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#1408 John S. Rush, Acquisition Management Center, LLC Date April 16, 2008

Making Federal Performance Based Policy Work. #1408 John S. Rush, Acquisition Management Center, LLC Date April 16, 2008 Time 9:40 AM – 10:40 AM. Agenda. Brief PBSA Background Advantages and disadvantages of PBSA Challenges to making PBSA work

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#1408 John S. Rush, Acquisition Management Center, LLC Date April 16, 2008

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  1. Making Federal Performance Based Policy Work #1408 John S. Rush, Acquisition Management Center, LLC Date April 16, 2008 Time 9:40 AM – 10:40 AM

  2. Agenda • Brief PBSA Background • Advantages and disadvantages of PBSA • Challenges to making PBSA work • Risks to Government and contractors when utilizing PBSA • Basic process of developing PWS and PAP • Integrated Project Team • Role of Performance Assessment Plan (PAP)

  3. Performance Based Service Acquisition Background • Initiative since early 1990s • Office of Federal Procurement Policy (OFPP) • Increase in use of Level of Effort service contracts • Lack of effective contract administration • Government often paid contractors full price for substandard work • Now part of Federal Acquisition Regulations • FAR Part 37 • Agency Supplements • Part of Public Law • Clinger-Cohen • SARA

  4. Performance Based Service Acquisition Background • Key aspects of PBSA initiative • Buy performance not process/time • “What not how” • Choose appropriate contract types • Include appropriate incentives • Have contract administration plan • Quality assurance surveillance plan • Performance assessment plan • Subsequent procurements of same service should move toward fixed price contract type

  5. Performance Based Service Acquisition Background • FAR 37.102 Agencies must • Use performance based contracting to the maximum extent practicable • FAR 37.103 Contracting Officer • Ensure use of performance based contracts • Written justification for not using performance based methods • Mandated agency PBA goals • Goals not met

  6. What is Performance Based Service Acquisition? • It is not a contract type • It is not a set of Performance Based Service Acquisition contract clauses • It is an acquisition strategy • Identifying desired outcomes • Not activities • Not processes • Linking contractor payment to contractor performance • Objectively measured • Fixed Price effort • Reduced price for nonconforming performance • Cost Reimbursement effort • Reduced fee for nonconformance • Increased fee for enhanced performance

  7. Fatal PBSA Myths • Performance based contracts are easy to write • Performance based contracting will result in shorter work statements • Performance based contracting will require less up-front government effort • Performance based contracting will streamline the contracting process • Using a statement of objectives will solve most of the problems with performance based contracts

  8. PBSA Reduced Government involvement Stronger remedies for unsatisfactory effort More competition Perhaps lower contract prices Improved customer satisfaction Government pays for what it gets Contractor must perform satisfactorily Re-performance at contractor expense Non-PBSA Quicker to get contractor working More flexibility in problem solving efforts Less initial Government effort in RFP preparation Close Government - Contractor relationship inherent in LOE structure PBSA vs. Non-PBSA Benefits

  9. PBSA Government must know what it wants Government time to develop PWS Government time to perform Best Value evaluation Government effort to administer deductions and any incentive structures Non-PBSA Government is buying time not performance Government – Contractor relationship may evolve to personal services Government may never know the reasonable price of work Contractor’s obligation is to provide labor hours or “best effort” No guarantee of performance or delivery Re-performance at Government expense PBSA vs. Non-PBSA Liabilities

  10. Impediments to Successful PBSA • Inadequate acquisition planning • PBSA takes more time than LOE/TO • Conflicting procurement policy objectives • We must reduce PALT • We must implement PBSA • Inadequate funding strategies • Fully-funded versus incrementally funded contracts • Incrementally funded strategies will limit the effectiveness of PBSA • Limits contractor ability to find efficiencies in managing performance • Reluctance of requirements community to accept ownership of PBSA responsibilities • It is still seen as a “contracts” problem • It is and should be an acquisition team problem • Failure of government to relinquish management of performance

  11. Risks in Performance Based Contracting • Government Risks • Poorly defined objectives • Poorly stated performance standards • Failure to adequately link performance to payment • Inadequate performance assessment methods • Inadequate funding approach

  12. Risks in Performance Based Contracting • Contractor risks • Unrealistic customer performance expectation • Too many incentives • Contradicting incentives • Inappropriate performance assessment • Reluctance of customer to relinquish management control • Overzealous performance assessment

  13. Defining Performance—The Performance Work Statement • The Performance Work Statement (PWS) provides • Performance Requirements—unambiguous statements that describe specific, measurable results to be provided • Performance Standards—statements that define the acceptable quality of the delivered product or service • Performance Measurements—statements that describe how performance will be measured • The PWS focuses on results and avoids describing how the work will be performed • The Performance Work Statement must answer Two Simple Questions: • “What problem am I trying to solve?” • “How will I know when I’ve solved it?”

  14. Two Questions • “What problem am I trying to solve?” • What services are required? • “How will I know when I’ve solved it?” • What are the performance standards? • How am I going to assess performance?

  15. Steps to PBSA • Identify the services to be contracted • Decompose the services into component tasks • If necessary decompose the component tasks into sub-tasks • Identify any mandated standards or specifications to which work must comply • Licenses, Qualifications of workmanship, etc. • Identify any performance constraints • Security, access, availability of utilities, etc. • Gather workload data This is a concurrent iterative process

  16. Steps to PBSA • Identify contract performance incentives • Award Fee Structure • Performance Incentives • Past Performance Assessments • Identify Performance Standards for tasks • Must be consistent with customer objectives and expectations • Linked and consistent with performance incentives • Determine appropriate performance assessment strategy • Must be consistent with contract terms and incentive structures • Must be economical to employ This is a concurrent iterative process

  17. Performance Standards • Performance standards should be objective • Observable • Measurable • Aligned with requirements • Realistically attainable • Subjective standards could lead to inconsistent performance assessment and disputes with contractor • Performance standards should be aligned incentive/fee adjustment device • Award Fee Plan • Technical or schedule performance incentives • Award term performance assessments

  18. Developing Standards • Objective performance standards can generally be described with one or more of the following characteristics: • Quantity • How many • How much • Timeliness • When • How often • Deliverable format • How reported • What is reported • Quality • How well • How accurate

  19. Checklist for Developing Standards • Are the standards • Aligned with overall scope of the requirement • Focused on performance results • Measurable • Economical to apply • Attainable • Consistent with contract terms and customer expectations

  20. Performance Standards • Performance standard establishes the expected level of performance each time the contractor attempts to perform the task • Acceptable Quality Level (AQL) defines minimum level of performance in an effort • Example • Contractor must resolve category 1 trouble calls within 2 hours for no less than 98% of all category 1 trouble calls • All work is not critical • Even the best contractor fails sometime • Perfection is expensive • You must gather workload or historical data to give the AQL meaning

  21. Performance Standards • AQL is NOT broadening the performance standard’s tolerance • Every time contractor attempts to perform, he’s expected to perform to the standard • AQL is really identifying the acceptable number of failures or a failure percentage of all performances

  22. Performance Assessment Plan(QASP) • Government’s plan for how contractor performance will be assessed • Should be developed concurrent with requirements definition and performance standards • Kept outside of the contract • Must be linked to contract incentive structures or remedies • Must recognize contractor’s responsibility to perform quality control • “Living document” begun during Requirements analysis and continues through life of contract

  23. Performance Assessment Plan • Plan should be developed as PWS is developed • Objective: • Employ consistent, objective surveillance at reasonable cost • Should be implemented as written to assure objectivity and consistency • Should recognize contractor’s responsibility for managing performance quality • Should be consistent with • Incentive structures • Award Fee Plan • Contractor Performance Report (CPARS/CPR)

  24. Performance Assessment Plan Contents • Purpose • Roles and Responsibilities • Methods Used to Assess Contractor’s Performance • Examples of Forms Used • Deficiency Resolution/Validation Process • Assessment and Recommendation Process • Distribution of Assessment Report

  25. PBSA is a Team Effort • PBSA can not be accomplished by the Contract Specialist/Contracting Officer alone • At a minimum Team includes: • Customer • Contracting Officer • COR • Contractor • It can include many others

  26. What is Important? • PBSA requires Government to • Have a clear understanding of requirements • Have a clear understanding of standards • Have a clear understanding of how you will assess performance • Have a clear understanding of contractor’s quality control and management processes • Have a clear understanding of its own resources

  27. What is Important? • Potential Problems • Omitted requirements • Inappropriate standards • Incompatible assessment methods • Inadequate workload estimates • Inappropriate incentives • Government supervision of contractor workforce • Unrealistic performance expectations

  28. Questions and Answers • Don’t ask the question, if you don’t want to know the answer!

  29. John Rush Acquisition Management Center, LLC Chesapeake, VA 23320 (757) 502-1453

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