Link: GAO Opinion
Agency: Department of the Army
Disposition: Protest denied.
Keywords: Performance Based Standards
General Counsel P.C. Highlight: Under a performance-based contracting arrangement, such as here, performance metrics are more than mere proposal evaluation tools. Rather, the metrics become the standards used to assess the contractor during performance, and to determine the application of contractor-proposed performance incentives and disincentives.
Trace Systems, Inc., a small business, protests the elimination of its proposal from consideration for award under a request for proposals (RFP), issued by the Department of the Army for information technology services.
The RFP was issued as a total set-aside for small business, to establish a multiple award indefinite-delivery/indefinite-quantity (ID/IQ) contract for a range of services and solutions necessary to implement the agency’s enterprise infrastructure and infostructure goals. To achieve this end, the RFP sought to enter into “performance-based” arrangements with successful offerors. The RFP noted that establishing performance based arrangements introduced several changes from traditional procurement approaches, including the use of a statement of objectives (SOO) rather than a statement of work (SOW). Under a SOO, the government describes its requirements in terms of desired objectives, and offerors are free to propose solutions that they believe will best meet or exceed those objectives. After award, the agency monitors and evaluates contractor performance using performance metrics established by the contract. These metrics gauge a contractor’s level of success in meeting the stated objectives, and provide for performance-related incentives and disincentives. The RFP also advised that the agency contemplated making award without discussions.
According to the RFP, the awards would be made to offerors with proposals determined to be the most beneficial, considering three evaluation factors: mission support, performance risk, and price. The mission support factor consisted of three subfactors: corporate capability, management approach, and quality control programs. Pursuant to the RFP, under the management approach subfactor, offerors were to identify performance metrics for each objective identified in the SOO using “Table 1 – Performance Metrics.” These metrics consisted of “Measures and Metrics; Acceptable Level of Quality (ALQ); and the contract level Incentives (non-monetary)/Disincentives.”
After another offeror received the award, Trace learned that its proposal had received a red/unacceptable rating under the management approach subfactor, which resulted in a red/unacceptable rating for the entire mission support evaluation factor, and a determination that Trace’s proposal was unacceptable overall. Specifically, the agency determined that Trace had improperly modified metric 3.c and ALQ 3.c of Table 1 in a manner that materially altered the performance metric’s meaning and failed to conform to the RFP.
Trace asserts that the deficiency was improper because the agency misapplied the evaluation factors, unreasonably applied the evaluation factors according undue weight to one deficiency, unreasonably applied undue weight to the management approach subfactor, introduced an unstated evaluation factor, and mechanically applied the evaluation factors under the mission support subfactor. GAO states that clearly stated RFP requirements are considered material to the needs of the government, and a proposal that fails to conform to such material terms is unacceptable and may not form the basis for award.
Here, the government-specified performance metrics were material requirements of the RFP and the agency reasonably determined that Trace improperly modified the performance metrics in a manner that did not conform to the terms of the RFP. Under a performance-based contracting arrangement, such as here, performance metrics are more than mere proposal evaluation tools. Rather, the metrics become the standards used to assess the contractor during performance, and to determine the application of contractor-proposed performance incentives and disincentives. Indeed, the measures, metrics, ALQ, and incentives/disincentives serve to establish the performance levels that are required to meet the objectives specified by the SOO. In this case, the agency provided certain government-specified performance metrics reflecting the level of performance that the government required, and repeatedly cautioned the offerors’ that they were not to be revised. Such clearly stated RFP terms, which establish the obligations of the parties during contract performance, are undoubtedly material to the needs of the government; failure to conform to these terms rendered this proposal unacceptable. Based on a review of the record, it is apparent that through its modifications to the government-specified metric at 3.c of Table 1, and the corresponding ALQ, Trace materially changed the fundamental nature of the performance metric established by the agency in the RFP. Instead of following the RFP’s clear directive not to alter the metric and ALQ for 3.c., Trace revised the proposed metric to read, “[p]ercentage of pricing obtained competitively by Trace from its subcontractors, vendors and suppliers,” and the corresponding ALQ to state, “100% obtained competitively.” Under Trace’s proposed metric and ALQ, Trace would be entitled to any proposed performance incentives merely by competitively obtaining its subcontractor’s prices, and would also thereby avoid the imposition of performance based disincentives even in the event that it sought upward price adjustments during task order performance. Since the deviations introduced by Trace altered the fundamental legal relationship of the parties with respect to contract performance requirements, the agency reasonably determined that Trace’s proposed deviations constituted deficiencies, which rendered its proposal unacceptable. The protest is denied.