A New Way to Claim Damages Resulting from an Unfavorable CPARS Rating

Government contractors know that an unfavorable performance review posted to the Contractor Performance Assessment Reporting System (“CPARS”) can be extremely costly. Many negotiated solicitations include past performance as an important or even primary evaluation factor for contract award. An unfavorable review on a past contract can impose significant costs on the contractor to address the unfavorable review with contracting officers on future solicitations. However, the contractor saddled with an unfair and inaccurate CPARS review may now have a means to challenge the review and recover some of these costs.

Both the Federal Court of Claims and the Armed Services Board of Contract Appeals have held that they have jurisdiction to hear Contract Disputes Act claims regarding unfair and inaccurate CPARS reviews. However, the relief available up until this year was a declaration from the Court or Board that the unfair and inaccurate CPARS review was arbitrary and capricious. Neither the Court nor the Board have the power to order the contracting officer to change the unfavorable review. A contractor who receives a declaration from the Court or Board regarding an unfavorable CPARS review may use it in the future to explain the unfavorable review when bidding new government work, but the unfavorable review remains in CPARS.

However, the Board has recently validated a new type of claim related to an unfavorable CPARS review. In Appeal of Government Services Corporation, ASBCA No. 60367, 16-1 B.C.A. (CCH) ¶ 36411 (June 20, 2016), the contractor received a CPARS review that it believed was unfair and inaccurate. The contractor filed a claim for $100,000 in estimated damages. The estimate was not based on future profits from lost work, which cannot be recovered, but on the estimated costs to address the unfavorable review on future proposals. The contractor calculated how many proposals it would submit on solicitations that require consideration of past performance during the time period that the unfavorable review would remain in CPARS, and then estimated the cost “both administrative and legal, of addressing the issue with future Contracting Officers in the form of negotiations as well as protests.”

The Government moved to dismiss this claim on the basis that it failed to state a sum certain. The Board rejected this argument and validated the estimated claim, allowing the litigation to proceed. While the Board has not yet issued a decision granting such a claim, the ability to pursue monetary relief for an unfavorable CPARS review could be a game-changer for government contractors suffering from the consequences of unfair and inaccurate reviews.

This type of claim could be increasingly important if recent statutory changes to CPARS reviews are implemented. In May 2016, we summarized President Obama’s Executive Order 13673, known as the “Fair Play and Safe Workplaces” order, which imposes reporting requirements on government contractors for alleged labor law violations. One of Executive Order 13673’s lesser known effects was to add a subsection to FAR § 42.1502, which governs CPARS reviews, requiring past performance reviews to consider both the contractor’s labor law violations and steps the contractor took to address its subcontractors’ labor law violations.

Earlier this month, we reported that a federal court had enjoined the enforcement of Executive Order 13673. On October 25, 2016 the Office of Management and Budget issued a Memorandum directing Government agencies not to implement Executive Order 13673, including the new subsection of FAR § 42.1502. However, it is important to note that the district court did not address the new subsection of FAR § 42.1502 in its injunction. It is not yet clear what will happen to the new requirement to consider labor violations in CPARS reviews even if the rest of Executive Order 13673 is struck down.

We will continue to post on this issue to keep the government contractors we serve apprised of the situation as it develops.