Presentation on theme: "U.S. General Services Administration"— Presentation transcript:
1U.S. General Services Administration Performance Based Acquisition Chris Hamm Operations Director (acting) GSA FEDSIM
2Topics Introductions PBSA History FAR References PBSA Goals PerspectivesSeven StepsTraining
3History 1991 – OFPP Policy Letter 91-2 (Administrator Allan Burman) 1993 – GPRA1994 – FASA and OFPP Pilot Project for PBSC1997 – Changed the FAR to incorporate OFPP Policy Letter 91-2 and rescinded the policy letter in 20002001 – Public Law , Section 821 – Added to the FAR a PBC preference and order precedence2004 – SARA PBC change (Section 1431 and Section 1433)Treat certain performance-based orders and contracts as commercial items if certain conditions are metreport on these contracts and orders in FPDS2004 published an interim rule under FAR Case2005 published final SARA PBA changes*PBA formerly Performance-Based Contracting (PBC).
4PBA FAR ReferencesFAR Statement of Guiding Principles – highlights PM roleFAR Part DefinitionFAR Part Acquisition PlanningFAR Part Market ResearchFAR Part Describing Agency RequirementsFAR Part 16 - Types of ContractsFAR Part 37 - Service Contracting – recognizes use of SOO when PWS is not suitableFAR Part 46 - Quality Assurance Requirements
5Actual PBA Goal (Average Government-wide PBA Goal achieved) PBA GoalsFiscal YearsTarget Achievement Goals (eligible service contract dollars over $25,000 should be performance-based)Actual PBA Goal (Average Government-wide PBA Goal achieved)200110%26%200220%34%200330%35%200440%41%200551%200640%+49%200745+45%+ approx200850%TBE
6Performance Based Services Acquisition FY08 – 50% of all eligible services acquisitions should be PBSAFAR Subpart 37.6(b) Performance-based contracts for services shall include—(1) A performance work statement (PWS);(2) Measurable performance standards (i.e., in terms of quality, timeliness, quantity, etc.) and the method of assessing contractor performance against performance standards; and(3) Performance incentives where appropriate. When used, the performance incentives shall correspond to the performance standards set forth in the contract (see ).
7Should Everything be Performance Based? PBA should be used to the maximum extent practicable on eligible service contracts. Agencies are not required to use PBA on: A&E, construction, utility services, services incidental to supplies, R&D, professional medical services, tuition, registration, and membership fees.
8Government’s Perspective Compliance – We have to do itFunding – Less $ to do more workCost – Best Value for the taxpayerPerformance – Use of commercial best practicesSchedule – Congressional & Executive mandated datesPersonnel – More work, fewer 1102s1991 – GSA had 33,000 Acquisition Professionals, buying $150B2008 – GSA had 28,700 Acquisition Professionals, buying $560B17% decrease is in staffing, 400% increase in volume.PBA is hard, especially when we are overwhelmed with work and are starting with the old SOW
9Contractor’s Perspective Profitability – Companies are in business to make money first.Project Success – Delivering success typically results in more follow-on businessCash Flow – Regular payments and meeting corporate profitability is essential for publicly traded companies. Missing deliveries and failing metrics/SLAs results may lead to lower stock prices and replacement of personnelPersonal Services – Use of PBA reduces the ability for the Government to dictate the solution
10PBA Contract Type Order of Precedence ResearchDevelopmentProduction / SustainmentCPFFCPFF / CPAFCPIF/CPAFFPAF/FPIF/ FFPFPIF /FFPEnhancementsOperations & MaintenanceR&DDevelopment/ ProductionHigher risk, less-definedrequirementsLower Risk, well-defined requirementsGovernment assumesContractor assumesmore cost riskmore cost riskGreater Performance Risk = Government Assumes More Cost Risk
11Why Use Performance Based? Achieve innovative solutions from industryMaximizes CompetitionIncreases customer satisfaction because results are improvedShifts the risk to the contractorImproves the Contractor’s PerformanceEncourages frequent communication between the COR and the contractorRequires good contract management to ensure results are achievedAfter award, it’s “we” and “us!”
13Establish the TeamCreate an Integrated Project Team! The IPT should have your technical expert, stakeholders, financial person, and acquisition. Be sure to include contracting so that you start off on the right strategy and discuss the requirement.Research the requirement to understand the market and research the market to understand alternatives and contract vehicles to meet your needs.13
14Describe the Problem that Needs Solving Create an Integrated Project Team! The IPT should have your technical expert, stakeholders, financial person, and acquisition. Be sure to include contracting so that you start off on the right strategy and discuss the requirement.Interview all internal and external parties to determine the needs, desired outcome, potential solutions, obstacles. Get Buy IN!Take notes during the meeting, send them out to everybody. Documentation takes time, but eliminates complaints and issues that may arise.14
15Identify the elements of a good requirements document At a minimum, include this information:Background to include the current state or level of performanceScopeNeed or problem to solveOutcomesPerformance measuresMonitoring methods for the requirementLimitations or ConstraintsConsider aStatement ofObjectives!15
16Requirements Documents Writing is hard! Very few people in most organizations have the skill and interest to write good requirements. Find these people, praise them, and promote them so they can never leave.Use Templates! Most of the information about your organization remains constant. Have a standard SOW / PWS document template that somebody has ownership and keeps up to date.If you don’t have one, send me an at and I’ll send you one of ours16
17Common Mistakes Let’s start with the old statement of work” “We really like Vendor X and can’t get along without them, so let’s just wait until it is too late and sole source it to them”“We are unique”“Contractor shall do X upon direction of the Government”
18Conduct Market Research ContractualResearch existing contract vehicles to see if they can be used to meet your needsThere are tons of GWACs, MACs, and GSA Schedules out there. Generally, if you look hard enough or ask enough people, you can find somebody else has already done all of the work for you.Document market research in Acquisition PlanTechnicalResearch to find out possible solutions and involve your team members in market researchResearch the public-sector to see what has worked for your counter-parts in other agenciesResearch your industry before structuring the acquisitionMeet with industry one-on-one to learn about your industry. This is best performed before the actual solicitation18
19Developing the PWS Conduct an analysis Apply the “so-what?” test Capture the results of the analysis in a matrixWrite the PWSLet the contractor solve the problem19
21Using a Statement of Objectives ( SOO) Begin with the acquisition’s “elevator message”Describe the scopeWrite the performance objectivesIdentify constraintsDevelop the backgroundMake the final checks and balances.A SOO can be shockingly short21
22Due Diligence / Industry Days What if you don’t know what you want?Industry Day: This is our current environment and requirement, we give a presentation to interested vendors.Due Diligence: The Government releases a draft description of the requirement and opens up the doors to interested parties, helping each side clarify the requirementIndustry Day is good, Due Diligence is better. Both will increase the quality of your RFP and the contractor proposal.22
23Decide how to measure and manage performance People get really wrapped up in performance measures and SLAs, but this can be made simple if you want it to be.Think about the outcomes rather than the processes or org chartsUse the systems that you have in placeOnly measure things that are meaningful, not things because you canBad Example: Cost Savings over IGCE23
24Good Contract Types for Measuring “Incentive” types (CPIF / FPIP)Firm Fixed Price (FFP) and Fixed Unit Price (FUP)Award Fee (CPAF / FPAP)Note: Time & Materials can have metrics, but cannot have SLAs with financial incentivesGSA FEDSIM typical PBA project with SLAs is award/incentive fee, with a few managed services that are Fixed Unit Price24
25SLA Process (Pre-Award) Draft Award Fee Plan and SLA Format Evaluation Decision:Option 1: Specify SLAs & have all vendors bid the sameOption 2: Let vendors chose SLAs & targetsReview requirements before release and see if tasks are sufficiently defined to create notional SLAs to include as recommendationsRemember that the Government’s strongest negotiation position is pre-awardAward/ Incentive Fee Plans are unilateral before the period begins, bi-lateral during the period (if the CO allows any changes at all)25Option # 2 is harder to evaluate but better post award: Better measures, more leverage after award.
26SLA Process (immediate Post-Award) Ensure Contract Award includes any contractor proposed metric and/or changes from NegotiationSet the percentage of award fee pool that is metric based- General range from 20% to 50%. Try to increase over timeSet up separate meeting from Kickoff Meeting with key stakeholders to review metrics.- Ensure that all stakeholders agree to the metrics- Set the “weight” of each metric- Make sure the metric is entirely within the control of the contractor (no mixed responsibility)- Add further definition of the metric and all exclusions26
27Select the right contractor – Source Selection Process Preparation and Planning PhaseInitial Evaluation PhaseAward Without DiscussionsCompetitive Range DeterminationDiscussions PhaseFinal Evaluations PhaseRecommends oral presentations!Decision Phase27
28Understanding the Source Selection Process Evaluate Risk and Associate Surveillance and Incentives to the RiskWe can’t monitor everythingRequire and evaluate Contractors Quality Control Plan. Put it on contractAdjust the Government surveillance to the weaknesses and high risk areasUse award fees and incentive fees to ensure contractor attention28
29Manage PerformanceConduct a post-award kick-off meeting with the ENTIRE teamEnsure all parties including the Program Manager understands contract administration roles and responsibilitiesEnsure a COR/COTR is assigned to the contractConduct performance assessments and performance evaluations as planned and requiredManage the contract to obtain results!29
30Metrics & SLA Measurement Recommend use of Contractor owned automated toolsIf not owned by the contractor and proposed at time of award, be prepared to pay for the toolSome agencies have their own tools. Make sure that you can extend the license to contractorsUse an IV&V contractor to sample the data from the contractorSend the monthly results of the SLAs to stakeholders so there are no surprises when it comes time to pay the contractorIn general, contractors prefer SLAs because they have control over their own destiny in terms of meeting their SLAs and can obtain a very high fee amount relative to subject evaluations30
31Free TrainingThe FAI offers a FREE three-day workshop on PBA designed as a just-in-time solution for acquisition teams from various agencies.The participants are encouraged to bring their current PBA documents and are given a chance to refine these documents in the training class.The FREE training is offered at various locations around the country and is generally available through the Acquisition Workforce Training Fund. Students should register online atQuestions about this training should be directed to FAI student services at
32More Free Training - DAU Resources The DAU offers a four and a half day classroom course entitled “Mission Focused Service Acquisitions,” course number ACQ265, and two online learning modules: 1) Performance-Based Services Acquisitions, CLC 013; and 2) Work Breakdown Structure, CLM 013.Acquisition Center of Excellence for Services Community of Practice, available at https://acc.dau.mil/ace.
33Even More Free Training: DAU Online On-Line, Free, 24/7, Self-Paced, Continuous Learning Modules:CLC 106 COR with a Mission FocusCLC 013 Performance Based Services AcquisitionCLM 013 Work Breakdown StructureCLE 003 Technical ReviewsCLC 004 Market ResearchCLM 012 SchedulingCLC 007 Contract Source SelectionPlus many more…..COR Community of Practice: https://acc.dau.corConnects you with training, policy, samples, community forum33
36Firm Fixed PriceThe basic type of fixed-price contract is the firm-fixed-price (FFP). Such a contract provides for a price that is not subject to any adjustment due to the cost experience of the contractor during the performance of the contract. Use of such a contract places maximum risk on the contractor and provides the maximum profit incentive for effective cost control and contract performance. Since the contractor has assumed all the risk, there is a minimum of administrative burden placed on the Government. An FFP contract is suitable when reasonably definite specifications are available, and fair and reasonable prices can be established from the outset by means of adequate competition, prior purchasing history, or reasonably accurate identification of uncertainties and their probable costs.Generally considered the best contract type & the most performance based.
37Fixed Price Incentive Fee A fixed-price incentive contract is a fixed-price contract that provides for adjusting profit and establishing the final contract price by a formula based on the relationship of final negotiated total cost to total target cost.A variation of FPIF can be performed by measuring cost at the unit level (e.g., number of widgets)Most of the risk is on the contractor, with an separate pool of fee determined by objective criteria
38Fixed Price Award FeeThe award fee is an incentive structure that provides the government a method of subjective, after the fact evaluation of contractor performance and affords the Government additional flexibility to reward a contractor for above average performance. Additionally, the award fee is not subject to the disputes clause of a Government contract.Most of the risk is on the contractor, with an separate pool of fee determined by a combination of subjective & objective criteria (e.g., 60% SLAs, 40% Qualitative)
39Cost Plus Incentive Fee Description: A cost-reimbursement contract that provides for the initially negotiated fee to be adjusted later by a formula based on the relationship of total allowable costs to total target costs. This contract type specifies a target cost, a target fee, minimum and maximum fees, and a fee adjustment formula. (FAR )Application: Under a CPIF contract, you and the contracting officer agree on a target cost, a target fee, and an incentive formula for determining the final fee. The formula provides for an adjustment in the fee, based on any difference between the target cost and the total allowable cost of performing the contract. Unlike the fixed-price incentive contract, however, the contract will provide both a minimum and maximum limit on the fee adjustment.Limitations: This contract type is appropriate when a cost-reimbursement contract is permissible and a target cost and a fee adjustment formula likely to motivate effective contract performance can be negotiated. There is no statutory limit (e.g. CPFF – 10%)The Government bears more risk than FFP contract types, but the post award contract administration is governed by objective criteria (e.g., Completion of a project by X date)
40Cost Plus Award FeeA cost-plus-award-fee contract is a cost-reimbursement contract that provides for a fee consisting of, (1) a base amount fixed at inception of the contract and, (2) an award amount that the contractor may earn in whole or in part during performance and that is sufficient to provide motivation for excellence in such areas as quality, timeliness, technical ingenuity, and cost-effective management. The amount of the award fee to be paid is determined by the Government’s judgmental evaluation of the contractor’s performance in terms of the criteria stated in the contract. This determination is made unilaterally by the Government and is not subject to the Disputes clause.The risk shared by the Government and the contractor, with an separate pool of fee determined by a combination of subjective & objective criteria (e.g., 60% SLAs, 40% Qualitative). Significant contract administrative requirements.
41Bad Contract Types for PBSA Time & Materials / Labor HourCannot really be made performance based, no matter how hard you try.Cost Plus a Percentage of CostProhibited. Wrong motivation for the contractor in incur more cost
42Other TypesAward TermSuccessful performance grants the contractor a longer period of performanceGood motivation, but this approach can run into FAR / Agency acquisition regulations limiting the PoP. Less meaningful that profit.