Some of you were confused when I classified the following statement as myth-information in the Federal Contracting Myths thread:

Offerors with no record of past performance must be rated neutral.

Let me explain where I was coming from.

In April of 1994, OFPP used a variation of the word neutral with the term "past performance" in a Federal Register notice soliciting comments on their proposed pilot program to increase the use of past performance information in source selections. The notice stated:

"New" Firms. One of the most frequently asked questions about using past performance information in source selections is, "How are new firms to be treated?" In OFPP's view, new firms should be neither rewarded nor penalized as a result of their lack of performance history. If, for example, past performance is to be rated on a scale of one to ten, a new firm should be given the average score of the other competing offerors. Unless the RFP contains a specific requirement for prior performance based on safety, health, national security, or mission essential considerations, agencies should "neutralize" the past performance factor and evaluate the merits of proposals received from new firms in accordance with other stated evaluation criteria. [59 FR 18168-02]

In November of 1994, the Federal Acquisition Streamlining Act (FASA) (Public Law 103-355) amended 41 USC 405 to include a new subsection (j) implementing the Government's policy of considering past performance in source selections. (j)(2) contains the following language:

In the case of an offeror with respect to which there is no information on past contract performance or with respect to which information on past contract performance is not available, the offeror may not be evaluated favorably or unfavorably on the factor of past contract performance.

The FAR Council attempted to "plain language" the statute when it came time to implementing the new policy. In a proposed rule implementing the past performance information policy, FAR 15.608(a)(2)(iii) contained the following statement:

Firms shall be allowed to compete for contracts even though they lack a history of relevant past performance. [59 FR 8108]

When the final rule came out in March 1995 (FAC 90-26), the proposed rule was changed to read as follows:

Firms lacking relevant past performance history shall receive a neutral evaluation for past performance.

The background statement of the FAC stated that the final rule "clarifies that firms lacking relevant performance history shall receive a neutral evaluation for past performance." (60 FR 16718-01) However, since there is no discussion of the comments received in response to the proposed rule, it is unclear why the proposed rule needed clarification.

Apparently, the FAR Council thought that the rule needed even further clarification and proposed the following definition of a neutral evaluation in the first proposed FAR Part 15 Rewrite:

Firms lacking relevant past performance history shall receive a neutral evaluation for past performance. A neutral evaluation means

any assessment that neither rewards nor penalizes firms without relevant performance history. [61 FR 4830]

However, this only muddied the waters. The background of the second proposed rule provides the following explanation:

Several public comments requested that a definition of "neutral'' past performance rating be included in the final rule. This proposed

rule provides only general guidelines for establishing a neutral rating, since what constitutes "neutral'' seems to change with the

circumstances of each individual source selection. However, suggestions from the general public for a more rigorous definition are solicited

and will be considered by the FAR Council in drafting the final rule. [62 FR 26639]

The second proposed rule also contained a valiant attempt to define a neutral past performance evaluation as follows:

Firms lacking any relevant past performance history shall receive a neutral evaluation for past performance. The evaluation

approach shall reflect the circumstances of each acquisition. A neutral evaluation is one that neither rewards nor penalizes offerors without

relevant performance history (41 U.S.C. 405). While a neutral evaluation will not affect an offeror's rating, it may affect the

offeror's ranking if a significant number of the other offerors participating in the acquisition have past performance ratings either above or below satisfactory.[62 FR 26639]

This language failed to clarify anything, so in the final rule the FAR Council said the heck with it, let's just parrot the statute:

Definition of neutral past performance evaluations. The proposed rules provided a definition of neutral past performance evaluations. Public comments recommended that we revise the definition and provide detailed instructions on how to apply neutral past performance ratings in any source selection. 41 U.S.C. 405(j)(2) requires offerors without a previous performance history, to be given a rating that neither rewards nor penalizes the offeror. We did not adopt the public comment recommendations, opting instead to revise the final rule to reflect the statutory language, so that the facts of the instant acquisition would be used in determining what rating scheme is appropriate. This alternative provides for flexible compliance to satisfy requirements of the statute. [62 FR 51224-01, FAC 97-02]

This final rule gave us the rule as it is stated now at FAR 15.305(a)(2)(iv):

In the case of an offeror without a record of relevant past performance or for whom information on past performance is not available, the offeror may not be evaluated favorably or unfavorably on past performance.

So the FAR Council took the language of the statute, attempted to clarify it by introducing the term "neutral past performance evaluation", tried again to clarify it by defining "neutral past performance evaluation", confused a lot of people, then gave up. "Neutral past performance" was removed from the FAR over 11 years ago after a brief and infamous appearance. Despite this fact, it remains popular in the federal contracting vernacular.