Reform of contractor performance information requirements

(a) In general Not later than 180 days after the date of the enactment of this Act, the Secretary of Defense shall revise subpart 242.15 of the Defense Federal Acquisition Regulation Supplement (DFARS) to modify contractor performance information requirements 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 verifiable and measurable to reduce subjectivity and inconsistency in evaluations; (2) reduce the administrative burden on contracting officers by limiting reporting to prior contractor failures or poor performance; and (3) ensure the government can identify and avoid contractors with a history of poor performance or bad actions. (b) Revision of contractor performance information requirements Not later than 180 days after the date of the enactment of this Act, the Secretary of Defense shall revise subpart 242.15 of the DFARS and related guidance, including the Contractor Performance Assessment Reporting System (CPARS) to provide for the following requirements related to contract performance information: (1) Elimination of subjective performance ratings (A) Subjective performance ratings for contracts subject to this section shall be eliminated. (B) Performance evaluations shall be limited to the reporting and scoring of negative performance events as described in subsections (c) and (d). (2) Scope of reporting (A) Contracting officers shall report only negative performance events with verifiable data which have a material impact on contract performance or government interests, including events involving subcontractors. (B) Reporting shall exclude positive or neutral performance assessments, except as necessary to provide context for a negative performance event. (3) Frequency and timing (A) Contracting officers shall report negative performance events within 30 days of identifying and verifying the event. (B) Annual or periodic performance evaluations shall not be required unless a negative performance event occurs. (4) Use in source selection (A) Negative performance events and their associated scores, as calculated under subsection (c), shall be considered in source selection evaluations to assess contractor risk and responsibility. (B) The absence of negative performance events for a contractor, including nontraditional defense contractors or new entrants, shall not be considered a deficiency in past performance evaluations. Such contractors shall be evaluated based on technical capability, price, and other relevant factors. (c) Scoring mechanism for negative performance events Not later than 180 days after the date of the enactment of this Act, the Secretary of Defense shall revise subpart 242.15 of the DFARS and related guidance, including the Contractor Performance Assessment Reporting System (CPARS) to provide for the following requirements related to a scoring mechanism for negative performance events: (1) Standardized scoring mechanism To ensure fair and equitable evaluation of contractors, a standardized scoring mechanism shall normalize negative performance events based on the number of transactions and the dollar volume of contracts performed by the contractor. (2) Application of scores (A) The composite score shall be reported in CPARS alongside the negative performance events and used in source selection to assess past performance risk. (B) Scores shall be calculated automatically by the CPARS system based on data entered by contracting officers, including the number of transactions and contract dollar value. (3) Transparency (A) Contractors shall have access to their composite scores and the underlying data (number of events, transactions, and dollar volume) through CPARS. (B) Contractors may submit comments or rebuttals to reported events or scores, which shall be maintained in CPARS for consideration in source selection. (d) Key issues of negative performance Not later than 180 days after the date of the enactment of this Act, the Secretary of Defense shall revise subpart 242.15 of the DFARS and related guidance, including the Contractor Performance Assessment Reporting System (CPARS) to provide for the following requirements related to key issues of negative performance: (1) Mandatory reporting Contracting officers shall report the following negative performance events, based on verifiable data or objective evaluations: (A) Delivery of defective products Delivery of products failing to meet contract requirements, as verified by government inspection reports, quality assurance records, or testing results. (B) Delinquent deliveries Failure to meet contract delivery schedules, as documented in contract milestones, delivery orders, or government correspondence. (C) Improper markings or rights assertions on technical data deliveries Incorrect or unauthorized markings on technical data or software, or improper assertions of restrictive rights, as verified by government review or legal findings. (D) Defective pricing Submission of inaccurate, incomplete, or misleading cost or pricing data, as identified through audits by the Defense Contract Audit Agency (DCAA) or other authorities. (E) Failure to flow down required clauses to subcontractors Failure to include mandatory contract clauses in subcontracts, as verified by contract reviews or audits. (F) False claims or misrepresentations Submission of false claims, fraudulent invoices, or misrepresentations, as substantiated by investigations, legal findings, or government records. (G) Non-compliance with safety or regulatory requirements Failure to comply with safety, environmental, or other regulatory requirements, as documented by government inspections or citations. (H) Significant cybersecurity breaches or failures Failure to meet cybersecurity requirements or significant breaches caused by contractor negligence, as verified by government assessments or incident reports. (e) Additional performance indicators The Secretary of Defense may establish additional negative performance indicators, provided they are— (1) based on verifiable data or objective evaluations; and (2) published in the Defense Federal Acquisition Regulation Supplement (DFARS) with clear criteria for identification and reporting. (f) Implementation (1) Templates Not later than 180 days after the date of the enactment of this Act, the Secretary of Defense shall issue revised regulations under revise subpart 242.15 of the DFARS to include standardized templates for reporting negative performance events and calculating composite scores. (2) Training and guidance (A) Training The Secretary of Defense shall develop and provide training for contracting officers on— (i) identifying, verifying, and reporting negative performance events; and (ii) entering data for transaction counts and contract dollar values to support the scoring mechanism. (B) Guidance Guidance shall emphasize the use of objective evidence and the exclusion of subjective judgments, including— (i) standardized templates for reporting negative performance events; (ii) guidelines for weighting negative performance scores in source selection; and (iii) procedures for quality assurance reviews and contractor dispute resolution. (3) System modifications Not later than one year after the date of the enactment of this Act, the Secretary of Defense shall modify the CPARS system to— (A) support the categorization of negative performance events; (B) eliminate fields for subjective ratings; (C) automatically calculate composite scores based on reported data; (D) include a mechanism for contractors to review and respond to reported events and scores; and (E) integrate with the Federal Awardee Performance and Integrity Information System (FAPIIS) for seamless data sharing. (4) Transition period (A) Existing CPARS evaluations For contracts awarded prior to the effective date of the revised regulations, contracting officers may complete existing CPARS evaluations under the prior system until the contract is closed or terminated. (B) New evaluations New evaluations for contracts awarded after the date of the revised implementing regulations shall comply with this section. (g) Reporting and oversight (1) Report Not later than one year after the date of the enactment of this Act, the Secretary of Defense shall submit a report to the Committees on Armed Services of the Senate and the House of Representatives on the implementation of the revised Contractor Performance Assessment Reporting System required by this section. (2) Government accountability office review Not later than 3 years after the date of the enactment of this Act, the Comptroller General of the United States shall conduct a review of the revised contractor performance information system to assess— (A) its effectiveness in achieving the purposes outlined in subsection (a); (B) the accuracy and fairness of the scoring mechanism; and (C) the system’s impact on competition and nontraditional defense contractor participation. (h) Definitions In this section: (1) Negative performance event The term negative performance event means a verifiable instance of contractor failure or poor performance, as described in subsection (d). (2) Nontraditional defense contractor The term nontraditional defense contractor has the meaning given the term in section 3014 of title 10, United States Code. (3) Verifiable data The term verifiable data means objective evidence documented in contract records, inspection reports, audits, correspondence, or other government records.