Government Contracts Monitor

Failing to Meet Socio-Economic and Subcontracting Goals May Cost You!

March 2, 2015

A recent GAO decision provides support to agencies in addressing the increasing pressure to evaluate offerors’ compliance with, and puts some teeth in, socio-economic and subcontracting goals. Specifically, GAO found reasonable, and rejected a bid protest challenging, an agency’s assessment of “weaknesses” and downgrading of an offeror’s past performance for failing to meet socio-economic and subcontracting goals under four of five contracts submitted for evaluation. Science Applications International Corp., B-408690.2, B-408690.3, decided Dec. 17, 2014.

The decision involved a Defense Logistics Agency (DLA) request for proposals (RFP) for supplies and services to DLA’s tailored logistics support (TLS) prime vendor program for two separate “Zones” in the southeastern United States. The RFP provided for award on a best value basis, considering three evaluation factors, in descending order of importance: (1) past performance, (2) technical merit, and (3) price, with the non-price factors being “significantly more important” than price.

With respect to past performance, the RFP directed offerors to submit information on up to six prior contracts, and stated that “[b]oth relevancy and contractor performance will be evaluated.” Pertinently, the RFP explicitly stated that the evaluation would include “the degree to which the offeror met . . . socio-economic goals,” and further, that the agency would rate “how well the offeror met its subcontracting goals.” The RFP stated that the agency would assign overall past performance ratings of “substantial confidence,” “satisfactory confidence,” “limited confidence,” “no confidence” and “unknown (neutral) confidence.”

Eight offerors submitted proposals, including SAIC, an incumbent. In evaluating SAIC’s past performance, the agency assigned weaknesses based on SAIC’s failure to meet socio-economic and/or subcontracting goals under four of the five contracts submitted for evaluation. During discussions, the agency advised SAIC of these assessed weaknesses.

After a second round of discussions, and evaluation of final proposal revisions, the agency determined that SAIC had the same “Satisfactory Confidence” ratings for past performance, and “Outstanding” for technical merits, as two competitors who each had significantly lower total evaluated prices. The agency therefore awarded to those competitors, SAIC protested both awards, and the GAO consolidated the protests.

SAIC asserted that it was unreasonable for the agency (i) to have downgraded SAIC’s proposal for what SAIC characterized as “four minor weaknesses” pertaining to SAIC’s failure to meet its socio-economic goals, and (ii) to have assigned SAIC, a successful incumbent, the same “satisfactory confidence” rating assigned to the awardees. SAIC complained that the agency appeared to have disregarded what SAIC characterized as its “across-the-board” ratings of “exceptional” for many of its prior contracts. SAIC further asserted that the assigned “weaknesses” 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 summarily rejected SAIC’s arguments. First, the GAO noted that the RFP explicitly notified offerors that the past performance evaluation would include the degree to which offerors met socio-economic and subcontracting goals. Second, the record clearly showed that SAIC in fact failed to meet its socio-economic and/or subcontracting goals under each of the four contracts. Third, the record further reflected that the agency recognized that SAIC met or exceeded most of its prior contract requirements, but nonetheless, and consistent with the RFP terms, concluded that the multiple failures to meet the socio-economic goals constituted weaknesses and rated SAIC’s past performance as “good,” but not “outstanding,” and assigned an overall past performance rating of “satisfactory confidence.”

GAO concluded that the agency’s actions were reasonable, and that SAIC’s complaints “merely reflect[ed SAIC’s] ongoing dissatisfaction with the agency’s judgments,” and failed to provide bases for sustaining SAIC’s protest.

This decision demonstrates that prime contractors who fail to meet their socio-economic and/or subcontracting goals do so at their peril. This is particularly important given the increasing scrutiny and pressures on agencies to enforce and ensure compliance with small business subcontracting plans. Such developments also create opportunities for small businesses to team with and help large business primes meet their goals.