Relying on an Affiliate for Past Performance to Win A Contract

October 7, 2014

By Antonio R. Franco



Government contractors work hard to please their customers not only to fulfill their contractual obligations but also to establish a solid past performance record and to secure more work.

When a company lacks past performance experience, it can find itself at a significant competitive disadvantage against its competitors. Companies without track records often try to address the problem by relying on the experience of an affiliated entity. The affiliate could be a new company they have acquired or, for example, if joint venturing, the experience of the individual joint venture partners.

Before a company seeks to claim the past performance of an affiliated entity, it should know that reliance on the experience of such a firm can be misplaced if the proposal does not demonstrate how the affiliated concern will contribute to performance of the contract.

The U.S. Government Accountability Office (“GAO”) has recognized that agencies may attribute to an offeror the experience or past performance of a parent or affiliated company, if the offeror’s proposal demonstrates that the resources of the parent or affiliate will affect contract performance.

According to the GAO, the relevant consideration is whether the resources of the parent or affiliated company, such as its work force, management, facilities, or other resources, will be provided or relied upon for contract performance, such that the parent or affiliate will have a meaningful involvement in contract performance. In other words, an offeror cannot simply refer to the past performance record of an affiliated entity to satisfy the solicitation’s past performance evaluation criteria. Rather, the offeror must demonstrate that the affiliated entity will be committed to performing or assisting it in performing the work.

For contractors that form joint ventures, the GAO’s position is noteworthy because many joint ventures do not have any past performance history. By definition, joint ventures are normally formed to perform a single project or contract.  If a contractor participates in a joint venture, its offer is submitted in the name of the joint venture entity, usually either a partnership or a limited liability company. Since these are usually newly-created entities, they do not have a record of past performance and the joint venture partners must rely on their own past performance to win.

Unless a solicitation specifically states that the agency will consider the past performance record of the partners, the joint venture’s proposal must explicitly provide the procuring agency with information about the joint venture, i.e., the affiliates of the joint venture, and how their resources will be utilized so that their experience is considered when the joint venture’s proposal is evaluated.

Contractors need to structure proposals that allow agencies to make an award on the basis of the offeror’s and any affiliated entity’s past performance record. It should not be assumed that a source selection official will give full credit just because a proposal refers to an affiliated entity with a good reputation. Offerors need to provide procuring agencies with the information they need to appropriately evaluate past performance.

About the Author: Tony Franco is a senior partner with PilieroMazza and oversees the Government Contracts and Small Business Programs Groups. He may be reached at afranco@pilieromazza.com.

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