Using the Past Performance of a Parent or Affiliates

The Government has wide latitude when evaluating the past performance of a bidder.  When evaluating a bidder, the Government may consider the experience and qualifications of a parent, subcontractor, or other third party to meet a responsibility criteria.  However, the bidder must provide the Government with adequate evidence that the third party is committed to the success of the bid.  A recent case before the GAO, Charter Environmental, Inc., B-297219, December 5, 2005, demonstrates how important it is for a bidder to provide such evidence to the Government, even when the third party upon whose experience it relies has a close relationship to the bidder.

In Charter Environmental, the Forest Service issued an Invitation for Bids (“IFB”) for a contract to remove and stabilize mine waste. As a component of the IFB’s responsibility criteria, the winning bidder was required to show that it had successfully completed at least three similar projects. The Government received six bids and awarded the contract to ECI Northwest (“ECI-Northwest”), the low bidder. The second-lowest bidder, Charter Environmental, Inc. (“Charter”), filed a protest with the GAO. Charter argued that the Forest Service improperly considered projects performed by ECI’s parent company, Environmental Contractors of Illinois (“ECI”), in determining that ECI-Northwest met the IFB’s responsibility criteria. ECI-Northwest would not have met the responsibility requirements had it not used ECI’s past performance in its bid.

Generally, a bidder is allowed to use the experience of a technically qualified subcontractor or other third party—such as a parent, subsidiary, or consultant—to satisfy responsibility criteria contained in an IFB. However, in order for a third party’s experience to meet the requirements, the third party must make a commitment to the bidder’s successful performance of the work, and the Government must have evidence of this commitment.

In this case, the GAO determined that there was “no information in the record” that the Forest Service could have used to determine that ECI had made a commitment to ECI-Northwest’s successful completion of the contract work. Instead, the Contracting Officer improperly assumed that ECI had made such a commitment by virtue of the parent-subsidiary relationship between ECI and ECI-Northwest. The GAO held that the parent-subsidiary relationship alone was not enough evidence to determine that ECI was committed to ECI-Northwest’s bid. Without such information, it was improper for the Forest Service to use ECI’s performance record in evaluating ECI-Northwest’s responsibility. Therefore, the GAO sustained Charter’s protest.