Awarding Contracts to Achieve Results

1
Awarding Contracts to Achieve Results

• Performance-Based Acquisition (PBA)
• Julia Wise, OMB, OFPP

2
Regulatory PBA changes

• 1991 - OFPP Policy Letter 91-2
• 1993 GPRA
• 1994 FASA and OFPP Pilot Project for PBSC
• 1997 - Changed the FAR to incorporate OFPP
  Policy Letter 91-2 and rescinded the policy
  letter in 2000
• 2001- Public Law 106-398, Section 821 Added to
  the FAR a PBC preference and order precedence
• 2004 SARA PBC change (SARA signed 11-24-03)
• Section 1431 and Section 1433
• treat certain performance-based orders and
  contracts as commercial items if certain
  conditions are met
• report on these contracts and orders in FPDS
• 2004 published an interim rule under FAR Case
  2004-004
• 2005 published final SARA PBA changes.
• PBA formerly Performance-Based Contracting
  (PBC). The PBA name change will be official when
  FAC 2005-07 is published.

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Other PBA Changes

• 1995 OFPP Best Practices PBSC Guide
• 2001 -OMB PBC goals
• FY 2002 20 of eligible service contract
  dollars over 25,000 should be performance-based.
  
• FY 2003 30
• FY 2004 and 2005 40
• 2002 - GAO Audits initiated on training and use
  of PBC
• 2002/2003 - Seven Steps guide initiated and
  completed
• 2003 OFPP Issued Recommend. Report to improve
  the use of PBC
• 2004/2005 published proposed rule on 7/18/04
  under FAR Case 2003-018 final changes to be
  published next FAC 2004 - OFPP Issued a 9/7/04
  memo highlighting changes goals, reporting
  requirement, incentives, etc. www.acqnet.gov

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What is PBA?

• An acquisition strategy used to structure all
  aspects of
• an acquisition around the purpose of the work to
• be performed.
• What problem are you trying to solve?

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Myths/Realty of PBA

• Myths
• PBC is a new trend in acquisition.
• PBC is very vague and unspecific.
• PBC is a contract type.
• PBC is the responsibility of the contracting
  officer.
• PBC is complex and not worth the time.
• PBC leaves us powerless.
• PBC equals no direction.

• Reality!
• First airplanes procured from
• the Wright Brothers using PB
• SOW.
• Outcome specific not process specific.
• Any contract type may be used. The SOW is
  focused on results.
• It is joint team effort Program Manager needs
  to know the outcome and write the SOW in a
  performance-based manner.
• It forces us to work hard upfront to ensure the
  time invested is worth and results are achieved.
  
• Gives us power to achieve the outcome.
• Team can give outcome oriented guidance - what
  guidance but not how to guidance.

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Who is involved?

• PBA involves the entire acquisition team -FAR
  Part 1.102-3.

Technical Community
End-user
Program Manager
Quality Assurance
Industry
Roles/Responsibilities
Legal
Business/ finance
Contracting
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When is PBA used? (FAR 37.102)

• PBC is used to the maximum extent practicable on
  eligible service contracts, orders,
  modifications, except on
• AE, Construction, Utility services, Services
  incidental to supplies.
• Additional exclusions in OFPP September 7, 2004
  memo.
• When determining contract type remember to use
  the following order of precedence -
• FFP PBC or task order
• A PBC or task order that is not FFP or
• A contract or task order that is not PBC.
• Note FAR 7.105(b)(4) requires rationale if PBC
  will not be used or if PBC is used on other than
  FFP basis

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What makes it a PBA? (FAR 37.601)

• Performance Work Statement (PWS) or
• Statement of Objectives (SOO)
• (2) Measurable Performance Standards (MPS) and
  method of assessing the standards
• Performance Incentives, if applicable.
• - Negative or Positive
• - Monetary or Non-monetary
• (4) Quality Assurance Surveillance Plans (QASP)
• Note QASP is no longer stated as an element
  because contract quality requirement is not
  unique to PBA. The type and extent of the
  contract quality requirement is depended on the
  acquisition.

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Transitioning to PBA

• Use
• PWS
• SOO --- PWS

Acq. Plan Market Research
Acq Plan Market Research
Tight SOW
Rigid Govt Solution Awarded
PM creates Routine Tasks
Innovative Ktr Solutions Awarded
Empower Acquisition Teams to define outcome
Evaluation Team
Evaluation Team
Organizational Change in service Of Performance
Formal Systems
Combative Strategy
Share Information
Collaboration Strategy
QA Req
Incentives
Incentive Contracts
QA Req
Learning
Bureaucratic
Award Contract Contract Administration
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Key Points for the PWS or SOO

• Know the outcome desired.
• Plan for the acquisition upfront.
• Program Manager/team should conduct an analysis -
  Use the team to refine the requirement
• Perform market research to understand
• Commercial practices
• Tasks needed to achieve results
• Standards
• Incentives
• Similar acquisitions conducted by other agencies
• Describe the outcome to be achieved to the
  contractor making sure that the contractor is
  allowed to solve the problem.
• List specific tasks that must be performed to
  achieve the outcome.
• Emphasis on the use of specified deliverables.
• Establish specific standards.
• Build in a validation mechanism for acceptance.
• Team writes and reviews the PWS.
• Consider the issuance of draft solicitations to
  refine the PWS.

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Key Points for Developing MPS

• Team should conduct market research on commercial
  MPS.
• Team should know what they view as a successful
  outcome.
• MPS should be measurable, meaningful, easy to
  apply and attainable.
• Define your metrics - measure the contractors
  performance.
• MPS should have a basis - commercial standards or
  Govt required standards so rely on commercial
  quality standards, if available.
• When doing a SOO, have the contractor propose the
  MPS.

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Key Points for Performance Incentive

• Team should determine if it is appropriate
  upfront and cover it in the Acquisition Plan.
• Payment is based on results not resources used.
• Incentives can be monetary or non-monetary.
• If a financial incentive, make sure money is
  committed to pay it!
• Administer incentives fairly, frequently.
• Monetary incentives may include Profit on Fixed
  price contracts, incentive fees on CPIF or FPIF
  contracts, award fees on CPAF Contracts or FPAF
  Contracts, etc.
• Non-monetary incentives may include Reduced
  oversight, revised schedules, positive
  performance evaluation, etc.

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What is a QASP?

• The Quality Assurance Plan describes the strategy
  and methods the project will deploy to ensure two
  things that the project is being managed,
  developed, and deployed in a sound, reasonable
  way and project's deliverables are of acceptable
  quality before they are accepted.
• QASP
• Monitors the contractors performance specifying
  the surveillance schedule, methods, and
  performance measures, key processes, and
  deliverables.
• Establishes clear criteria for specifically
  defining quality at each key checkpoint or for
  each deliverable.
• Outlines roles and responsibilities for the key
  quality assurance evaluators.
• Obtain agreement on the points in time that
  quality reviews will occur and how and to whom
  findings will be reported.

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Why PBA?

• To achieve results and improve business results
  because of PM/PS.
• To increase customer satisfaction due to outcome
  and results achieve
• To motivate contractors to offer their best
  value, innovative solutions and competitive
  prices.
• To move away from tedious detailed specifications
  and use a PWS or SOO that states the Government
  problem.
• To shift problem solving or how to risk to the
  contractor.
• To improve communication with contractors because
  you are managing the contract relationship not
  the contractor.
• To lessen contract administration because of
  QASP.

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Managing a PBA

• Good Contract Administration means you plan and
  train for it. It generally includes
• A kick-off meeting to specify roles and
  responsibilities of CO, PM, COR/COTR, and QA
  specialist roles.
• Use of a QASP to manage performance.
• Contractor manages using the Quality Control Plan
  (QCP)
• Government manages the contractors performance
  using the QASP.
• Frequent performance assessments.
• Annual past performance evaluations.
• Communication Plan.
• EVMS is a good tool to use to manage PBAs to
• ensure the outcome is achieved.
• ensure delivery of an acceptable product/service
  at the agreed upon price and time.
• Accurate payment for work performed.
• monitor the contractors performance.
• avoid scope of contract creep!

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FAR References

• FAR 1.102, Statement of Guiding Principles
  highlights PM role.
• FAR Part 2, Definition - new definitions.
• FAR Part 7 Acquisition Planning
• FAR Part 10, Market Research
• FAR Part 11, Describing Agency Requirements
• FAR Part 16, Types of Contracts
• FAR Part 37, Service Contracting recognizes use
  of SOO when PWS is not suitable.
• FAR Part 46, Quality Assurance. not listed
  because it is not stated as the only contract
  quality requirement that can be used per FAR.
  
• New FAR changes to be finalized in FAC 2005-07

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PBA Resource

• Seven Steps to PBSA website www.acqnet.gov -go
  to the Library to see vetted samples