Motivators, Incentives, Remedies: “Tools” for Thought

1. Motivators, Incentives, Remedies:“Tools” for Thought Maj Kristen A. Nelson AMC/LGCO 779-4373

2. Overview • Award Fee for Base-level Services: My Thoughts • Motivators and Incentives: Being Creative • Remedies: Making Them Work • Acquisition Professionals: If remedies and incentives are good for contractors they’re good for us, right?

3. Award Fee Contracts:My Thoughts • Acquisition Reform Renewed It’s Use • It’s Subjectivity Seemingly Suits Services • Just One Tool in the Toolkit • Not New • Not a Panacea • Not Easy • Can We Measure Its Effectiveness? • Eagle Look findings say we are not even trying to measure

4. Yes, When... • MR clearly shows it incentivizes a good contractor to be great • Excellence is clearly beneficial and cost effective • We can clearly afford it now and in the future • It’s not used as a sledge hammer; i.e. not the only tool used

5. But Remember... • An award fee to get a poor contractor to be good is throwing good money after bad • An award fee to get very good rather than just good results is wasteful in many situations • An award fee to get the contractor to do work that is not in the scope of work is unethical • An award fee without proper MR, negotiating with offerors, or doing a thorough SS will gain nothing

6. So What Is The Answer? • Erase bad sealed bid memories • Do market research • Gain confidence that excellent contractors do exist • Find out how the market operates for these excellent contractors • Are monetary incentives common in this market

7. So What Is The Answer? • Stop trying to write the “perfect” SOW • Perfection does not exist • Note the number of amendments issued for every solicitation • If you do write the perfect SOW, then an award fee DEFINITELY NOT NEEDED

8. So What Is The Answer? • Start trying to write “a living SOW” • Frame the relationship (personality dependent) • Outline what is important to the customer, including budget limitations • Let contractor choose how to meet those priorities • Treat everyone as equal partners

9. So What Is The Answer? • Dust off the Contracting “ShopSmith” • Negotiation: Now there’s a power tool! • Resolve to award “with discussions” • Use “basic” attachments first • Market research • Performance based contracting • Past performance evaluation

10. So What Is The Answer? • Use Specialty Attachments when a finer finish is needed • Award fee when it makes sense • Partnering • Non-monetary incentives • Remedies • Exit the relationship

11. Sole Source Acquisitions So what about NISH, Native American, 8(a) and other sole source acquisitions? • The process is exactly the same!!! • MR to learn how COMPETITIVE contractors operate • MR to build government estimate • Write a living SOW to frame the relationship • Thoroughly compare offer’s proposal to MR • Negotiate! • Treat Contractor as a Partner

12. Motivators and Incentives: Being Creative • Motivator: need or desire that causes a person or organization to act (i.e. to propose) • Used in a pre-award context • Positive or negative • Incentive: Perceived benefit or actual reward for fulfilling an obligation (i.e. to perform well) • Used in a post-award context • Positive or negative • Remedy: Something that prevents, corrects, or balances a fault or error (i.e. poor performance) • Post-award context

13. Why Use Positive Motivators • Compete with opposing business opportunities • Encourage new participants • Encourage more participants • Improve outcome • Discourage poor performers • Encourage new approaches • Encourage expertise and teamwork • Better price competition

14. Long term relationships Higher quantities Rapid payment Market share/penetration Reasonable margin Develop new skills Commercial processes Existing product or service Keep staff employed, doors open Follow-on business It’s not just a job… it’s an adventure Unusual proposal requirements Unusual admin duties Special reporting requirements Unique processes Long acquisition time/proposal acceptance period Over inspection/High risk of failure Wrong time of year for new business High start up cost Frequent changes BusinessMotivators and Demotivators

15. Why Use Incentives • All incentives • Promote excellent results and outcomes • Promote internal quality control and remedies • Encourage expertise, teamwork, partnering • Contractor satisfaction/pride in workmanship • Monetary • Promote upper management participation • Promote cost savings • Non-monetary • Promote workforce satisfaction & stability

16. Incentive or Award Fee Follow-on business Long term relationships Rapid payment Reasonable margin Develop new skills Partnering and teamwork, equal partner Name recognition Employee recognition More than just a job… it’s an adventure Over inspection/High risk of failure Late payment Lower than expected ROI Lower than expected margin Frequent changes Difficult personalities All the responsibility but none of the authority BusinessIncentives and Disincentives

17. Creative Motivators Base Tour/ Mission Briefing Newspaper Article on Reform and Advantages Squadron Commander Greeting or Invitation Explanation of PPTO process Market Research Phone call Pictures on a Website Draft RFP, not SOW Commercial schedule Vendor Fair/Open House Award on time Creative Incentives Contract Kick-off Meeting “Meet the New Contract Manager” in base paper Recognition letters/pictures Recognition luncheon Survey results Customer complaints trends Value Engineering Proposals Working together on long-term change Some Ideas

18. RemediesFrom “Liquidated Incentives, Performance Damages” by Stephen Sopko, Exec VP, ContractBrokerAlentis Trade Journal 15 Aug 2000 • A well written contract depends directly on its ability to respond to failure with appropriate mechanisms proactively designed to restore the agreement’s integrity. • Remedies must answer the question, “What happens if the other side fails to deliver as promised, when promised?”

19. Remedies • Contractors that identify a problem, fix it and then propose a remedy for the fault exemplify a good partner. • Customers that identify a problem, communicate it to the contractor and enthusiastically cooperate in its resolution echo this principle.

20. Apologize and forgive “I’m sorry” Escalate Sq CC to Off-site manager Mutual Involvement Share decisions, worries, opportunities Cooperate Build confidence between stakeholder and ktr Trumpet Good Performance Credit where credit is due Reward Say “thank you” Bolster the Relationship failure is an opportunity to do better together Innovate Seek long term gains Anticipate Include contractors in planning discussions Team Up Equal Partners in success Moving PastMonetary Remedies “Ten ideas to encourage good performance without exchanging a dime”

21. Acquisition Professionalism If remedies and incentives are good for contractors, they’re good for us, too... ...right?

22. Experts in field On-time Delivery Outstanding Customer Service Performance despite Staffing problems Employee Training Learning and Improvement Internal Quality Control Performance Measurement Plans and Reports Past (Current) Performance Evaluation Management Involvement Team Players Emergency response To make us look good Reperformance Payment deductions Acquisition Professionalism What we require of our contractors:

23. Lack of confidence in new skill sets Slow or late delivery Bad attitudes, long memories Low manning excuse Square-filler or no employee training Slow learning and improvement Poor or no internal quality control No or unimportant performance measurement Poor planning Over-inflated past (current) performance evaluations Not enough or too much management involvement Finger pointers, not team players Inconsistent customer service Great emergency response For ktr to make up for our failures or omissions No or late reperformance No payment deductions Acquisition Professionalism A double standard?

24. Questions and Discussion