Nice Affiliate You’ve Got There–But So What?

Small contractors often rely upon the experience of corporate parents, subsidiaries, and other affiliates to bolster their past performance scores.  Especially for new subsidiaries and joint ventures with minimal independent past performance, relying on corporate experience can help avoid a “neutral” past performance rating.

However, as two GAO cases show, it isn’t enough to simply identify an affiliate and rely on its experience.  In order to receive credit, an offeror must identify the affiliate’s connection to the contract contemplated by the solicitation.   Otherwise, you’ll leave the contracting officer scratching his or her head, and saying, “so what?”

The GAO’s decision in Bering Straits Technical Services, LLC, B-401560.3, B-401560.4 (Oct. 7, 2009) is the cautionary part of the story.  In that case, an offeror on a Navy contract submitted numerous examples of its affiliates’ relevant past performance with its proposal.  The Navy assigned the offeror a “neutral” score, stating that the offeror hadn’t discussed how those affiliates would be involved in the contract.

The GAO denied the offeror’s protest.  It noted that although an agency may properly consider the past performance of an offeror’s affiliates, it should only do so “where the firm’s proposal demonstrates that the resources of the parent or affiliated company will affect the performance of the offeror.”  When an offeror submits the past performance information of an affiliate, the GAO wrote, the agency must determine whether the affiliate “will have meaningful involvement in contract performance,” in other words, whether the affiliate’s “workforce, management, facilities or other resources-will be provided or relied upon for contract performance.”

In this case, the GAO found that the offeror’s proposal did not specifically state what goods or services, if any, the affiliates were to provide to the contract.  In view of the “limited information provided in [the offeror’s] proposal regarding the application of resources and personnel from its affiliated companies,” it was reasonable for the GAO to ignore the past performance of those affiliates and assign a “neutral” score.

The GAO’s decision in another case, AMI-ACEPEX Joint Venture, B-401560 (2009), demonstrates that when an offeror uses its proposal to tie its affiliate companies to the contract, an agency may consider the affiliates’ past performance, even if the affiliates are not contractually obligated to perform on the awarded contract.  In that case, the awardee received a strong past performance score based, in part, upon the experience of its parent and sister companies.  A disappointed offeror filed a protest, arguing that it was improper for the agency to consider these companies’ experience because they were not teamed with the awardee or contractually obligated to perform on the awarded contract.

The GAO reviewed the awardee’s proposal, which stated that the resources of the parent and sister companies, including workforce management, key personnel, facilities, and performance strategies, would be provided for contract performance.  The proposal went into considerable detail about the precise resources each of the affiliates would provide.  The GAO held that this level of detail was sufficient to tie the parent and sister companies to the contract, and the mere fact that the companies were not contractually obligated to provide those services did not render the agency’s consideration of their past performance unreasonable.

Together, Bering Straits and AMI-ACEPEX Joint Venture demonstrate the importance of using the proposal to tie an affiliate to the contract whenever the affiliate is relied upon for past performance.  Per AMI-ACEPEX, a formal teaming agreement or subcontract is not necessary, but the proposal should spell out the specific resources the affiliate is expected to provide.

Of course, for set-aside contracts, this matter needs to be addressed especially carefully, as overreliance upon affiliates could be seen as violating the FAR’s Limitation on Subcontracting clause.  If a contractor is relying upon an affiliate’s past performance on a full-and-open solicitation, though, unless the RFP provides otherwise, it seems that the more information about the specific resources an affiliate will perform, the better.

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