Construction Law

The Right of Contractors to Challenge Unfair Performance Evaluations is Further Expanded by the U.S Court of Federal Claims

By Michael Payne

We recently reported (see our earlier blog article) the decision of the United States Court of Federal Claims in BLR Group of America, Inc. v. United States, issued on November 25, 2008, in which the Court opened the door to contractor challenges of unfair or incorrect performance evaluations.  Coming literally on the heels of the BLR case, the Court issued another decision on December 9, 2008, Todd Construction Co., Inc. v. United States, denying a government motion to dismiss and holding that the Court had the jurisdiction to consider a challenge to a contracting officer’s decision regarding a contractor’s performance evaluation.  The Court held that Todd had submitted a “claim” within the meaning of the Contract Disputes Act of 1978 because, on March 22, 2006, the Government issued its proposed final evaluations of Todd’s work, and on April 20, 2006, Todd submitted its comments protesting those evaluations.  The Government issued final evaluations on July 21, 2006, and Todd submitted both a claim and a supplemental claim to the Department of the Army, asserting regulatory violations in the preparation of the evaluations and lack of factual accuracy. On April 25, 2007, the contracting officer wrote to Todd, indicating the letter “serves as my final decision regarding your performance on the above Task Order” with a subject line “Final Contracting Officer Decision.”  Based upon these facts, the Court held that “this is a final decision of the contracting officer upon a written demand.”

In 2003, Todd Construction received two task orders from the United States Army Corps of engineers (“Corps”) for roof repair of buildings at the Seymour Johnson Air Force Base in North Carolina, and the work was completed in September of 2005. On March 26, 2006, the Corps issued proposed final evaluations rating Todd’s overall performance on the work as unsatisfactory.  Todd submitted comments to the contracting officer explaining why, in its view, those ratings were unmerited, but the contracting officer nonetheless issued final unfavorable evaluations on July 23, 2006.  In August of 2006, Todd appealed the contracting officer’s decision to Ms. Rita Miles of the Department of the Army, alleging that the Government (1) violated the applicable performance review procedures set forth in Army Corps of Engineers Regulation 415-1-17 and (2) arbitrarily issued evaluations unsupported by the facts.  Ms. Miles apparently provided some documents to a vice-president of Todd, and Todd responded to that communication on October 2, 2006.  Ms. Miles rejected Todd’s appeal on April 25, 2007.  The negative evaluations were then made part of the Construction Contractor Appraisal Support System (“CCASS”).

The government’s motion to dismiss contented that the Court lacked jurisdiction because Todd’s challenge to the accuracy and procedural propriety of performance evaluations was not a “claim” within the meaning of the Contract Disputes Act because it is not made “as a matter of right” and does not arise from or relate to the contract. Specifically, the government contended that [w]here, as here, the contractor’s claim is that the Government breached its internal policies, rather than the provisions of the contract, such a claim cannot properly be considered a claim ‘relating to the contract.’” The Court disagreed and concluded that “this is a ‘final decision’ of the contracting officer upon a ‘written demand,’ and the Court further concluded that Todd made that written demand ‘as a matter of right.’” 

The Court further stated that Federal regulations require that for construction contracts the “contracting activity shall evaluate contractor performance and prepare a performance report” “in accordance with agency procedures,” and that the report must be “reviewed to ensure that it is accurate and fair.” FAR 36.201.  The Corps has set forth detailed procedures to be followed in assessing contractor performance, with additional steps to be taken when the rating will be unfavorable.  Army Corps of Engineers Regulation 415-1-17(5)(c)(1).  In this case, Todd alleges that those procedures were not followed and that the evaluations it received were not, in fact, accurate and fair.  To the extent plaintiff asserts that when the Government prepares a performance evaluation that will be made part of the record upon which its future submissions will be judged, it is entitled to an accurate and fair performance evaluation prepared in accordance with the regulations, it makes that request “as a matter of right.” Alliant Techsystems, Inc. v. United States, 178 F.3d 1260, 1265 (Fed. Cir. 1999) (observing that the “claim must be a demand for something due or believed to be due rather than, for example, a cost proposal for work the government later decides it would like performed”); BLR Group of Am. v. United States, No. 07-579C, at 10 (Fed. Cl. Nov. 25, 2008).

While the Court has scheduled further briefing by the parties as to what should be the appropriate remedy, the decision comes as yet another welcome advance in the willingness of the Court to look into the fairness of contractor performance evaluations. In the past, government agencies have acted with impunity and have leveraged their power to issue poor performance ratings in order to extract concessions from contractors during performance. There is no question, moreover, that the power to reduce a performance rating has had a chilling effect on the filing of claims – a right that is granted by law and regulation. The Court further noted that “the creation of mandatory performance reviews, databases archiving those reviews, and the requirement to consider those archived materials in future contract awards means that a negative review is potentially devastating to a contractor, who may have no opportunity—or very little opportunity—to mitigate the impact that review will have on future awards.”  Accordingly, “there are sound reasons, as Judge Sweeney recently explained, to address performance evaluations as issues of contract performance rather than as part of a bid protest when the contractor seeks future government contracts.”  See BLR Group of Am. v. United States, No. 07-579C, at 17 (Fed. Cl. Nov. 25, 2008).

The BLR and the Todd cases make it clear that contractors do not have the right to simply challenge a performance evaluation by filing an appeal directly to the Court. There must first be a “claim” that is submitted to the contracting officer challenging the decision and explaining why the contractor believes that the performance rating should be changed. If the contracting officer then issues a decision denying the “claim,” or if the contracting officer fails or refuses to respond within a reasonable time, the contractor may then appeal the contracting officer’s decision to the Court of Federal Claims. (The jurisdiction of the boards of contract appeals is not as broad as the Court’s and the boards have not been as receptive to contractor challenges to performance evaluations). Because this is an evolving area of the law, however, and because there are procedural hurdles that must be overcome, it is strongly suggested that contractors seek legal counsel before undertaking an appeal of this nature.

Full post as published by Federal Construction Contracting Blog on December 26, 2008 (boomark / email).