Agencies determine success or failure of past performance

The American Bar Association recently released the results of a survey of government industry and the private bar on how the government is doing using past performance in procurement. Although there were only 133 respondents (24 from government 75 from industry and l8 from the private bar) some patterns emerged. The findings are revealing and basically positive.

Here's the bottom line: The government people were presented with the statement "The use of past performance as a significant evaluation factor " and then they were provided with a series of statements of which they could check as many as appropriate. The largest number of checks were for the statement "helped to eliminate poor performing contractors" (9 checks) followed by "enhanced my ability to select superior contractors" (8 checks).

Although seven government respondents said use of past performance in source selection had "increased workload " only four said it had "not been worth the effort resources etc. " and only one said it had "failed to alter contractor performance."

These findings are consistent with other information about the impact of past performance on vendor performance. The Office of Management and Budget's Office of Federal Procurement Policy conducted a survey one year ago on how vendors were performing on recompeted contracts that were part of its 1994 past-performance pledge - in which agencies agreed to make past performance a significant source selection factor on some specific contracts. At that time program managers reported an increase in satisfaction of better than 20 percent compared with the previous contract.

At a meeting earlier this year I asked government people in the audience how many had observed improvements in the performance of their vendors since the government began paying more attention to past performance and virtually every government person raised their hand. When I asked industry participants how many had changed their own internal system in at least some way to increase the chances they would perform well on contracts all but one raised their hands. A former senior official who is now a federal contractor at a small firm said to me once "Steve I can tell you from personal experience that past performance is working. I am working harder on my government contracts because I want to make sure I get a good reference."

The ABA survey also reveals some notable differences between government and industry attitudes toward the past-performance initiative. Industry respondents were more likely to characterize past-performance report cards as "primarily negative."

Presented with a number of responses to the statement "The greatest hurdles to the governmentwide implementation of the use of past performance " industry was far more likely than government to check the box "inability to adequately comment/challenge " while government was far more likely than industry to choose "evaluator's fear of reprisal for negative reports." I certainly can understand industry fears about unjustified negative reports given the consequences for subsequent source selections but I think government people are correct to believe that past-performance report cards that pull punches are far more likely to occur than ones that engage in unfair vendettas. Government folks have in mind the example of employee performance ratings which are notoriously biased upward. It may be psychologically easier to be hard on a vendor than an employee and even the government's biased rating system does make distinctions among employees - even if average ratings are too high.

Respondents to the ABA survey were allowed to make written comments as well and one from a government respondent caught my eye: "Now we collect tons of data most of which will never be used we collect answers to common questions rather than specific questions relevant to the particular source selection and we are all struggling to deal with potential litigation that will unfortunately very likely bog us down for generations to come! My recommendation is to scrap the [Federal Acquisition Regulation] requirements related to this whole subject."

It's a big government out there and almost certainly some - perhaps many - organizations will manage past performance in a mechanistic ritualistic way that will justify this respondent's negative conclusion. Whether this happens is not a matter of fate it is in the hands of the government people who will make the system either work or not work for them.To make it work here's some advice:

* Use past-performance report cards to improve contract administration. Gathering information for past performance in source selection is moving away from ad hoc questionnaires and toward report cards filled out during the contract period. This will reduce the burden of filling out many surveys on a single contract. And it will give agencies an opportunity on an ongoing basis to sit down with their vendors and go over in a structured way what's going right and what's going wrong with the contract.

* Tie past-performance ratings to objective performance measures. There are many good reasons to get better at putting objective performance measures in contracts. One side benefit is that it makes it psychologically easier to give honest ratings ("I don't have anything against you but the contract said 98 percent availability and it's only 92 percent.").

* Take the new rating scales seriously. The Defense Department has agreed on a five-point rating scale where the midpoint is defined as "met contract requirements." To get a four or five the vendor needs to have exceeded contract requirements. This scale can be a powerful tool against grade inflation. I hope it will be adopted by civilian agencies.

* Use past performance to reward outstanding vendors and not just punish poor ones. The biggest value added from past performance comes from driving performance upward. That won't happen if people see past performance only as a way to get rid of the bottom of the barrel.

Past performance can be a powerful tool to help the government obtain better value from contracting. Whether it does so in your agency depends on you.

-- Kelman was the administrator of the Office of Federal Procurement Policy from 1993 to 1997. He is now Weatherhead Professor of Public Management at Harvard's Kennedy School of Government.