Performance Based Contracting (PBC) DGS/DPS Procurement Forum 12

Performance Based Contracting (PBC)DGS/DPS Procurement Forum 12 Donald R. Rainey, Sr., CPPB/VCO Director, Office of General Services Virginia Department of Social Services

AGENDA • Background/History • What is PBC? • Steps to PBC • PBC for Social Services • Q & A

BACKGROUND/HISTORY • Government Performance & Results Act 1993 • Federal Acquisition Streamlining Act of 1994 • Clinger-Cohen Act of 1996All of these laws sent an important message about “Performance” in federal programs and acquisitions. • PBC isn’t new • Federal government policy for agencies to use PBC to the maximum extent possible when acquiring services.

What is PBC? • Performance – At the state and local government levels, performance is generally taken to mean outputs, qualityand outcomes of government programs and services.(1) Outputs (the amount of service provided)(2) Quality (the quality of the service provided)(3) Outcomes (the results, impacts or accomplishments) • Performance Focus = Outputs + Quality + Outcomes

What is PBC? • Performance Based Contracting – A contract that focuses on the outputs, quality and outcomes of service provision and may tie at least a portion of a contractor’s payment as well as any contract extension/renewal to the contractor accomplishments or performance. • PBC is an “umbrella” term that incorporates a variety of different approaches that can vary depending on the level of government and the type of service.

Steps to PBC • Establish a Team- Ensure senior management involvement- Involve multi-disciplinary SMEs- Define roles and responsibilities- Develop rules of conduct- Empower team members- Identify stakeholders- Maintain the knowledge base over the project life

Steps to PBC • Describe the problem that needs Solving- Link the procurement to mission and performance objectives- Define desired outcomes- Decide what constitutes success- Determine current level of success

Steps to PBC • Examine Private & Public Sector Solutions- Conduct a market survey (team approach)- Learn from public sector counter-parts- Take with private sector companies- Look for existing contracts- Document your research

Steps to PBC • Develop a Performance Work Statement (PWS) or a Statement of Objectives (SOO)- Write the PWS- Let the contractor solve the problem- Describe the scope in the SOO- Write the performance objectives- Identify constraints- Develop the background

Steps to PBC • Decide How to Measure & Manage Performance- Rely on commercial quality standards- Have the contractor propose metrics and quality assurance plan- Select only a few meaningful measures to judge success - Use incentive-type contracts - Recognize the power of profit as a motivator

Steps to PBC • Select the right Contractor- Compete the requirement- Use Oral Presentations- Emphasize past performance- Use best-value evaluation and source selection

Steps to PBC • Manage Performance- Maintain team integrity- Adjust roles and responsibilities- Assign a Contract Administrator- Host a Post-Award Conference (Kick-Off)- Regularly contractor performance- Report on contractor’s performance

PBC Social Services • Increase in contracting for services delivery –vs- agency employees- Rise is expected to continue- 80% of all Human Service (HS) funding involves performance language- Subject to Federal audits of HS programs- All providers are not the same- Demand for evidence based practices

PBC Social Services • Traditional focus on inputs and process measures rather then outcomes • Shifting toward increased accountability- Performance of contractors- Public pressure to justify spending with measurable performance

PBC Social Services (Concepts) • Emphasizes results related to output, quality and outcomes –vs- process or method • Has an outcome orientation and clearly defined objectives and timeframes • Uses measureable performance standards and quality assurance plans • Provides performance incentives and ties payment to outcomes

PBC Social Services (Benefits) • Reward is based on outcomes and performance resulting in:- Improvement and delivery of better services supporting improved outcomes- Clarity of goals and expectations- Fiscal flexibility for providers to achieve desired results- Sets the groundwork for program evaluation and monitoring - Encourages the contractors to develop and implement innovative and cost effective service delivery- Less frequent but more meaningful monitoring

PBC Social Services (Dynamics) • Amount and timing of payments • Extent to which incentives and disincentives are offered • Level of financial risk assumed by the contractor • Types of information collected and frequency of reports on performance • Contractor involvement in performance measure development • Reinvestment of saving

PBC Social Services • Contract MonitoringMost critical and most challenging- Define what actions the agency will take in order to ensure contract standards are met- Develop well in advance of contract award- Focus on outputs and outcomes not routine tasks- Enforce penalties for not meeting standards

PBC Social Services (Success Factors) • Define Success • Selection of Performance Measures • Collaboration with Providers • Capacity of Providers • Staff and Contractor Training • Internal Management Systems

Q & A ?????????

Performance Based Contracting (PBC) DGS/DPS Procurement Forum 12