Chapter 1

Orientation to Performance-Based Acquisition

What’s It All About?

Performance-Based Acquisition

PBA Concept

“Never tell people howhow to do things. Tell them whatwhat 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 strategyNot a contract typeStrategy applied to the contract type of your choice

Outcome-oriented “What” not “How”

Good business senseRequires the contractor to manage performancePromotes 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 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 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 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

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

How can Policy become Reality?

Start with the terminologyMission Results/OutcomesIntegrated Process TeamsWork Breakdown StructuresPerformance MetricsQuality AssuranceAcceptable Quality LevelPerformance StandardsIncentives

Focus on Mission Results in Performance-Based Acquisition

Team Participants involved in the acquisition Must function as a single, integrated and mission focused unit

Mission Knowledge Stable or Changing, Funding Criticality

Market Knowledge Best practices, leverage, competition, trends

Process Knowledge Roles and Responsibilities, planning-execution-assessment-effectiveness

Performance Knowledge Ability to align Mission outcomes with performance requirements

Mission Results = T (M2 + P2)

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) Establishthe 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 PWSConduct an analysis

Apply the “so what?” test

Capture the results of the analysis in a matrixWrite the performance work statement Let the contractor solve the problem

including the labor mix

OR

Step 4 (cont’d)

Develop SOOExplain how the acquisition relates to the

agency’s mission needDescribe the scopeWrite the performance objectives into the SOOMake sure the Government and the Contractor

share objectivesIdentify the constraintsDevelop the backgroundMake 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 contractorCompete the solution

Let the contractors solve the problemUse downselection and “due diligence”Use oral presentations and other opportunities to

communicateEmphasize past performance in evaluationUse best-value evaluation and source selectionAssess solutions for issues of conflict of interest

Step 7

Manage PerformanceKeep the team togetherAdjust roles and responsibilitiesAssign accountability for managing contract

performanceInclude the contractor in a post-award meetingRegularly review performance Ask the right questionsReport on the contractor’s “past performance”

PBA Elements

This is a concurrent, iterative process

Identify Desired OutcomesData Assembly

Requirements Analysis

Performance AnalysisStandardAcceptable Quality Level

Measurement MethodologySurveillance Schedule

Surveillance Analysis

Incentive AnalysisPositiveNegative

Performance Requirements Summary

Outcome Performance Standard

AQL Measurement 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”