Chapter 1 Orientation to Performance-Based Acquisition

What’s It All About? Performance-Based Acquisition

PBA Concept how what “Never tell people how to do things. Tell them what to do and they will surprise you with their ingenuity.” George S. Patton

Performance-Based Acquisition…  Structures all aspects of an acquisition around the results to be achieved  Describes contract requirements in clear, objective terms  Contains measurable outcomes -FAR 2.101

What is Performance-Based Acquisition?  An acquisition strategy  Not a contract type  Strategy applied to the contract type of your choice  Outcome-oriented  “What” not “How”  Good business sense  Requires the contractor to manage performance  Promotes innovation and creativity

Best practices, leverage, competition, trends Marriott’s need for efficient room cleaning led to the development of the back-pack vacuum cleaner rather than the common vacuum cleaners that roll on the ground!

Performance-Based Acquisition  Recognizes contractor’s ability to manage work and perform efficiently  Links contractor payment to contractor performance through measurable performance standards

How did we get here?  Federal budget changes  DoD service acquisition increased 106% $62B (1993) → $127.4 B (2004)  Predicted Federal workforce changes  Personnel eligible for full retirement climbs from 32% (2010) to 54% (2015)  Existing problems with Government service acquisition

In the beginning… The concept of Performance-Based Acquisition isn’t new…

PBA has been around for a while Contract for Production of a Coat of Mail : “ One coat of mail, insignum of power which will protect, is to be made by the woman Mupagalgagitum, daughter of Qarikhiya, for Shamash-iddin, son of Rimut. She will deliver in the month of Shebat one coat of mail, which is to be made and which will protect.” Taken from clay tablet dated in the thirty-fourth year Darius I (488 B.C.)

Then came Policy… – OFPP Pamphlet (guide) 1980 – OFPP Policy Letter 91-2 – Government Performance Results Act 1993 – Federal Acquisition Streamlining Act and National Performance Review of 1994 – OFPP Pilot Project for PBSC 1994 – OFPP Guide for Best Practices for Past Performance 1995 – FAR Case , Final Rule 1995 – Federal Acquisition Reform Act (Clinger-Cohen) 1996 – OFPP A Guide to Best Practices for Performance-Based Service Contracting 1998 – Guidebook for PBSA in the DoD 2000 – USD AT&L (Gansler) Memo 2000 – Seven Steps to Performance-Based Services Acquisition 2001 – Defense Authorization Act 2001 – User’s Guide to Performance-Based Payments 2001 – USD AT&L (Aldridge) Memo 2002 – USD AT&L (Wynne) Memo 2003 – Dir, DPAP (Lee) Memo 2004 – OMB (Burton) Memo 2004 – Dir, DPAP (Cipicchio) Memo 2006 – OMB Memo (Burton) 2006 – Dir, DPAP (Assad) Memo 2006 – USD AT&L (Krieg) Memo 2006 – Dir, DPAP (Assad’s 5 Points) 2006

Current Government PBA Policy FAR (a) states that PBA: Is the preferred method for acquiring services Must be used to “maximum extent practicable” except for: Architect-engineer services, Construction, Utility services, and services incidental to supply purchases

DoD’s latest perspective on Performance-Based Acquisition  Continue goal of 50% of eligible service actions exceeding $25,000 with concentration on the quality of execution  Focus on:  Clear, performance-based requirements  Identifiable and measurable cost, schedule and performance outcomes  Properly planned and administered outcomes consistent with customer’s need(s)  Business arrangements in the best interest of DoD and in compliance with statues, regs, policies, etc.  Strategic, enterprise-wide approaches applied to planning and execution of the acquisition  PBA training

Student Exercise Performance-Based Acquisition

How can Policy become Reality? Start with the terminology  Mission Results/Outcomes  Integrated Process Teams  Work Breakdown Structures  Performance Metrics  Quality Assurance  Acceptable Quality Level  Performance Standards  Incentives

Focus on Mission Results in Performance-Based Acquisition  Team  Participants involved in the acquisition  Must function as a single, integrated and mission focused unit  M ission Knowledge  Stable or Changing, Funding Criticality  M arket Knowledge  Best practices, leverage, competition, trends  P rocess Knowledge  Roles and Responsibilities, planning-execution-assessment- effectiveness  P erformance Knowledge  Ability to align Mission outcomes with performance requirements Mission Results = T (M 2 + P 2 )

7 Step Process to PBA 1.Establish an Integrated Solutions Team 2.Describe the Problem that Needs Solving 3.Examine Private-Sector and Public Sector Solutions 4.Develop PWS or SOO 5.Decide How to Measure and Manage Performance 6.Select the Right Contractor 7.Manage Performance

(2) Decide what problem needs solving (3) Examine private-sector and public-sector solutions (1) Establish the Team (4) Develop PWS or SOO (5) Decide how to Measure & Manage Performance (6) Select the right Contractor (7) Manage Performance 7 Step Process to PBA

Step 1 Establish an Integrated Solutions Team  Ensure senior management involvement and support  Tap multi-disciplinary experts  Define roles and responsibilities  Develop rules of conduct  Empower team members  Identify stakeholders and nurture consensus  Develop and maintain the project knowledge base  Incentivize the team – link program mission and team members’ performance

Step 2 Describe the problem that needs solving  Link acquisition to mission and performance objectives  Define (at a high level) desired results  Decide what constitutes success  Determine the current level of performance

Step 3 Examine private-sector and public-sector solutions  Take a team approach to market research  Spend time learning from public-sector counterparts  Talk to private-sector companies before structuring the acquisition  Consider one-on-one meetings with industry

Step 4 Develop PWS  Conduct an analysis Apply the “so what?” test  Capture the results of the analysis in a matrix  Write the performance work statement  Let the contractor solve the problem including the labor mix OR

Step 4 (cont’d) Develop SOO  Explain how the acquisition relates to the agency’s mission need  Describe the scope  Write the performance objectives into the SOO  Make sure the Government and the Contractor share objectives  Identify the constraints  Develop the background  Make the final checks and maintain perspective

Step 5 Decide how to measure and manage performance  Review the success determinants Where do I want to go and how do I know I’m there?  Rely on commercial quality standards  Have contractor propose metrics and quality assurance plan  Select only a few meaningful measures to judge success And…

Step 5 (cont’d)  Include contractual language for negotiated changes to metrics and measures  Apply contract type order of precedence  Use incentive-type contracts  Consider other incentive tools  Recognize the power of profit as a motivator  Consider the relationship  Create and maintain mutual benefit and value

Step 6 Select the right contractor  Compete the solution  Let the contractors solve the problem  Use downselection and “due diligence”  Use oral presentations and other opportunities to communicate  Emphasize past performance in evaluation  Use best-value evaluation and source selection  Assess solutions for issues of conflict of interest

Step 7 Manage Performance  Keep the team together  Adjust roles and responsibilities  Assign accountability for managing contract performance  Include the contractor in a post-award meeting  Regularly review performance  Ask the right questions  Report on the contractor’s “past performance”

Focus on Mission Results in Performance-Based Acquisition  Team  Participants involved in the acquisition  Must function as a single, integrated and mission focused unit  M ission Knowledge  Stable or Changing, Funding Criticality  M arket Knowledge  Best practices, leverage, competition, trends  P rocess Knowledge  Roles and Responsibilities, planning-execution-assessment- effectiveness  P erformance Knowledge  Ability to align Mission outcomes with performance requirements Mission Results = T (M 2 + P 2 )

PBA Elements This is a concurrent, iterative process Identify Desired Outcomes Data Assembly  Requirements Analysis  Performance Analysis Standard Acceptable Quality Level Measurement Methodology Surveillance Schedule  Surveillance Analysis  Incentive Analysis Positive Negative

Performance Requirements Summary OutcomePerformance Standard AQLMeasurement Method Incentive

What keeps you up at night? Mission Success depends on Mission Knowledge – Are the stakeholders actively involved? – Have all risks been addressed? – Is there stability in the mission? – Is there flexibility in the plan? The elements of the PRS are tools used to ensure that the stakeholder needs are identified and met

PBA Bottom Line “In this business, I do not buy a service, I buy a…. - Miami Vice Dec 2006 RESULT”