Original Date: 07/10/2000
Revision Date: 01/18/2007

The Red/Yellow/Green Program is a source selection tool designed to reduce the risk of receiving nonconforming products and late deliveries. The program classifies the degree of risk by assigning a color to a contractor’s historical product quality and delivery performance in individual Federal Supply Classifications. Red is high risk, yellow is moderate risk, and green is low risk.

In the past, the Navy’s Vendor Data Analysis Report was prepared manually by the Quality Assurance Department. The report, primarily for internal use, listed the top 20 to 30 worst contractors. The process was cumbersome and required bi-yearly reviews to generate the hard copy reports. At best, the reviews were subjective and sometimes vendors were overlooked. Not only was this report narrow in scope, but it offered very little value to the procurement process. In 1992, the Navy implemented the Red/Yellow/Green (RYG) Program and assigned the Naval Sea Logistics Center (NSLC), Detachment Portsmouth as the program administrator. The following year, a RYG Continuous Improvement Council was established and by 1996, delivery classifications were added to the process.

The RYG Program is a source selection tool designed to help the Contracting Officer reduce the risk of receiving nonconforming products and late deliveries. The program classifies the degree of risk by assigning a color to a contractor’s historical product quality and delivery performance in individual Federal Supply Classifications. Red is high risk, yellow is moderate risk, and green is low risk. Equally important, the RYG Program provides procedures and an automated system for incorporating these classifications into source selection. The program meets Navy requirements to include an evaluation of the offeror’s past quality and delivery performance in the award decision process; however, it does not eliminate the need to meet the standards in the Federal Acquisition Regulations.

The RYG Program also employs the Technical Evaluation Adjustment (TEA) and the Greatest Value/Best Buy (GV/BB) methodologies in source selection to determine the best value for the Navy. The TEA calculates the government’s cost of additional quality assurance and procurement actions needed to reduce the risk of receiving nonconforming products and late delivery. When added to a Red or Yellow offeror’s price, an adjustment may displace a low offeror in favor of another with a better product quality and delivery history. The GV/BB plan includes price and a RYG classification as part of the evaluation factors.

Once a month, quality and delivery historical records are evaluated, and predefined criteria is used to develop RYG classifications for each contractor’s Federal Supply Classification. In cases of insufficient data, a neutral classification is assigned. Contractor performance data is obtained from the Product Data Reporting and Evaluation Program (PDREP) database. Contractors are provided electronic access to and written notification of their current classification(s). For Red or Yellow classification, the notification includes a summary of the data used to develop the classification. For Green, only a status sheet is sent. Contractors have three weeks to challenge the data before it becomes official. As a microcomputer application, the RYG Program runs on an IBM-compatible computer that uses a five-megabyte hard drive, printer, and modem. A web-based access is coming soon.

The RYG Program has proven to be a valuable and accurate tool in the procurement process. Less than 0.5% of classifications have changed as a result of challenges from contractors. The program eliminates the low bidder syndrome and has stood up to legal challenges. The reject rates of procurements have decreased from 16.8% in 1989 to 5.5% in 2000, which translates to tremendous cost avoidance through reducing rework and re-procurements.

For more information see the Point of Contact for this survey.