Reform of contractor performance information requirements

(a) Revision to DFARS The Secretary of Defense shall revise part 242.15 of the Department of Defense Supplement to the Federal Acquisition Regulation to establish an objective, fact-based, and simplified system for reporting contractor performance. The revised system shall— (1) focus exclusively on negative performance events that are measurable to reduce subjectivity and inconsistency in evaluations; (2) create a level playing field for commercial entities, subcontractors, and new entrants that do not have extensive past performance records to compete for Department of Defense contracts; (3) reduce the administrative burden on contracting officers by limiting reporting to significant failures or poor performance; (4) establish standardized templates for reporting negative performance events and calculating composite scores; and (5) ensure the Government can identify and avoid contractors with a history of poor performance or bad actions. (b) Revision of contractor performance information requirements (1) Elimination of subjective performance ratings The Secretary of Defense shall revise part 242.15 of the Department of Defense Supplement to the Federal Acquisition Regulation and related guidance, including the Contractor Performance Assessment Reporting System (or a successor system) (in this section referred to as CPARS), to eliminate subjective performance ratings for contracts subject to such part. (2) Scope of reporting A contracting officer shall only include negative performance events that have a material impact on contract performance or Government interests in CPARS and shall exclude positive or neutral performance assessments, except as necessary to provide context for an included negative performance event. A contracting officer shall report in CPARS negative performance events within 30 days after verifying the event. (3) Categorization of negative performance events A contracting officer shall categorize negative performance events reported under paragraph (2) in one of the following areas: (A) Failures related to innovation, technical development, or prototype delivery. (B) Failures related to manufacturing, quality control, or delivery of products. (C) Failures related to maintenance, logistics, or support services. (D) Failures related to professional, administrative, or operational services. (E) Failures related to software, hardware, cybersecurity, or information technology systems. (4) Performance evaluations A contracting officer is not required to conduct an annual or periodic performance evaluation of a contractor unless the contracting officer has verified a negative performance event of such contractor. (5) Use in source selection The Secretary of Defense shall consider a negative performance event and the score associated with such event (as calculated under subsection (f)) in source selection evaluations to assess contractor risk and responsibility.The absence of negative performance events for an offeror, including an offer that is a nontraditional defense contractor or a new entrant, shall not be considered a deficiency in past performance evaluations. Such offerors shall be evaluated based on technical capability, price, and other relevant factors. (c) Scoring mechanism for negative performance events (1) Calculation The Secretary of Defense shall establish a standardized scoring mechanism to normalize negative performance events of a contractor based on the number of transactions and the dollar value of contracts performed by the contractor. (2) Application of scores The Secretary shall ensure that— (A) a composite score for each contractor is included in CPARS, along with any negative performance events used in source selection to assess past performance risk; and (B) CPARS is programmed to automatically calculate scores based on data entered by contracting officers, including the number of transactions and the dollar value of contracts performed by the contractor. (4) Transparency The Secretary shall ensure that contractors— (A) have access to composite scores and the underlying data through CPARS; and (B) may submit comments or rebuttals to reported negative performance events or scores, which shall be maintained in CPARS for consideration in source selection. (d) Mandatory reporting A contracting officer shall report the following negative performance events: (1) Delivery of products failing to meet contract requirements, as verified by Government inspection reports, quality assurance records, or testing results. (2) Failure to meet contract delivery schedules, as documented in contract milestones, delivery orders, or Government records. (3) Incorrect or unauthorized markings on technical data or software, or improper assertions of restrictive rights, as verified by Government review or legal findings. (4) Submission of inaccurate, incomplete, or misleading cost or pricing data, as identified through audits by the Defense Contract Audit Agency or other Government authorities. (5) Failure to include mandatory contract clauses in subcontracts, as verified by contract reviews or audits. (6) Submission of false claims, fraudulent invoices, or misrepresentations, as substantiated by investigations, legal findings, or Government records. (7) Failure to comply with safety, environmental, or other regulatory requirements, as documented by Government inspections or citations. (8) Failure to meet cybersecurity requirements or significant breaches caused by contractor negligence, as verified by Government records. (9) Any other negative performance event, as determined by the Secretary of Defense, that is based on verifiable data or objective evaluations and for which the Secretary publishes criteria in the Department of Defense Supplement to the Federal Acquisition Regulation. (e) Implementation (1) Training and guidance The Secretary of Defense shall develop and provide training for contracting officers on the following: (A) Identifying, verifying, and reporting negative performance events. (B) The use of objective evidence and the exclusion of subjective judgments in reporting negative performance events. (C) Entering data for creating a score in CPARS. (2) System modifications Not later than one year after the date of the enactment of this Act, the Secretary of Defense shall modify CPARS to include the following functions: (A) The categorization of negative performance events. (B) Elimination of fields for subjective ratings. (C) Automatically calculate composite scores based on reported data. (D) A mechanism for contractors to review and respond to reported events and scores. (3) Transition period With respect to a contract awarded before the effective date of the revision to the Department of Defense Supplement to the Federal Acquisition Regulation required by subsection (a), a contracting officer for such contract may complete CPARS evaluations under the prior system until the contract is closed or terminated. (f) Report and oversight (1) Report Not later than January 15, 2026, the Secretary of Defense shall submit to Committees on Armed Services of the Senate and House of Representatives a report on the implementation of this section. (2) GAO review Not later than three years after the date of the enactment of this Act, the Comptroller General of the United States shall conduct a review of the revised CPARS that includes the following: (A) The effectiveness of CPARS to carry out the requirements of this section. (B) The accuracy and fairness of the scoring mechanism developed under subsection (d). (C) The effect of the modifictions made by this section on competition and participation of nontraditional defense contractors in contracts of the Department of Defense. (g) Effective date This section and the requirements of this section shall take effect 180 days after the date of the enactment of this Act. (h) Definitions In this section: (1) The term negative performance event means a verifiable instance of contractor failure or poor performance as described in subsection (e). (2) The term nontraditional defense contractor has the meaning given in section 3014 of title 10, United States Code. (3) The term verifiable data means objective evidence documented in contract records, inspection reports, audits, correspondence, or other Government records that substantiate a negative performance event.

(a) Revision to DFARS The Secretary of Defense shall revise part 242.15 of the Department of Defense Supplement to the Federal Acquisition Regulation to establish an objective, fact-based, and simplified system for reporting contractor performance. The revised system shall— (1) focus exclusively on negative performance events that are measurable to reduce subjectivity and inconsistency in evaluations; (2) create a level playing field for commercial entities, subcontractors, and new entrants that do not have extensive past performance records to compete for Department of Defense contracts; (3) reduce the administrative burden on contracting officers by limiting reporting to significant failures or poor performance; (4) establish standardized templates for reporting negative performance events and calculating composite scores; and (5) ensure the Government can identify and avoid contractors with a history of poor performance or bad actions. (b) Revision of contractor performance information requirements (1) Elimination of subjective performance ratings The Secretary of Defense shall revise part 242.15 of the Department of Defense Supplement to the Federal Acquisition Regulation and related guidance, including the Contractor Performance Assessment Reporting System (or a successor system) (in this section referred to as CPARS), to eliminate subjective performance ratings for contracts subject to such part. (2) Scope of reporting A contracting officer shall only include negative performance events that have a material impact on contract performance or Government interests in CPARS and shall exclude positive or neutral performance assessments, except as necessary to provide context for an included negative performance event. A contracting officer shall report in CPARS negative performance events within 30 days after verifying the event. (3) Categorization of negative performance events A contracting officer shall categorize negative performance events reported under paragraph (2) in one of the following areas: (A) Failures related to innovation, technical development, or prototype delivery. (B) Failures related to manufacturing, quality control, or delivery of products. (C) Failures related to maintenance, logistics, or support services. (D) Failures related to professional, administrative, or operational services. (E) Failures related to software, hardware, cybersecurity, or information technology systems. (4) Performance evaluations A contracting officer is not required to conduct an annual or periodic performance evaluation of a contractor unless the contracting officer has verified a negative performance event of such contractor. (5) Use in source selection The Secretary of Defense shall consider a negative performance event and the score associated with such event (as calculated under subsection (f)) in source selection evaluations to assess contractor risk and responsibility.The absence of negative performance events for an offeror, including an offer that is a nontraditional defense contractor or a new entrant, shall not be considered a deficiency in past performance evaluations. Such offerors shall be evaluated based on technical capability, price, and other relevant factors. (c) Scoring mechanism for negative performance events (1) Calculation The Secretary of Defense shall establish a standardized scoring mechanism to normalize negative performance events of a contractor based on the number of transactions and the dollar value of contracts performed by the contractor. (2) Application of scores The Secretary shall ensure that— (A) a composite score for each contractor is included in CPARS, along with any negative performance events used in source selection to assess past performance risk; and (B) CPARS is programmed to automatically calculate scores based on data entered by contracting officers, including the number of transactions and the dollar value of contracts performed by the contractor. (4) Transparency The Secretary shall ensure that contractors— (A) have access to composite scores and the underlying data through CPARS; and (B) may submit comments or rebuttals to reported negative performance events or scores, which shall be maintained in CPARS for consideration in source selection. (d) Mandatory reporting A contracting officer shall report the following negative performance events: (1) Delivery of products failing to meet contract requirements, as verified by Government inspection reports, quality assurance records, or testing results. (2) Failure to meet contract delivery schedules, as documented in contract milestones, delivery orders, or Government records. (3) Incorrect or unauthorized markings on technical data or software, or improper assertions of restrictive rights, as verified by Government review or legal findings. (4) Submission of inaccurate, incomplete, or misleading cost or pricing data, as identified through audits by the Defense Contract Audit Agency or other Government authorities. (5) Failure to include mandatory contract clauses in subcontracts, as verified by contract reviews or audits. (6) Submission of false claims, fraudulent invoices, or misrepresentations, as substantiated by investigations, legal findings, or Government records. (7) Failure to comply with safety, environmental, or other regulatory requirements, as documented by Government inspections or citations. (8) Failure to meet cybersecurity requirements or significant breaches caused by contractor negligence, as verified by Government records. (9) Any other negative performance event, as determined by the Secretary of Defense, that is based on verifiable data or objective evaluations and for which the Secretary publishes criteria in the Department of Defense Supplement to the Federal Acquisition Regulation. (e) Implementation (1) Training and guidance The Secretary of Defense shall develop and provide training for contracting officers on the following: (A) Identifying, verifying, and reporting negative performance events. (B) The use of objective evidence and the exclusion of subjective judgments in reporting negative performance events. (C) Entering data for creating a score in CPARS. (2) System modifications Not later than one year after the date of the enactment of this Act, the Secretary of Defense shall modify CPARS to include the following functions: (A) The categorization of negative performance events. (B) Elimination of fields for subjective ratings. (C) Automatically calculate composite scores based on reported data. (D) A mechanism for contractors to review and respond to reported events and scores. (3) Transition period With respect to a contract awarded before the effective date of the revision to the Department of Defense Supplement to the Federal Acquisition Regulation required by subsection (a), a contracting officer for such contract may complete CPARS evaluations under the prior system until the contract is closed or terminated. (f) Report and oversight (1) Report Not later than January 15, 2026, the Secretary of Defense shall submit to Committees on Armed Services of the Senate and House of Representatives a report on the implementation of this section. (2) GAO review Not later than three years after the date of the enactment of this Act, the Comptroller General of the United States shall conduct a review of the revised CPARS that includes the following: (A) The effectiveness of CPARS to carry out the requirements of this section. (B) The accuracy and fairness of the scoring mechanism developed under subsection (d). (C) The effect of the modifictions made by this section on competition and participation of nontraditional defense contractors in contracts of the Department of Defense. (g) Effective date This section and the requirements of this section shall take effect 180 days after the date of the enactment of this Act. (h) Definitions In this section: (1) The term negative performance event means a verifiable instance of contractor failure or poor performance as described in subsection (e). (2) The term nontraditional defense contractor has the meaning given in section 3014 of title 10, United States Code. (3) The term verifiable data means objective evidence documented in contract records, inspection reports, audits, correspondence, or other Government records that substantiate a negative performance event.