Chapter 1 Orientation to Performance Based Acquisition PerformanceBased

Chapter 1 Orientation to Performance. Based Acquisition

Performance-Based Acquisition What’s It All About?

PBA Concept “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… ØStructures all aspects of an acquisition around the results to be achieved ØDescribes contract requirements in clear, objective terms ØContains measurable outcomes -FAR 2. 101

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

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 ØRecognizes contractor’s ability to manage work and perform efficiently ØLinks contractor payment to contractor performance through measurable performance standards

How did we get here? ØFederal budget changes § Do. D service acquisition increased 106% • $62 B (1993) → $127. 4 B (2004) ØPredicted Federal workforce changes § Personnel eligible for full retirement climbs from 32% (2010) to 54% (2015) ØExisting 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

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 95 -311, 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 Do. D 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 37. 102(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

Do. D’s latest perspective on Performance-Based Acquisition Ø Continue goal of 50% of eligible service actions exceeding $25, 000 with concentration on the quality of execution Ø 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 Do. D and in compliance with statues, regs, policies, etc. § Strategic, enterprise-wide approaches applied to planning and execution of the acquisition § PBA training

How can Policy become Reality? Start with the terminology ØMission Results/Outcomes ØIntegrated Process Teams ØWork Breakdown Structures ØPerformance Metrics ØQuality Assurance ØAcceptable Quality Level ØPerformance Standards ØIncentives

Focus on Mission Results in Performance-Based Acquisition Mission Results = T (M 2 + P 2) ØTeam § Participants involved in the acquisition § Must function as a single, integrated and mission focused unit ØMission Knowledge § Stable or Changing, Funding Criticality ØMarket Knowledge § Best practices, leverage, competition, trends ØProcess Knowledge § Roles and Responsibilities, planning-executionassessment-effectiveness ØPerformance Knowledge § Ability to align Mission outcomes with performance

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

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

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

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

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

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

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

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

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

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

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

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

Performance Requirements Summary Outcome Performan ce Standard AQL Measureme Incentiv nt Method e

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…. RESULT” - Miami Vice Dec 2006