Poor performance under a federal contract can have immediate consequences for contractors, who could potentially be denied award or incentive fees, required to pay damages, or terminated for default. In addition, it can affect their ability to obtain future contracts because federal law generally requires agencies to evaluate contractor's "past performance" and consider past performance information when making source selection decisions in negotiated procurements and when determining whether prospective contractors are "responsible." "Past performance" refers to contractors' performance on "active and physically completed contracts" and certain orders under existing contracts. Reports alleging that some contractors received new contracts despite allegedly deficient performance under prior or current contracts have recently prompted interest in the role that evaluations of past performance play in federal contracting, as well as attempts by some Members of Congress and the Obama Administration to improve agencies' compilation and use of past performance evaluations. The 112 th Congress enacted legislation that requires the Department of Defense (DOD) ( P.L. 112-81 ) and the Federal Acquisition Regulatory Council ( P.L. 112-239 ) to develop "strateg[ies] for ensuring" that past performance reports are timely, accurate and complete; and would give contractors 14 days to comment on, rebut, or supplement past performance reports. The 113 th Congress also enacted legislation addressing certain issues relating to past performance, although such legislation was narrower in scope than that enacted in the 112 th Congress. In addition, the Obama Administration updated the Federal Acquisition Regulation (FAR) in 2013 to standardize the factors used in evaluating contractors' performance, and require that all past performance information be entered into the Contractor Performance Assessment Reporting System (CPARS). It made further updates to the FAR in 2014 to implement P.L. 112-81 and P.L. 112-239 . The evaluation and any response from the contractor should be marked "source selection information" and submitted to the Contractor Performance Assessment Reporting System (CPARS), from which it is "automatically transmitted" to the Past Performance Information Retrieval System (PPIRS). A negotiated procurement is one in which the contract is awarded to the vendor whose proposal represents the "best value" for the government. Congress and the executive branch required agencies to consider past performance in source selection decisions in the hope that the government would obtain better performance under its contracts—and better value for its procurement dollars—by shifting the basis of its source selection decisions. Past Performance as an Evaluation Factor

Subpart 15.3 of the FAR currently requires agencies to consider past performance or some other non-cost evaluation factor in all procurements, although the requirements differ somewhat depending upon the value of the procurement: 
With procurements valued at or below the simplified acquisition threshold (generally $150,000) , agencies must consider past performance or some other non-cost evaluation factor (e.g., technical excellence, management capability). Agencies are required to consider cost/price and the quality of the product or service, along with past performance, in all negotiated procurements. Agencies are prohibited from awarding a contract to a contractor who has not been determined to be affirmatively responsible. Consideration of this information would arguably be most helpful in assessing responsibility criteria other than whether the contractor possesses a satisfactory performance record (e.g., whether the contractor has a satisfactory record of integrity and business ethics). Debarment and Suspension Under the FAR

Agencies also have legal authority under Subpart 9.4 of the FAR to debar or suspend contractors for willful failure to perform under a contract or a history of failure to perform.
Poor performance under a federal contract can have immediate consequences for contractors, who could be denied award or incentive fees, required to pay damages, or terminated for default. In addition, it could affect their ability to obtain future contracts because federal law generally requires agencies to evaluate contractors' past performance and consider past performance information when making source selection decisions in negotiated procurements and determining whether prospective contractors are "responsible." "Past performance" refers to performance on "active and physically completed contracts" and certain orders under existing contracts.
Federal law generally requires agencies to evaluate and document contractor performance on contracts or orders whose value exceeds the simplified acquisition threshold (generally $150,000). The evaluation must generally address the quality of the product or service supplied by the contractor, its efforts to control costs, its timeliness and compliance with schedules, its conduct of management or business relations, its performance in subcontracting with small businesses, and other applicable factors (e.g., tax delinquency). The evaluation and any contractor response comprise the past performance information that is stored in government databases (e.g., Past Performance Information Retrieval System (PPIRS), Federal Awardee Performance and Integrity Information System (FAPIIS)) and may be used in future source selection decisions.
Federal law also generally requires agencies to consider contractors' past performance when making source selection decisions in negotiated procurements whose value exceeds the simplified acquisition threshold. In a negotiated procurement, the contract is awarded to the offeror whose proposal represents the "best value" for the government based on various factors identified in the solicitation. These factors typically must include price and past performance. However, other factors may be considered, and procuring agencies determine the weight given to various factors.
Additionally, agencies are required by law to consider whether the contractor has a "satisfactory performance record" when determining whether the contractor is sufficiently "responsible" to be awarded a federal contract. Agencies generally cannot award a contract without determining that the contractor is "responsible." While agencies are generally prohibited from repeatedly finding a contractor nonresponsible based upon the same deficient past performance, they may debar or suspend contractors for willful failure to perform under a contract or contracts, or for a history of failure to perform or of unsatisfactory performance of a contract or contracts.
Reports alleging that contractors received new contracts or orders despite poor performance under prior ones have recently prompted interest in the role that evaluations of past performance play in contracting, as well as attempts by some Members of Congress and the Obama Administration to strengthen requirements pertaining to performance evaluations. The 112th Congress enacted legislation that requires the Department of Defense (P.L. 112-81) and the Federal Acquisition Regulatory Council (P.L. 112-239) to develop "strateg[ies] for ensuring" that past performance reports are timely, accurate and complete; and give contractors 14 days to comment on, rebut, or supplement past performance reports. The 113th Congress also enacted legislation addressing certain issues relating to past performance (P.L. 113-6, P.L. 113-291), although this legislation was narrower in scope than that enacted by the 112th Congress. In addition, the Obama Administration updated the Federal Acquisition Regulation (FAR) in 2013 to standardize the factors used in evaluating contractors' performance, and require that all past performance information be entered into the Contractor Performance Assessment Reporting System (CPARS). It made further updates to the FAR in 2014 to implement P.L. 112-81 and P.L. 112-239.