[Federal Register Volume 63, Number 179 (Wednesday, September 16, 1998)]
[Proposed Rules]
[Pages 49530-49538]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-24739]


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ENVIRONMENTAL PROTECTION AGENCY

48 CFR Part 1509 and 1552

[FRL-6158-6]


Acquisition Regulation: Contractor Performance Evaluations

AGENCY: Environmental Protection Agency.

ACTION: Proposed rule with request for comments.

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SUMMARY: The Environmental Protection Agency (EPA) is amending the EPA 
Acquisition Regulation (EPAAR) (48 CFR Chapter 15) to revise its policy 
and procedures regarding the evaluation of contractor performance on 
EPA contracts and to establish an EPAAR clause to be used in 
solicitations and contracts with an estimated dollar value in excess of 
$100,000. This proposed rule applies to all large and small entities 
who perform or are interested in performing under EPA contracts.

DATES: Comments should be submitted not later than November 16, 1998.

ADDRESSES: Written comments should be submitted to the contact listed 
below at the following address: U.S. Environmental Protection Agency, 
Office of Acquisition Management (3802R), 401 M Street, SW, Washington, 
D.C. 20460. Comments will also be accepted on disks in WordPerfect 6.1 
format or by electronic mail (E-mail) to: 
[email protected]. E-mail comments must be submitted as an 
ASCII file, avoiding the use of special characters and any form of 
encryption. No Confidential Business Information (CBI) should be 
submitted through E-mail.

FOR FURTHER INFORMATION CONTACT: Frances Smith, U.S. Environmental 
Protection Agency, Office of Acquisition Management, (3802R), 401 M 
Street, SW, Washington, D.C. 20460, Telephone: (202) 564-4368.

SUPPLEMENTARY INFORMATION:

A. Background

    This proposed rule implements the Office of Federal Procurement 
Policy (OFPP) Policy Letter 92-5, Past Performance Information. The 
OFPP Policy Letter requires Federal agencies to evaluate contractor 
performance on contracts over $100,000, to use past performance 
information in making responsibility determinations in both sealed bid 
and competitively negotiated procurements, and to specify past 
performance as an evaluation factor in solicitations for competitively 
negotiated contracts expected to exceed $100,000.

B. Executive Order 12866

    This proposed rule is a significant regulatory action for the 
purposes of Executive Order 12866. The Office of Information and 
Regulatory Affairs within the Office of Management and Budget (OMB) has 
reviewed and issued OMB Clearance No. 9000-0142 for agencies to adhere 
to the OFPP Policy Letter 92-5.

C. Paperwork Reduction Act

    The Paperwork Reduction Act of 1980 (44 U.S.C. 3501 et seq.) 
applies to this proposed rule, and the information collection request 
(ICR) in this proposed rule has been evaluated by the Office of 
Management and Budget (OMB). The Office of Information and Regulatory 
Affairs within OMB has issued OMB Clearance No. 9000-0142 for the 
collection of contractor performance information. Comments regarding 
Paperwork Reduction Act concerns should be sent to OMB (Attn: EPA Desk 
Officer). OMB is required to make a decision concerning the collection 
of information contained in the proposed rule between 30 and 60 days 
after publication of this document in the Federal Register. Therefore, 
a comment to OMB is best assured of having its full effect if OMB 
receives it within 30 days of publication. This does not affect the 
deadline for the public to comment to EPA on the proposed rule.

D. Regulatory Flexibility Act

    Under the Regulatory Flexibility Act (RFA), 5 U.S.C. 601 et seq., 
as amended by the Small Business Regulatory Enforcement Fairness Act 
(SBREFA), whenever EPA is required to publish notice of general 
rulemaking, EPA must prepare an initial regulatory flexibility analysis 
(IRFA) describing the economic impact of the proposal on small 
entities, unless the Agency certifies that a proposed rule will not 
have a ``significant economic impact on a substantial number of small 
entities.'' As defined in RFA/SBREFA, small entities include small 
businesses, small not-for-profit enterprises, and small governmental 
jurisdictions. After consideration of the economic impacts of today's 
proposed rule on small entities, the Agency certifies that the proposed 
rule will not have a significant economic impact on a substantial 
number of small entities.
    This proposed rule merely formalizes EPA's contractor performance 
evaluation process, as an expansion of the government-wide requirements 
already established in the Federal Acquisition Regulation, 48 CFR 
Subpart 42.15. The proposed rule explains that EPA contracting officers 
will be recording the evaluations on simple and easy-to-understand 
report forms generated by the National Institutes of Health's (NIH) 
Contractor Performance System. Likewise, the evaluation rating system 
that the contracting officers will be using is based on straightforward 
numerical scores with a narrative explanation to be provided by the 
contracting officers. An adverse economic impact upon a contractor 
(i.e., in the form of less future federal business) as a result of a 
rating assessed by an EPA contracting officer would be attributable to 
the contractor's past performance itself, not to the rating system 
prescribed herein.
    Further, the proposed rule requires no reporting or recordkeeping 
by contractors. Rather, the proposed rule merely provides contractors 
with a formal opportunity, generally one time a year per contract, to 
review and comment on their specific performance evaluations as 
conducted by the cognizant EPA contracting officers. EPA estimates that 
the contractor's review and comment process will require a minimal 
amount of time to complete; therefore, to the extent that this does 
result in some contractor-incurred costs, EPA anticipates that these 
will be de minimus. In any event, any reasonable costs incurred by the 
contractor in connection with the process will be allowable and 
allocable to the contract under evaluation and thereby borne by EPA.

E. Unfunded Mandates

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public 
Law 104-4, establishes requirements for Federal agencies to assess 
their regulatory actions on State, local, and tribal governments, and 
the private sector. This proposed rule does not contain a Federal 
mandate that may result in expenditures of $100 million or more for 
State, local, and tribal governments, in aggregate, or the private 
sector in one year. The rule is not

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subject to the requirements of sections 202 and 205 of the UMRA.

F. Executive Order 13045

    Protection of Children from Environmental Health Risks and Safety 
Risks (62 FR 19885, April 23, 1997), applies to any rule that: (1) is 
determined to be ``economically significant'' as defined under 
Executive Order 12866, and (2) concerns an environmental health or 
safety risk that EPA has reason to believe may have a disproportionate 
effect on children. If the regulatory action meets both criteria, the 
Agency must evaluate the environmental health or safety effects of the 
planned rule on children, and explain why the planned regulation is 
preferable to other potentially effective and reasonably feasible 
alternatives considered by the Agency.
    This rule is not subject to E.O. 13045 because it is not an 
economically significant rule as defined by E.O. 12866, and because it 
does not involve decisions on environmental health or safety risks.

List of Subjects in 48 CFR Parts 1509 and 1552

    Environmental protection, Government procurement. Therefore, 48 CFR 
Chapter 15 is proposed to be amended as set forth below:
    1. The authority citation for Parts 1509 and 1552 continue to read 
as follows:

    Authority: 5 U.S.C. 301; Sec. 205(c), 63 Stat. 390, as amended.

PART 1509--[AMENDED]

    2. Section 1509.170-1 is amended by adding the following at the 
end:
    * * * Contracting officers shall insert the contract clause at 
1552.209-76 in all solicitations and contracts with an estimated dollar 
value in excess of $100,000. For acquisitions involving options, the 
total estimated value of the acquisition shall include the estimated 
base amount plus the option(s) amount(s).
    3. Sections 1509.170-2, 1509.170-3, and 1509.170-4 are revised to 
read as follows:


1509-170-2  Purpose.

    This subpart provides guidance to program and contracting personnel 
regarding the evaluation of contractor performance. It establishes a 
uniform method for determining and recording the effectiveness of 
contractors in meeting contractual obligations. Additionally, this 
subpart details a systematic approach for identifying and maintaining 
records of contractors' performance histories.


1509.170-3  Applicability.

    (a) This subpart applies to all EPA acquisitions in excess of 
$100,000, except for construction acquisitions, architect-engineer 
acquisitions, acquisitions awarded under FAR Subpart 8.6, Acquisitions 
from Federal Prison Industries, Incorporated, FAR Subpart 8.7, 
Acquisitions from Nonprofit Agencies Employing People Who Are Blind or 
Severely Disabled, and FAR 13.5, Test Program for Certain Commercial 
Items. FAR 36.201 and 36.604 provide detailed instructions for 
construction and architect-engineer contractor performance evaluations.
    (b) The acquisition of commercial items in accordance with FAR 
13.106 is not applicable to this subpart because simplified acquisition 
procedures do not require the creation or existence of a formal 
database for past performance evaluations. In cases where simplified 
acquisition procedures are not used to acquire commercial items (see 
FAR 12.203), this subpart is applicable to acquiring commercial items 
in excess of $100,000.
    (c) EPA Form 1900-26, Contracting Officer's Evaluation of 
Contractor Performance, and EPA Form 1900-27, Project Officer's 
Evaluation of Contractor Performance, shall apply to all performance 
evaluations completed prior to the effective date of this subpart. 
However, on the effective date of this chapter, EPA Forms 1900-26 and 
1900-27 are obsolete and all contractor performance evaluations shall 
be completed by use of the National Institutes of Health's (NIH) 
Contractor Performance System.


1509.170-4  Definitions.

    (a) Contractor Performance Report is an evaluation of a 
contractor's performance for a specified period of time.
    (b) Interim Report refers to a Contractor Performance Report that 
covers a contractor's performance evaluation at the end of each 
contract period of performance (including extensions to the performance 
period, but not exceeding 24 months) or each 12 month (from the date of 
contract award) performance period when the contract period of 
performance exceeds 24 months.
    (c) Final Report refers to a Contractor Performance Report that 
covers the last period of performance in a contract. If the last period 
of performance exceeds 24 months, an interim Report shall be completed 
for 12 months (from the date of the prior performance evaluation) of 
contractor performance and the final (last) Report shall cover the 
remaining months of contractor performance.
    (d) Ratings refer to the numerical scores for each performance 
category. Ratings are defined as follows: 0 = unsatisfactory, 1 = poor, 
2 = fair, 3 = good, 4 = excellent, and 5 = outstanding.
    (e) Summary ratings refer to the ratings determined by one level 
above the contracting officer (CO) regarding disagreements between the 
contractor and the CO. Summary ratings reflect the Agency's ultimate 
conclusion for the performance period being evaluated.
    (f) Performance Categories refer to the measures used to evaluate a 
contractor's performance. Performance categories are defined as 
quality, cost control, timeliness of performance, and business 
relations.
    4. Section 1509.170 is also amended by adding 1509.170-5, 1509.170-
6, 1509.170-7, and 1509.170-8 to read as follows:


1509.170-5  Policy.

    (a) Contracting officers (COs) are responsible for the timely 
completion of contractors' performance evaluations. The NIH Contractor 
Performance System shall be used to record individual contractor 
performance histories on EPA contracts and to obtain contractor past 
performance information for use in EPA's source selection process.
    (b) Contracting officers are required to use the NIH Contractor 
Performance System to record evaluations for all contract performance 
periods expiring after the effective date of this subpart.
    (c) Contractor evaluation information shall be recorded in 
Contractor Performance Reports (Report) which are generated by the NIH 
system. Reports shall cover individual contractor evaluations at the 
contract level, which includes all work assignments, task orders, or 
delivery orders associated with the period of performance being 
evaluated or the 12 month period being evaluated when the contract 
period of performance exceeds 24 months.
    (d) The contracting officer (CO) must complete interim Reports 
covering each contract period of performance (including extensions to 
the performance period up to 24 months) or covering each 12 month 
period after contract award (if the contract period of performance 
exceeds 24 months) for all contracts in excess of $100,000, except 
those acquisitions identified in 1509.170-2 Applicability. In addition 
to interim Reports, the CO must complete a final Report which covers 
the last period of performance (including extensions to the last 
performance period up to 24 months) for applicable contracts in excess 
of $100,000. If the last period of performance exceeds 24

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months, an interim Report shall be completed for 12 months (from the 
date of the prior performance evaluation) of contractor performance, 
and the final (last) Report shall cover the remaining months of 
contractor performance.
    (e) The contracting officer (CO) shall initiate the process for 
completing interim Reports within five (5) calendar days after the end 
of each contract period of performance or at the end of each 12 month 
period if the contract period of performance exceeds 24 months. The CO 
shall initiate the process for completing a final Report within five 
(5) calendar days after the end of the last period of performance. 
Final Reports must be completed prior to contract closeout.
    (f) The contracting officer (CO) must complete interim and final 
Reports, including the project officer's (PO) evaluation of contractor 
performance, receipt of any contractor input, and resolution of summary 
ratings (if any) within 90 calendar days from the date the CO initiates 
the evaluation.
    (g) Reports shall be used to inform other agencies and departments 
(upon request) about a contractor's performance on an EPA contract, and 
to assist the contracting officer and the Technical Evaluation Panel 
(TEP) with evaluating past performance for future EPA acquisitions.
    (h) When evaluating proposals, contracing officers (COs) shall use 
the NIH system to access Reports from other agencies or departments 
that are available in the NIH database. COs may need to access past 
performance information from other than the NIH system if the NIH 
system does not include applicable information.
    (i) In accordance with FAR 42.1503(b), the ultimate conclusion on 
the performance evaluation is the decision of the Agency. The CO must 
ensure the accuracy of ratings for each performance category by 
verifying that information in the contract file corresponds with the 
PO's designated ratings. A contractor's performance evaluation should 
closely parallel award fee determinations made under the contract.
    (j) In cases of novations involving successors-in-interest, a final 
evaluation of the predecessor contractor must be completed within five 
(5) calendar days after the end of the predecessor contractor's 
performance, and an interim evaluation of the successor contractor must 
be completed at the end of the specific period of performance or at the 
end of each 12 month period after the successor began performing. In 
cases of change-of-name agreements, the system shall be changed to 
reflect the new contractor's name.
    (k) Contracting officers must inform the Office of Debarment and 
Suspension of any repetitive unsatisfactory or poor (a score of 0 or 1) 
ratings encountered by the contractor.


1509.170-6  Filing of forms.

    The original copy of completed Contractor Performance Reports 
(interim and final) shall be filed in each individual contractor's 
official contract file. The NIH Contractor Performance System will 
retain all reports three (3) years after contract completion.


1509.170-7  Release of ratings.

    (a) Agencies and departments who subscribe to NIH's Contractor 
Performance System will have direct access to all Reports, including 
those of EPA, in NIH's database. Information on EPA contractors' 
performance ratings may also be obtained by contacting the EPA 
contracting officer responsible for the evaluation.
    (b) Contractors' performance ratings may be released to other 
Federal, State, and local Governments upon written request. The release 
to other Federal, State, and local Governments must stipulate that the 
information provided shall not be released outside of the requesting 
Government agency. In cases where the Federal agency is part of the NIH 
Contract Performance System, a written request is not applicable.
    (c) The Department of Justice, Office of Information and Privacy, 
has concluded that past performance evaluations are exempt under 
Exemption 5 of the Freedom of Information Act (FOIA). However, any 
requests for contractor performance ratings by a third party 
(including, but not limited to commercial businesses (private industry) 
and foreign governments) must be processed in accordance with the FOIA 
and 40 CFR Part 2.
    (d) FOIA requests shall be processed by the EPA FOIA office where 
the contract is located. The FOIA office will consult the Office of 
General Counsel, on a case-by-case basis, regarding applicable FOIA 
exemptions.


1509.170-8  Contractor Performance Report.

    (a) Contractor Performance Reports (interim and final) must be 
prepared electronically by use of the NIH's Contractor Performance 
System. Hard copy preparation of Reports shall not be used unless 
specifically instructed by the NIH. NIH will provide EPA's Office of 
Acquisition Management Internal Oversight Service Center with specific 
instructions if hard copy use becomes necessary.
    (b) A copy of the NIH Contractor Performance Report (including 
instructions) shall be included in each solicitation and contract with 
an estimated value in excess of $100,000.

PART 1552--[AMENDED]

    5. Section 1552.2 is amended by adding 1552.209-76 as follows:


1552.209-76  Contractor Performance Evaluations.

    As prescribed in section 1509.170-1, insert the following clause in 
all applicable solicitations and contracts.

CONTRACTOR PERFORMANCE EVALUATIONS

(OCT 19XX)

    The contracting officer (CO) shall complete a Contractor 
Performance Report (Report) within ninety (90) calendar days after 
the end of each contract period of performance in accordance with 
EPAAR 1509.170-5. The contractor shall be evaluated based on the 
following ratings and performance categories:
    Ratings: 0 = unsatisfactory, 1 = poor, 2 = fair, 3 = good, 4 = 
excellent, 5 = outstanding.

Performance Categories

    Quality: Compliance with contract requirements; accuracy of 
reports; effectiveness of personnel; and technical excellence.

------------------------------------------------------------------------
              Rating                                                    
------------------------------------------------------------------------
0................................  Contractor is not in compliance and  
                                    is jeopardizing achievement of      
                                    contract objectives.                
1................................  Major problems have been encountered.
2................................  Some problems have been encountered. 
3................................  Minor inefficiencies/errors have been
                                    identified.                         
4................................  Contractor is in compliance with     
                                    contract requirements and/or        
                                    delivers quality products/services. 
5................................  The contractor has demonstrated an   
                                    outstanding performance level that  
                                    justifies adding a point to the     
                                    score. It is expected that this     
                                    rating will be used in those rare   
                                    circumstances when contractor       
                                    performance clearly exceeds the     
                                    performance level described as      
                                    ``Excellent.''                      
------------------------------------------------------------------------

    Cost Control: Record of forecasting and controlling target 
costs; current, accurate and complete billings; relationship of 
negotiated costs to actuals; cost efficiencies.

------------------------------------------------------------------------
              Rating                                                    
------------------------------------------------------------------------
0................................  Contractor is unable to manage costs 
                                    effectively.                        
1................................  Contractor is having major difficulty
                                    managing costs effectively.         
2................................  Contractor is having some problems   
                                    managing costs effectively.         

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3................................  Contractor is usually effective in   
                                    managing costs.                     
4................................  Contractor is effective in managing  
                                    costs and submits current, accurate,
                                    and complete billings.              
5................................  The contractor has demonstrated an   
                                    outstanding performance level that  
                                    justifies adding a point to the     
                                    score. It is expected that this     
                                    rating will be used in those rare   
                                    circumstances when contractor       
                                    performance clearly exceeds the     
                                    performance level described as      
                                    ``Excellent.''                      
------------------------------------------------------------------------

    Timeliness of Performance: Met interim milestones; reliability; 
responsive to technical direction; completed on time, including 
wrap-up and contract administration; met delivery schedules; no 
liquidated damages assessed.

------------------------------------------------------------------------
              Rating                                                    
------------------------------------------------------------------------
0................................  Contractor delays are jeopardizing   
                                    performance of contract objectives. 
1................................  Contractor is having major difficulty
                                    meeting milestones and delivery     
                                    schedule.                           
2................................  Contractor is having some problems   
                                    meeting milestones and delivery     
                                    schedule.                           
3................................  Contractor is usually effective in   
                                    meeting milestones and delivery     
                                    schedule.                           
4................................  Contractor is effective in meeting   
                                    milestones and delivery schedule.   
5................................  The contractor has demonstrated an   
                                    outstanding performance level that  
                                    justifies adding a point to the     
                                    score. It is expected that this     
                                    rating will be used in those rare   
                                    circumstances when contractor       
                                    performance clearly exceeds the     
                                    performance level described as      
                                    ``Excellent.''                      
------------------------------------------------------------------------

    Business Relations: Effective management, including 
subcontracts; reasonable/cooperative behavior; responsive to 
contract requirements; notification of problems; flexibility; pro-
active versus reactive; effective small/small disadvantage business 
subcontracting program.

------------------------------------------------------------------------
              Rating                                                    
------------------------------------------------------------------------
0................................  Response to inquires, technical/     
                                    service/administrative issues is not
                                    effective.                          
1................................  Response to inquiries, technical/    
                                    service/administrative issues is    
                                    marginally effective.               
2................................  Response to inquiries, technical/    
                                    service/administrative issues is    
                                    somewhat effective.                 
3................................  Response to inquiries, technical/    
                                    service/administrative issues is    
                                    usually effective.                  
4................................  Response to inquiries, technical/    
                                    service/administrative issues is    
                                    effective.                          
5................................  The contractor has demonstrated an   
                                    outstanding performance level that  
                                    justifies adding a point to the     
                                    score. It is expected that this     
                                    rating will be used in those rare   
                                    circumstances when contractor       
                                    performance clearly exceeds the     
                                    performance level described as      
                                    ``Excellent.''                      
------------------------------------------------------------------------

    (a) The contracting officer (CO) shall initiate the process for 
completing interim Reports within five (5) calendar days at the end 
of each contract period of performance or at the end of each 12 
month contract period (if the contract period of performance exceeds 
24 months) by requesting the project officer (PO) to evaluate 
contractor performance for the interim Report. In addition, the CO 
shall initiate the process for completing final Reports within five 
(5) calendar days after the end of the last period of performance 
(not exceeding 24 months) by requesting the project officer to 
evaluate contractor performance for the final Report. The final 
Report shall cover the last contract period of performance which may 
be less than 12 months, but not more than 24 months. Within thirty 
(30) calendar days after the PO receives a request from the CO to 
complete an evaluation, the PO shall:
    (1) complete a description of the contract requirements;
    (2) evaluate contractor performance and assign a rating for 
quality, cost control, and timeliness of performance categories 
(including a narrative for each rating);
    (3) provide any information regarding subcontracts, key 
personnel, and customer satisfaction;
    (4) assign a recommended rating for the business relations 
performance category (including a narrative for the rating); and
    (5) provide additional information appropriate for the 
evaluation or future evaluations.
    (b) The CO shall:
    (1) ensure the accuracy of the PO's evaluation by verifying that 
the information in the contract file corresponds with the designated 
PO's ratings;
    (2) assign a rating for the business relations performance 
category (including a narrative for the rating);
    (3) concur with or revise the PO's ratings after consultation 
with the PO;
    (4) provide any additional information concerning the quality, 
cost control, and timeliness of performance categories if deemed 
appropriate for the evaluation or future evaluations (if any), and 
provide any information regarding subcontracts, key personnel, and 
customer satisfaction; and
    (5) forward the Report to the contractor within ten (10) 
calendar days after the CO receives the PO's evaluation.
    (c) The contractor shall be granted thirty (30) calendar days 
from the date of the contractor's receipt of the Report to review 
and provide a response to the CO regarding the contents of the 
Report. The contractor shall:
    (1) review the Report;
    (2) provide a response (if any) to the CO on company letter head 
or electronically;
    (3) complete contractor representation information; and
    (4) forward the Report to the CO within the designated thirty 
(30) calendar days.
    (d) The contractor's response to the Report may include written 
comments, rebuttals (disagreements), or additional information. If 
the contractor does not respond to the Report within the designated 
thirty (30) calendar days, the specified ratings in the Report are 
deemed appropriate for the reporting period of performance. In this 
instance, the CO shall complete the Agency review and sign the 
Report within three (3) calendar days after expiration of the 
specified 30 calendar days.
    (e) If the contractor submits comments, rebuttals 
(disagreements), or additional information to the CO which contests 
the ratings, the CO, in consultation with the PO, shall initially 
try to resolve the disagreement(s) with the contractor.
    (f) If the disagreement(s) is (are) not resolved between the 
contractor and the CO, the CO shall provide a written recommendation 
to one level above the CO for resolution as promptly as possible, 
but no later than five (5) calendar days after the CO is made aware 
that the disagreement(s) has (have) not been resolved with the 
contractor. The individual who is one level above the CO shall:
    (1) review the CO's written recommendation; and
    (2) provide a written determination to the CO for summary 
ratings (ultimate conclusion for ratings pertaining to the 
performance period being evaluated) within five (5) calendar days 
after the individual one level above the CO receives the CO's 
written recommendation.
    (g) If the disagreement is resolved, the CO shall complete the 
Agency review and sign the Report within three (3) calendar days 
after consultation.
    (h) The CO shall complete the Agency review and sign the Report 
within three (3) calendar days after the CO receives a written 
determination for summary ratings from one level above the CO.
    (i) An interim or final Report is considered completed after the 
CO signs the Report. The CO must provide a copy of completed Reports 
(interim and final) to the contractor within two (2) calendar days 
after completion.

    Dated: August 31, 1998.
Betty L. Bailey,
Director, Office of Acquisition Management.

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[FR Doc. 98-24739 Filed 9-15-98; 8:45 am]
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