cash flow forecasts rather than historical records and other tangential matters.

Responsibility Determinations - General

Before awarding any contract, the contracting officer must make an affirmative determination of responsibility with respect to the prospective contractor. The award of a contract to a supplier based on lowest evaluated price alone can be false economy if there is subsequent default, late deliveries, or other unsatisfactory performance resulting in additional contractual or administrative costs. While it is important that Government purchases be made at the lowest price, this does not require an award to a supplier solely because that supplier submits the lowest offer.

It is crucial for contractors and prospective contractors to assist contracting officers in that determination by providing all of the information requested. According to FAR 9.104, in the absence of information clearly indicating that the prospective contractor is responsible, the contracting officer shall make a determination of nonresponsibility.

In order to be considered “responsible”, prospective contractors must meet seven criteria. Failure to affirmatively demonstrate even one of these, will, if the Government is following its own regulations, cause a supplier to be determined nonresponsible. These seven criteria are,

1.     Have adequate financial resources to perform the contract, or the ability to obtain them.

2.     Be able to comply with the required or proposed delivery or performance schedule, taking into consideration all existing commercial and governmental business commitments;

3.     Have a satisfactory performance record. (However, a prospective contractor shall not be determined responsible or nonresponsible solely on the basis of a lack of relevant performance history).

4.     Have a satisfactory record of integrity and business ethics.

5.     Have the necessary organization, experience, accounting and operational controls, and technical skills, or the ability to obtain them

6.     Have the necessary production, construction, and technical equipment and facilities, or the ability to obtain them

7.     Be otherwise qualified and eligible to receive an award under applicable laws and regulations

As you might expect, the contracting officer must exercise a fair amount of judgment in making responsibility determinations. However, these judgments are often based on factual data and information that, in many cases, only the prospective contractor can provide.

Over the next few days, we will examine some of these criteria in more detail and provide some real-life cases where contractors were determined nonresponsive.