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Federal Acquisition Service U.S. General Services Administration Performance Based Acquisition Chris Hamm Operations Director (acting) GSA FEDSIM.

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Presentation on theme: "Federal Acquisition Service U.S. General Services Administration Performance Based Acquisition Chris Hamm Operations Director (acting) GSA FEDSIM."— Presentation transcript:

1 Federal Acquisition Service U.S. General Services Administration Performance Based Acquisition Chris Hamm Operations Director (acting) GSA FEDSIM

2 Seven Steps to Performance Based Services Acquisition 2 Topics  Introductions  PBSA History  FAR References  PBSA Goals  Perspectives  Seven Steps  Training

3 Seven Steps to Performance Based Services Acquisition 3 History  1991 – OFPP Policy Letter 91-2 (Administrator Allan Burman)  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GPRA  1994 – FASA and OFPP Pilot Project for PBSC  1997 – Changed the FAR to incorporate OFPP Policy Letter 91-2 and rescinded the policy letter in 2000  2001 – Public Law , Section 821 – Added to the FAR a PBC preference and order precedence  2004 – SARA PBC change (Section 1431 and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 –2005 published final SARA PBA changes *PBA formerly Performance-Based Contracting (PBC).

4 Seven Steps to Performance Based Services Acquisition 4 PBA FAR References  FAR Statement of Guiding Principles – highlights PM role  FAR Part 2 - Definition  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 Requirements

5 Seven Steps to Performance Based Services Acquisition 5 PBA Goals Fiscal YearsTarget Achievement Goals (eligible service contract dollars over $25,000 should be performance-based) Actual PBA Goal (Average Government-wide PBA Goal achieved) %26% %34% %35% %41% %51% %+49% %+ approx %TBE

6 Seven Steps to Performance Based Services Acquisition 6 Performance Based Services Acquisition FY08 – 50% of all eligible services acquisitions should be PBSA FAR 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 )

7 Seven Steps to Performance Based Services Acquisition 7 Should 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.

8 Seven Steps to Performance Based Services Acquisition 8 Government’s Perspective 1.Compliance – We have to do it 2.Funding – Less $ to do more work 3.Cost – Best Value for the taxpayer 4.Performance – Use of commercial best practices 5.Schedule – Congressional & Executive mandated dates 6.Personnel – More work, fewer 1102s 1991 – GSA had 33,000 Acquisition Professionals, buying $150B 2008 – GSA had 28,700 Acquisition Professionals, buying $560B 17% 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

9 Seven Steps to Performance Based Services Acquisition 9 Contractor’s Perspective  Profitability – Companies are in business to make money first.  Project Success – Delivering success typically results in more follow-on business  Cash 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 personnel  Personal Services – Use of PBA reduces the ability for the Government to dictate the solution

10 Seven Steps to Performance Based Services Acquisition 10 PBA Contract Type Order of Precedence ResearchDevelopment Government assumes more cost risk Contractor assumes more cost risk Production / Sustainment Greater Performance Risk = Government Assumes More Cost Risk Higher risk, less-defined requirements CPFFCPFF / CPAFCPIF/CPAF R&DDevelopment FPAF/FPIF/ FFP FPIF /FFP Enhancements / Production Operations & Maintenance Lower Risk, well-defined requirements

11 Seven Steps to Performance Based Services Acquisition 11 1.Achieve innovative solutions from industry 2.Maximizes Competition 3.Increases customer satisfaction because results are improved 4.Shifts the risk to the contractor 5.Improves the Contractor’s Performance 6.Encourages frequent communication between the COR and the contractor 7.Requires good contract management to ensure results are achieved 8.After award, it’s “we” and “us!” Why Use Performance Based?

12 Seven Steps to Performance Based Services Acquisition 12

13 Seven Steps to Performance Based Services Acquisition 13  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.  Research the requirement to understand the market and research the market to understand alternatives and contract vehicles to meet your needs. Establish the Team

14 Seven Steps to Performance Based Services Acquisition 14  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. Describe the Problem that Needs Solving

15 Seven Steps to Performance Based Services Acquisition 15 Identify the elements of a good requirements document  At a minimum, include this information:  Background to include the current state or level of performance  Scope  Need or problem to solve  Outcomes  Performance measures  Monitoring methods for the requirement  Limitations or Constraints Consider a Statement of Objectives!

16 Seven Steps to Performance Based Services Acquisition 16 Requirements 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

17 Seven Steps to Performance Based Services Acquisition 17 Common 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”

18 Seven Steps to Performance Based Services Acquisition 18 Conduct Market Research  Contractual  Research existing contract vehicles to see if they can be used to meet your needs –There 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 Plan  Technical  Research to find out possible solutions and involve your team members in market research  Research the public-sector to see what has worked for your counter-parts in other agencies  Research your industry before structuring the acquisition  Meet with industry one-on-one to learn about your industry. This is best performed before the actual solicitation

19 Seven Steps to Performance Based Services Acquisition 19 Developing the PWS  Conduct an analysis  Apply the “so-what?” test  Capture the results of the analysis in a matrix  Write the PWS  Let the contractor solve the problem

20 Seven Steps to Performance Based Services Acquisition 20 PBA Matrix Template

21 Seven Steps to Performance Based Services Acquisition 21 Using a Statement of Objectives ( SOO)  Begin with the acquisition’s “elevator message”  Describe the scope  Write the performance objectives  Identify constraints  Develop the background  Make the final checks and balances. A SOO can be shockingly short....

22 Seven Steps to Performance Based Services Acquisition 22 Due 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 requirement  Industry Day is good, Due Diligence is better. Both will increase the quality of your RFP and the contractor proposal.

23 Seven Steps to Performance Based Services Acquisition 23 Decide 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 charts  Use the systems that you have in place  Only measure things that are meaningful, not things because you can Bad Example: Cost Savings over IGCE

24 Seven Steps to Performance Based Services Acquisition 24 Good 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 incentives GSA FEDSIM typical PBA project with SLAs is award/incentive fee, with a few managed services that are Fixed Unit Price

25 Seven Steps to Performance Based Services Acquisition 25 SLA Process (Pre-Award)  Draft Award Fee Plan and SLA Format Evaluation Decision: –Option 1: Specify SLAs & have all vendors bid the same –Option 2: Let vendors chose SLAs & targets  Review requirements before release and see if tasks are sufficiently defined to create notional SLAs to include as recommendations  Remember that the Government’s strongest negotiation position is pre-award  Award/ Incentive Fee Plans are unilateral before the period begins, bi-lateral during the period (if the CO allows any changes at all) Option # 2 is harder to evaluate but better post award: Better measures, more leverage after award.

26 Seven Steps to Performance Based Services Acquisition 26 SLA Process (immediate Post-Award)  Ensure Contract Award includes any contractor proposed metric and/or changes from Negotiation  Set the percentage of award fee pool that is metric based  - General range from 20% to 50%. Try to increase over time  Set 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 exclusions

27 Seven Steps to Performance Based Services Acquisition 27 Preparation and Planning Phase Initial Evaluation Phase Award Without Discussions Competitive Range Determination Discussions Phase Final Evaluations Phase Decision Phase Select the right contractor – Source Selection Process Recommends oral presentations!

28 Seven Steps to Performance Based Services Acquisition 28 Understanding the Source Selection Process  Evaluate Risk and Associate Surveillance and Incentives to the Risk  We can’t monitor everything  Require and evaluate Contractors Quality Control Plan. Put it on contract  Adjust the Government surveillance to the weaknesses and high risk areas  Use award fees and incentive fees to ensure contractor attention

29 Seven Steps to Performance Based Services Acquisition 29 Manage Performance  Conduct a post-award kick-off meeting with the ENTIRE team  Ensure all parties including the Program Manager understands contract administration roles and responsibilities  Ensure a COR/COTR is assigned to the contract  Conduct performance assessments and performance evaluations as planned and required  Manage the contract to obtain results!

30 Seven Steps to Performance Based Services Acquisition 30 Metrics & SLA Measurement  Recommend use of Contractor owned automated tools  If not owned by the contractor and proposed at time of award, be prepared to pay for the tool  Some agencies have their own tools. Make sure that you can extend the license to contractors  Use an IV&V contractor to sample the data from the contractor  Send the monthly results of the SLAs to stakeholders so there are no surprises when it comes time to pay the contractor  In 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 evaluations

31 Seven Steps to Performance Based Services Acquisition 31 Free Training  The 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 at  Questions about this training should be directed to FAI student services at

32 Seven Steps to Performance Based Services Acquisition 32 More 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.

33 Seven Steps to Performance Based Services Acquisition 33 Even More Free Training: DAU Online  On-Line, Free, 24/7, Self-Paced, Continuous Learning Modules:  CLC 106 COR with a Mission Focus  CLC 013 Performance Based Services Acquisition  CLM 013 Work Breakdown Structure  CLE 003 Technical Reviews  CLC 004 Market Research  CLM 012 Scheduling  CLC 007 Contract Source Selection  Plus many more…..  COR Community of Practice: https://acc.dau.corhttps://acc.dau.cor  Connects you with training, policy, samples, community forum

34 Seven Steps to Performance Based Services Acquisition 34 Questions

35 Seven Steps to Performance Based Services Acquisition 35 Backup Slides

36 Seven Steps to Performance Based Services Acquisition 36 Firm Fixed Price  The 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.

37 Seven Steps to Performance Based Services Acquisition 37 Fixed 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

38 Seven Steps to Performance Based Services Acquisition 38 Fixed Price Award Fee  The 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)

39 Seven Steps to Performance Based Services Acquisition 39 Cost 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)

40 Seven Steps to Performance Based Services Acquisition 40 Cost Plus Award Fee  A 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.

41 Seven Steps to Performance Based Services Acquisition 41 Bad Contract Types for PBSA  Time & Materials / Labor Hour  Cannot really be made performance based, no matter how hard you try.  Cost Plus a Percentage of Cost  Prohibited. Wrong motivation for the contractor in incur more cost

42 Seven Steps to Performance Based Services Acquisition 42 Other Types  Award Term  Successful performance grants the contractor a longer period of performance  Good motivation, but this approach can run into FAR / Agency acquisition regulations limiting the PoP. Less meaningful that profit.


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