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© Facility Engineering Associates 2012 PERFORMANCE BASED SERVICE CONTRACTING
© Facility Engineering Associates 2012 Please let us know your name and/or location when you sign in We ask everyone to mute their telephone during the presentation If you have questions or comments, use the chat tool provided during the presentation At the end un-mute your telephone for general questions and answers Please mute cell phones to avoid background noise Do not touch wireless microphones (Fairfax only) Thank you for attending todays session!
© Facility Engineering Associates 2012 Kathy Powers P.E., CFM MS and BS in Civil Engineering Past U.S. Navy Civil Engineer Corps Officer Past warranted Department of Defense Contracting Officer, and Acquisition Professional Project Manager
© Facility Engineering Associates 2012 Learn the difference between performance based and prescriptive contracts (traditional) Understand the advantages and challenges to performance based service contracting Discover a repeatable methodology for writing performance based service contracts Learn how to administer a performance based service contract Learning Objectives
© Facility Engineering Associates 2012 WHAT IS PERFORMANCE BASED CONTRACTING?
© Facility Engineering Associates 2012 A PBC should describe the owners needs in terms of what is to be achieved, not how it is to be done. The intent is rather than micromanaging the details of how contractors operate, the owner should set the results and give the contractor the freedom to achieve them in the best way. Performance Based Contracting (PBC)
© Facility Engineering Associates 2012 PBC is also called outcome based contracting. Specification should focus on: Outcomes not inputs. Results of the contractors work not on the work itself. The cleanliness of the bathroom not how it was cleaned. Outcome Based Contracting
© Facility Engineering Associates 2012 Prescriptive vs. Performance Contracts Outline exact specifications expected Less flexible Can sometimes stifle innovation and morale Contractors may have little incentive or motivation to do anything beyond what is specified Describe expected results Flexibility for the vendor regarding achievement of those results With a responsible contractor, possible cost efficiencies and improvements Contractor may take more pride in work and look for ways to increase effectiveness and efficiencies and add value
© Facility Engineering Associates 2012 Prescriptive vs. Performance Specification Examples Mow and edge grass weekly. Aerate spring and fall. Fertilize in April and October. Weed beds quarterly. Use only commercial mowers. Maintain a smooth, neatly trimmed, acceptable lawn, free of eroded or bare spots and weeds. Maintain grass between 2 to 4 inches in height. Fertilize, water, edge, eliminate weeds, maintain mulch, and repair or replace damaged plants in shrub and plant beds.
© Facility Engineering Associates 2012 PBC allocates higher risk to the contractor compared to traditional contract arrangements, but at the same time opens up opportunities to increase his margins where improved efficiencies and effectiveness of design, process, technology or management are able to reduce the cost of achieving the specified performance standards. Why Performance Based Contracting?
© Facility Engineering Associates 2012 Outsourcing allows the organization to concentrate on their core business. Performance based contracting allows the contractor to bring their extensive experience and cutting-edge technology in their core business to your organization. Why Performance Based Contracting?
© Facility Engineering Associates 2012 Law and regulation establish a preference for performance-based service acquisition: Federal Acquisition Regulation Subpart 37.6 (Performance- Based Contracting) It is the policy of the Federal Government that agencies use performance-based contracting methods to the maximum extent practicable… Why Performance Based Contracting?
© Facility Engineering Associates 2012 OMB Best PBC Practices ocurement_guide_pbsc/ Drafting SOW Solicitations & Award Contract Administration
© Facility Engineering Associates 2012 ADVANTAGES AND CHALLENGES TO PERFORMANCE BASED CONTRACTING
© Facility Engineering Associates 2012 Advantages to PBC Reduce maintenance costs through the application of more effective and efficient technologies and work procedures. Improve control and enforcement of quality standards. No detailed specification or process description needed. Contractor flexibility in proposing solution. Contractor buy-in and shared interests. Surveillance: less frequent, more meaningful. Allows for measurement of metrics.
© Facility Engineering Associates 2012 Advantages to PBC Organization does not need to be an expert at how to get what they want they just need to be experts in knowing what they want.
© Facility Engineering Associates 2012 Disadvantages to PBC More challenging to develop and implement PBC: paradigm shift. Organizations need to be well schooled in the methodology for arriving at measurable metrics and acceptable quality levels when developing the performance work statement (PWS) or statement of work (SOW). Administering PBC can also require a paradigm shift for the organization.
© Facility Engineering Associates 2012 How To Overcome Disadvantages On-Line Training Books TRAINING mb/procurement_guide_ pbsc/
© Facility Engineering Associates 2012 WRITING PERFORMANCE BASED CONTRACTS
© Facility Engineering Associates 2012 Performance Based Specification 1: Define specific requirements 2: Decide on your organizations expectations 3: Determine performance standards or level of service 4: Decide how you will measure the contractors outcomes
© Facility Engineering Associates 2012 Define Requirements Need to determine the scope and nature of the services required and describe them clearly. Formulate a statement that clearly defines: 1)What do you want? 2)How much, when and where?
© Facility Engineering Associates 2012 Requirements Example 1. What services do you want included in the contract? Example grounds maintenance. Lawn care – mowing, edging, watering, weeding, irrigating, fertilizing, seeding, patching Pest management Snow and ice removal Garden care – planting, weeding, mulching Tree/bush care Leaf removal Ornamental fountain maintenance 2. Where?
© Facility Engineering Associates 2012 After you have determined requirements the next step is expectation. The RFP should clearly state what your organizations expectations are. Expectations
© Facility Engineering Associates 2012 Maintain all facilities at the APPA Custodial Service Level 2.5. Levels of service 4 and 5 will not be tolerated. [Service Level 2.5 is defined as routinely at the level 2 while only occasionally sinking to level 3.] Requests for service are responded to and resolved in a timely fashion. Utilize green and recycled products to the fullest extent possible and submit annual data in a complete and timely manner. Expectations Example
© Facility Engineering Associates 2012 Establishes the minimum level of service acceptable to meet customer requirements. Provides a framework for monitoring actual services requirements and targets. Use internal standards: relevant organizational or FM standards and/or standards that may have been part of previous contracts or at existing/current levels. Use external standards: conformance to regulatory requirements, international standards, health and safety laws and regulations, industry standards and manufacturers recommendations. Performance Standards
© Facility Engineering Associates 2012 Performance Standards Example LevelMaintenanceCustodialGrounds 1 Showpiece Facility Orderly Spotlessness State-of-the-Art 2 Comprehensive Stewardship Orderly TidinessHigh Level 3 Managed CareCasual InattentionModerate Level 4 Reactive Management Moderate Dinginess Moderately Low- Level 5 Crisis ResponseUnkempt NeglectMinimum Level APPA Service Levels
© Facility Engineering Associates 2012 Measure Outcomes How are you going to measure the contractors performance? Customer satisfaction KPIs Metrics Reports
© Facility Engineering Associates 2012 Measure Outcomes A performance metric is a measure of an organization's activities and performance. DM vs PM PM Completion Rates Customer Satisfaction Work Order Completion Times Unscheduled Downtime Workforce Productivity
© Facility Engineering Associates 2012 Metrics Examples Metric DescriptionStd.Metric DescriptionStd. Facility Condition Index (FCI)<0.05Stockroom Turns / Year2 – 3 Deferred Maintenance BacklogTrendAnnual Training Hours>40 hrs. On-the-job Wrench Time>60%Maint. Cost / Replacement Cost3 - 4% PM / CM Ratio70 / 30Percent Return Work<5% Unscheduled Maintenance Downtime<2%Mean Time Between FailuresTrend PM Schedule Compliance>95% Failures Assessed: Root Cause>75% CM Schedule Compliance>90%Maintenance OT Percentage5-15% Unscheduled Man-Hours<10% WO Covered by Estimates>90% WO Turn-Around TimeTrendOn-Site Supervisor Time>65% Emergency Response Time<15 min. 2 Stockroom On-Time Delivery>97% Stockroom Service Level>97%Material / Part Performance>98%
© Facility Engineering Associates 2012 Dashboard Reports
© Facility Engineering Associates 2012 Contract Musts Fixed Fee Competitively Bid Best Value Award Partnering
© Facility Engineering Associates 2012 ADMINISTERING PERFORMANCE BASED CONTRACTS
© Facility Engineering Associates 2012 Contract Administration Definition: any action from the time a contract is awarded until its closeout. It is the process of ensuring that the intent, requirements, and terms and conditions of the contract are met.
© Facility Engineering Associates 2012 Purpose for Contract Administration Assess Performance Compliance Document Outcomes Ensure Continuing Relevance
© Facility Engineering Associates 2012 Is there a difference between QC and QA? Is the contractor responsible for both? Answer to both questions: YES QC: Input vs. QA: Output Quality Control (QC) versus Quality Assurance (QA)
© Facility Engineering Associates 2012 Quality Control: the measures put in place by the contractor to control the quality of the input like training, proper procedures, utilizing quality materials & tools; etc Quality Control (QC) Quality Control Plan: A self-inspection plan that describes the internal staffing and procedures that the will meet the quality, quantity, timeliness, responsiveness, customer satisfaction, and other service delivery requirements in the statement of work.
© Facility Engineering Associates 2012 Quality Assurance is the evaluation of the quality of the output; this includes inspections, data monitoring, customer surveys, metrics, status reports, etc. The contractor must establish a QA plan, tell you what that plan is and follow it. Quality Assurance (QA) Why QA? So any discrepancies in the quality or timeliness of the work can be quickly addressed and resolved.
© Facility Engineering Associates 2012 QA/QC Goal The Contractor establishes procedures and processes that will produce quality outcomes. The Contractor establishes procedures and processes to check the quality of the outcomes. The Contractor establishes procedures and processes to fix poor quality.
© Facility Engineering Associates 2012 Owners Responsibility: Monitoring What are you monitoring? 1.The contractors processes 2.The contractors procedures 3.KPIs and/or metrics What are you looking for? 1.Adherence to their plan 2.Success of their QA/QC.
© Facility Engineering Associates 2012 Why Monitor? Ensures contract terms are met Provides early problem detection Helps prevent or reduce fraud Helps avoid conflicts when misunderstandings or unexpected requirements arise Encourages regular communication Reinforces partnership
© Facility Engineering Associates 2012 What is Monitoring? Reviewing metrics together. Spot checking for accuracy of the metrics. Reviewing their inspection reports. Talking to your customers. Spot checking completed tasks. The monitoring process is unique for every contract. The question is what will it take for you to know (have a warm & fuzzy) that you are getting what you are paying for.
© Facility Engineering Associates 2012 Partnering Partnering is critical in PBC. Partnering should not mean eliminating the control mechanisms that are necessary in order to have a strong claims avoidance strategy. Must identify the partnering expectations. The quest for trust, respect and co-operation replacing traditional confrontation, the delicate balance required to accommodate flexibility, performance incentives and opportunities for innovation.
© Facility Engineering Associates 2012 Partnering
© Facility Engineering Associates 2012 BEYOND SERVICE CONTRACTS Road Management & Maintenance Contracts
© Facility Engineering Associates 2012 The traditional way of contracting out road maintenance is based on the amount of work being measured. PB road contracts define minimum conditions of road and assets. Payments are based on how well the contractor manages to comply with the performance standards defined in the contract, and not on the amount of works and services executed. Performance-Based Road Contracts
© Facility Engineering Associates 2012 BEYOND SERVICE CONTRACTS Energy Saving Performance Contracts
© Facility Engineering Associates 2012 Based on energy cost savings - outcome Widely used for public-sector energy retrofit projects Typically involves 3 parties: Owner, Energy Services Company (ESCO) and Lender Typically, annual savings are guaranteed by ESCO to cover all costs during term of the loan Typical project term of years Energy Saving Performance Contracting
© Facility Engineering Associates 2012 PBC is on the rise. PBC requires a paradigm shift. PBC decreases costs and increases quality. PBC is not just for service contracts anymore. Summary
© Facility Engineering Associates 2012 Contact Information Mark your calendars for… FEA-U Info: Mayra Portalatin, SFP, LEED AP O+M Todays Presenter: Kathy Powers, PE, CFM Thank you! Access demo at: Click FM Diagnostics icon Next FEA-U Sessions August 21: Fall Protection September 18: Data Centers
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