Why a GAO report documenting improvement is not good news

The Government Accountability Office recently issued a new report called "DOD Acts to Improve the Reporting of Past Performance Information", documenting progress the Defense Department has made getting past-performance report cards on contractors submitted into DOD's past-performance database on time. Now 74 percent of reports are being submitted on time, compared to 56 percent two years ago.

Sounds like a good news story, right?

I'm not so sure.

Done right – and the government currently is a long ways from doing it right, unfortunately – past-performance report cards are one of the most powerful tools in the government's toolkit to incentivize better vendor performance. Everybody knows that considering the past performance of people from whom we buy is one of the most powerful tools customers have to make the market system work better – suppliers treat us right in the hope of getting our repeat business.

There are serious problems with the current operation of the past-performance system in the government, as I have frequently written. The biggest problem is insufficient honesty in reports, so they don't differentiate enough between good performance that should be rewarded and bad performance that should be punished. I have frequently argued that the government should eliminate the contractor's ability to challenge a past performance evaluation they don't like, because it disincentivizes government honesty. Putting their own version of events into the system should be all contractors are entitled to.

Homeowners who have used the Angie's List service will know what I'm talking about. People who have had experiences with service companies post reviews about them on the website. The companies may post responses to the reviews, but have no power to have them changed or removed.

There is also an attitude by many, including the punishment-first caucus on the Hill and some so-called "watchdog" groups, that past performance should be used only to punish the bad, not to reward the good.

Unfortunately, the GAO report -- despite what I am sure are good intentions, and a title that sounds promising -- doesn't really help. In fact, it may hurt the important effort to improve the government's past-performance system.

Why?

What the GAO report discusses is the extent of compliance with the requirement to submit past-performance report cards, and they praise DOD because “compliance” has increased. The report repeatedly uses the word "compliance" with regard to past-performance report cards, sometimes several times in one paragraph. But when government people hear the word "compliance," most think about something unpleasant but (probably or at least possibly) necessary. It's not something we want to do, but a bitter pill that must be swallowed for the greater good.

The second problem is the performance measure the report uses to measure compliance. Although GAO itself has in the past complained about inadequate content in the report cards that do appear in the system, in particular with regard to descriptive narrative (they should also complain about the lack of differentiation in grades), there is none of that in this report. All they measure is the input of how many reports get submitted on time, not about whether they are any good or whether anyone is using them.

Between the emphasis on compliance and the use of a poor, input-style performance measure, the GAO report sends a dismal signal about what past performance report cards are about – they are a "drill," a "data call," imposed by "them" for their purposes, not for us on the front lines of the contracting system. If we fill in these report cards, the only reason is to tick a box. This is not for us, it is for them.

But the past-performance system absolutely should be for "us" – for the customers of the contracting system -- as a tool for getting better contracting performance on our contracts. Clearly, there will be a "free rider" problem – even in a system with honest, valuable report cards, most users of the procurement system would prefer that everyone else fill out their report cards while neglecting to complete their own. A procurement system that took past performance seriously would look for ways to deal with the free rider problem, perhaps with a feedback system similar to that consulting firms use for the lessons-learned reports consultants file for use by other consultants, perhaps including some kind of rewards for the reports that the most users say influenced their contract award decision.

My point is that we need some serious thinking (and action) about improving the way the past-performance system works. I don't think this GAO report helps.

A job for OFPP?