Both the Senate and House, as part of the draft 2026 National Defense Authorization Acts (NDAA), have proposed nearly identical ideas on overhauling the Department of Defense’s Contractor Performance Assessment Report System (CPARS) processes. While both NDAAs have passed, and therefore require reconciliation in a committee, their ideas are extremely similar and signal a coming change in CPARS processes for defense contractors. One big change is to focus on specific negative performance events using “a standardized scoring mechanism” and to remove reporting on “positive or neutral performance assessments.”
As most contractors know, the CPARS is essentially a report card for how your business performed on a federal government contract. A CPARS report will discuss how well (or unwell) a contractor performed a certain contract, and provide a rating of that contractor for that specific contract. The CPARS reports can be quite impactful when pursuing contracts (in fact we have blogged on cases discussing CPARS here and here). As the CPARS ratings and reports can make or break an award, most contractors pay close attention to their CPARS and the processes for reviewing and commenting on them. Recently, the House and Senate, in separate versions of the 2026 NDAA, have proposed nearly identical changes to the CPARS processes for Department of Defense (i.e., Department of War or DoD) contracts.
An initial note: the House NDAA and Senate NDAA will need to go through a reconciliation process to create one NDAA to make a final law. So, these proposed DoD CPARS changes are not final yet, and there may be even more changes to the NDAA prior to its final form. However, the House and Senate’s CPARS sections are so similar, that it is likely the general overhaul of DoD’s CPARS will survive the committee process.
The goal of these changes to the DoD’s CPARS processes is for the DoD to create a more “fact-based” and simple system for contractor performance ratings. This new CPARS process is supposed to focus more on specific “negative” performance events which can be verified and objectively measured. This will hopefully lead to less subjectivity in the CPARS ratings. They also want to reduce the administrative burden on contracting officers by limiting the CPARS to basically enumerated “negative” events.
With that in mind, the House NDAA lays out the following as “Negative Performance Events”:
- Failures related to innovation, technical development, or prototype delivery.
- Failures related to manufacturing, quality control, or delivery of products.
- Failures related to maintenance, logistics, or support services.
- Failures related to professional, administrative, or operational services.
- Failures related to software, hardware, cybersecurity, or information technology systems.
The Senate NDAA (and House NDAA in very similar words) list the following events as negative performance events whose reporting on the CPARS will be mandatory for COs:
- Delivery of defective products
- Delinquent deliveries (e.g. not meeting schedules)
- Improper markings or rights assertions on technical data deliveries.
- Defective pricing.
- Failure to flow down required clauses to subcontractors.
- False claims or misrepresentations.
- Non-compliance with safety or regulatory requirements.
- Significant cybersecurity breaches or failures.
The 2026 NDAA also anticipates the ability for the Secretary of Defense to set additional performance indicators, so long as they are based on verifiable data and published in the DFARS.
In line with these updates focusing on “Negative Performance Events,” the 2026 NDAAs will require the DoD to create a standardized scoring mechanism. The House explains that the scoring mechanism will “normalize negative performance events of a contractor based on the number of transactions and the dollar value of contracts performed by the contractor.” These scores will be reflected alongside the different negative events discussed in the NDAAs. To prevent subjective CPARS, these scores will be automatically calculated based on data entered by contracting officers. Importantly, this does not appear to get rid of the ability for contractors to provide comments or rebuttals on CPARS.
The goal is to have these CPARS changes take effect 180 days after the NDAA is made law. At that point, the DFARS will be updated to reflect these changes. Finally, the Secretary of Defense will provide a report to to the Committees on Armed Services of the Senate and the House of Representatives a year after these changes are implemented, and GAO will conduct a review of the new CPARS processes within three years. So, there will be some feedback provided from the government side on these changes as the industry adjusts to them.
While this is only applicable to DoD procurements, it is still quite the shakeup. Contractors will need to keep an eye on what “Negative Performance Events” and mandatory reporting situations make it through the committee into the final NDAA, as such events will now be the primary drivers of negative CPARS on DoD procurements. Additionally, if the CPARS calculations work in such an automated fashion, it is unlikely that discussing grades or rankings with COs will be as fruitful as in the past. The goal with this proposed CPARS update is efficiency and subjectiveness, which likely would lessen any discretion COs have on CPARS. Finally, having such different CPARS standards across agencies may cause headaches for contractors in proposals, as the DoD may now view CPARS without such automated systems differently than its own CPARS and vice versa for other agencies. To avoid this, it’s possible that the civilian CPARS is also changed along these lines, in order to avoid having disparate systems.
No matter what, it will be important to see how this plays out as the NDAA gets finalized. As always, contractors should stay in contact with their federal government contracting legal counsel about any CPARS concerns, as it may get more complicated because it appears the DoD will soon have a different CPARS standard than other agencies.
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