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Past Performance Reference From Sister Company Was “Inherently Biased”

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Koprince Law LLC

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In its evaluation of past performance, an agency was permitted to disregard a past performance reference prepared by an offeror’s sister company–which also happened to be in line for a subcontracting role.

In a recent bid protest decision, the GAO upheld the agency’s determination that the sister company’s reference was “inherently biased” and need not be considered in the agency’s past performance evaluation.

The GAO’s decision in PacArctic, LLC, B-413914.3; B-413914.4 (May 30, 2017) involved a DoD Washington Headquarters Services solicitation for advisory and assistance services.  The solicitation, which was set-aside for 8(a) participants, called for the award of a single IDIQ contract.

Proposals were to be evaluated on a best value basis, considering three factors: technical capability, past performance, and price. With respect to past performance, the agency was to evaluate recent and relevant past performance.  The solicitation required offerors to submit past performance questionnaires from their customers for evaluation.

PacArctic, LLC submitted a proposal.  In its proposal, PacArctic included a PPQ completed by the president of PacArctic’s sister company, which shared “common ownership and control” with PacArctic.  The sister company, which was the incumbent contractor, said that PacArctic had performed subcontract work on the incumbent contract.  The sister company’s president rated PacArctic’s past performance as “exceptional.” PacArctic proposed the sister company as one of its subcontractors for the project.

In its evaluation of past performance, the agency elected not to consider the sister company’s PPQ. The agency explained that, because the companies shared common ownership, and because the sister company would be a subcontractor to PacArctic, the sister company was “inherently biased” in PacArctic’s favor.

The agency assigned PacArctic a “Moderate Confidence” past performance score.  The agency then awarded the contract to a competitor, which had received a “High Confidence” score.

PacArctic filed a GAO bid protest.  Among its arguments, PacArctic contended that it was improper for the agency to ignore the sister company’s PPQ.  PacArctic pointed out that nothing in the solicitation precluded a sister company from serving as a past performance reference.

The GAO agreed that the RFP did not prevent a sister company from serving as a reference.  Nevertheless, under FAR 15.305(a)(2)(i), the agency was to consider the “source of the information” as part of its evaluation.  The GAO continued:

Here, where the source of the PPQ was PacArctic’s sister company, which was proposed as a subcontractor in PacArctic’s proposal, we find that the agency reasonably concluded that the PPQ lacked sufficient credibility, given the sister company’s obvious stake in the evaluation.  Accordingly, we find nothing unreasonable regarding the agency’s decision to disregard the PPQ.

The GAO denied PacArctic’s protest.

PacArctic is a subsidiary of an Alaska Native Corporation.  It’s not uncommon for companies falling under the same ANC, tribal, or NHO umbrella to work together, as PacArctic and is sister company did on the incumbent contract.  Even outside of the ANC, tribal and NHO context, many small businesses have affiliates or close working relationships with other entities.  For contractors like these, it’s worth remembering that in a past performance evaluation, the “source of the information” must be considered.  As PacArctic demonstrates, when the source is a sister company, other affiliate, and/or proposed subcontractor, the agency may disregard the information provided.


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