NCMA Norfolk Chapter – 23 January 2008

Performance-Based Acquisition Overview

Jeff Brunner, U.S. Joint Forces Command

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

Why the Focus on Service Acquisition

Other $43.30

Maintenance, Repair, &

Rebuilding of Equipment

$11.61

Construction of Structures &

Facilities $11.80

Professional, Admin, & Mgmt

Support $28.44

RDT&E $37.10

ADP & Telecomm

Svcs $10.37

FY 05 Over Half DOD Contract Dollars DOD Total: $ 269.20 Billion

DOD Services: $141.62 Billion

Performance-Based Acquisition…

Goals of PBALink Mission performance results with measurable

acquisition performance resultsDescription in FAR 2.101

Structures all aspects of an acquisition around the results to be achieved

Describes contract requirements in clear, objective terms

Contains measurable outcomesObjectives measuresSubjective measures

What is Performance-Based Acquisition?

An acquisition strategyNot a contract typeStrategy applicable to most contract types

Results-oriented “What” not “How”

Good business senseRequires the contractor to manage performancePromotes innovation and creativityDrives accountability for results

Performance Based Examples

Examples of Performance Based Strategies

• Exxon Mobile• Marriott• Aircraft Engine Performance• Space Launch• Aircraft Tires• Performance Based Logistics

Performance-Based Acquisition

Recognizes contractor’s ability to manage work, and perform efficiently

Encourages innovation and performance improvement thru effective incentives

Links contractor payment to contractor performance through measurable performance standards

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) Basic Tenets 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

Focus on: Clear, performance-based requirements Identifiable and measurable cost, schedule and performance

outcomes Properly planned and administered outcomes consistent with

customer’s mission 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

ProfileCommodity

Conduct Supply Market

Analysis

Develop Commodity

Strategy

Issue RFx & Negotiate

Implement & Manage

Performance

1 2 3 4 5

1. Baseline Analysis• Overview of Commodity (definition, usage,

stakeholders, mission criticality, etc.)• Spend Summary Existing Sourcing Strategy and

Initiatives• Existing Contracts Analysis• Existing Sourcing Strategy & Initiatives• Business Process and Policy• Total Cost of Ownership

2. Commodity Requirements• Customer Needs Analysis/Requirements • Socio-Economic Requirements• Regulatory and Process Related Requirements• Estimated Volume Requirements

3. Market Analysis Findings and Opportunities • Market overview (segments, size)• Key trends • Small Business Capabilities• Comparison of market capabilities to requirements• Potential Sourcing Levers

1. Baseline Analysis• Overview of Commodity (definition, usage,

stakeholders, mission criticality, etc.)• Spend Summary Existing Sourcing Strategy and

Initiatives• Existing Contracts Analysis• Existing Sourcing Strategy & Initiatives• Business Process and Policy• Total Cost of Ownership

2. Commodity Requirements• Customer Needs Analysis/Requirements • Socio-Economic Requirements• Regulatory and Process Related Requirements• Estimated Volume Requirements

3. Market Analysis Findings and Opportunities • Market overview (segments, size)• Key trends • Small Business Capabilities• Comparison of market capabilities to requirements• Potential Sourcing Levers

SUMMARY OF ANALYSES PERFORMEDSUMMARY OF ANALYSES PERFORMED

1. Commodity Goals and Objectives (Includes scope, usage, mission criticality)

2. Business Need/Case for Change• Requirements• “As Is” Environment (sourcing strategy, process,

technology)• “To Be” Environment (sourcing strategy, process,

technology)• Benefits

3. Commodity Sourcing Strategy (strategy and tactics)

4. Business Case

5. Acquisition Strategy

6. Implementation Plan

1. Commodity Goals and Objectives (Includes scope, usage, mission criticality)

2. Business Need/Case for Change• Requirements• “As Is” Environment (sourcing strategy, process,

technology)• “To Be” Environment (sourcing strategy, process,

technology)• Benefits

3. Commodity Sourcing Strategy (strategy and tactics)

4. Business Case

5. Acquisition Strategy

6. Implementation Plan

COMMODITY STRATEGYCOMMODITY STRATEGY

Enterprise or Strategic Sourcing Process

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)

http://acquisition.gov/comp/seven_steps/index.html

Seven Step PBA Process

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

Performance Work Statement (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.

Statement of Objectives (SOO)

Begin with the acquisition's "elevator message."

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 4

Develop the PWS or SOO

Step 5

Decide how to measure and manage performance Review the success determinants

Where do I want to go and how do I know when 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

Use contracting approach that promotes effective partnership

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”

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)

PBA Elements

This is a concurrent, iterative process

Identify Desired ResultsData Assembly

Requirements Analysis

Performance AnalysisPerformance StandardsAcceptable Quality Level

Measurement MethodolgySurveillance Schedule

Surveillance Analysis

Incentive AnalysisPositiveNegative

What keeps your customer 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

What about Professional Services?

• Repetition and Context distinguish Professional Services from “commodity services”– Repetition

• Commodity services have high levels of repetitive tasks• Professional services vary with specific nature of the task

– Context• Commodity services tend to be more repetitive, similar

outcomes, and independent of context• Professional service outcomes vary with tasking and are

highly dependent on the context of task

How do we approach PBA

• Recognize that Professional Services are different, but a Performance Based Approach can be used

• Focus on Performance Results to be achieved– Set the right performance standards

• “What problem are we trying to solve?”– Define results that will meet our performance needs

• “How will I know if we’ve solved the problem?”– Properties of the solution produce the needed

results

Assessing Professional Services

• Requires a combination of objective and subjective performance factors

• Objective Measures– Timeliness– Cost

• Subjective Measures– Quality– Effectiveness

• Unbounded vs Bounded subjectivity– Must create balanced set of performance expectations– Promotes effective partnership

MissionOutcomes

Maintain line of sight Linkage between Mission Outcomes & Results during Planning

PerformanceRequirements

PerformanceStandards

PerformanceMeasures

AcquisitionStrategy

Performance Assessment

Strategy

MissionResults

Mission outcomes that rely on an outside service provider to accomplish that enable successful execution of the primary mission

Develop measurable Performance Requirements must be accomplished to achieve necessary mission outcomes. What are the critical few rather than the insignificant many

Define the performance standards or levels that must be achieved to support mission outcomes. Standards drive cost, choose wisely

Describe performance measures and methods to assess supplier performance in meeting mission outcomes

Integrate business strategy, contract type and incentive structures to deliver innovation and best value mission support

Implement team based, integrated, performance focused assessment strategy

Assess and measure results, make honest, fact base decisions, include service provider in decisions. Surveillance is the Government’s main job

• Be careful with infusing, overpowering, or defeating the project with some traditional elements that may contradict a PB approach-----– Many specific, required labor categories– Overly detailed personnel qualifications– Contract management at the labor category level– Source selection plans that do not reward

innovation and creativity (Government risk aversion)

PBA Bottom Line

“In this business, I do not buy a service,

I buy….

-”Miami Vice” Dec 2006

RESULTS”