Every year it seems the Defense Authorization Bill reiterates the need for DoD Activities to acquire services using Performance Based methods. Congress and OMB continue to emphasise the importance of this method of procurement. Performance-Based Services Acquisition is not new; however, the importance of PBSA and the emphasis being placed on it by the highest levels of Government is significant, and requirements for compliance with performance-based techniques are now mandatory for all agencies of the Federal Government. Moreover, realization of the benefits from PBSA is fast becoming a necessity, rather than an option. In general for a variety of reasons, service contracting requirements are increasing, in-house resources for administration are decreasing, and service contracting budgets are being cut. If we are to survive these pressures on both ends of service needs, we must be able to do more with less and still meet our mission needs. PBSA is a way to achieve this goal.
The Office of Federal Procurement Policy (OFPP) and DoD have indicated
that agencies should use the web based guidance for PBSA on the site at "Seven Steps to Performance-Based Services Acquisition, a web based guide.
In the Department of Defense, a minimum of at least 50 percent of service acquisitions, measured both in dollars and actions, are to be performance-based. For an acquisition to be counted in this assessment, the Office of Federal Procurement Policy has issued guidelines stating that the contract must be at least 50% performance-based in terms of work scope and dollars. In addition to the emphasis on using performance-based methods in acquiring services, another significant change in the process requires the use of commercial item acquisition procedures for the procurement of routine installation support and operation and maintenance services. All service contracts for such "commercial items" must be fixed price type contracts and incorporate to the maximum extent possible "commercial" practices and procedures.
So what is a performance-based contract? The objective of Performance Based Services Acquisition is to give the contractor the maximum flexibility in terms of methods and means of performance in satisfying Government needs. In a performance-based contract, the requirements must be stated to the maximum extent possible as "performance" oriented requirements telling the contractor what the needs of the government are and the outcomes required to meet those needs. In the traditional approach, the requirements document - a Performance Work Statement (PWS ) - describes work in terms of "what" the required service is rather than "how" to perform the work, and measurable performance standards to be met must be included to the extent that it is possible. In the absence of a specified performance standard, the commercially acceptable practice applies, and in all cases, the contractor has an implied warranty to deliver services that satisfy the intent of the contract requirements. Most contracts for base operations or facility support services are complex in nature and will necessarily include requirements that must conform to directives and are hence "design" or "proscriptive" in nature and cannot be "performance-based." The requirement in PBSA, is to limit such "design" requirements to those that are mandoatory by law, regulation, or directive and to those requirements where the collective experience and judgement of the organization dictate that a requirment be performed in a prescibed manner. Again, such design requirements must be less than half of the total scope of work in terms of work effort and dollars for the contract be considered as "performance based" contract.
For a contract to be performance-based, the FAR also requires that it include a Performance Plan or a Quality Assurance Surveillance Plan and appropriate incentives to encourage contractors to develop innovative and cost-effective methods of performing the work. In PBSA, Government agencies are encouraged to be flexible in developing a Performance Work Statement (PWS); to explore the commercial market place and adopt the successful practices found there that can be used.
Market research is the cornerstone of efforts to shift acquisition strategy towards commercial practices. Market research is used to determine whether or not a commercial product or service is available that might satisfy the Government need. It requires the efforts of both contracting and functional personnel to identify and adapt commercial practices related to Government needs. By going into the market place, the Government can find what truly works best.
In planning the acquisition, PBSA also encourages industry involvement. Industry comments on draft SOWs and other Government initiatives will often lead to a better way of doing business. It is important to keep industry involved throughout the acquisition cycle. Government and industry partnerships are encouraged in PBSA. Partnering is a mutually beneficial relationship and an agreement of trust to share risks in a cooperative attitude to deliver the service with efficiency and effectiveness. After contract award, Partnering Agreements can be formalized to promote mutual efforts to improve the process, to align the contractor's interests with the Government's. The partnering agreement should center on mutual goals and objectives driven toward the purpose of the contract.
PBSA contract templates have been prepared for a number of typical service contracts. These templates, while helpful, must be used with caution, and edited significantly to tailor them to specific installation needs.
There is no mandatory format for a Performance Work Statement; however, a standard format should be used for a number of reasons. Standardization facilitates both the preparation and understanding of the requirements document. Usage over time also improves performance and ultimately, reduces the cost of performance which is of benefit to both the contractor and the government.
In the past the Government has used 100 percent inspection, random sampling, periodic inspection, customer complaints, or a combination of these traditional surveillance methods aimed at problem identification, that is detecting nonconformances and defective units of service. Under PBSA, this approach is being de-emphasized. Under the new PBSA approach, the Government is now placing more reliance on contractors to control quality and develop metrics. Rather than spend a lot of time and effort evaluating specific service deliveries by the contractor, the Government now spends more time in assessing the contractor's management and performance metrics. As in the past, when defects are found, reperformance by the contractor is the preferred corrective action. The goal is to select contractors with proven performance records and award a well formed contract at a fair and reasonable price, one which will permit the contractor to perform at the level of quality required and still make a reasonable profit. Under the PBSA approach, quality control and quality assurance is a partnership between the contractor and the Government. It is true that the contractor remains responsible for quality control and the Government must initiate corrective action whenever it discovers defects in service delivery. However, under the new procedures, the partnership with the contractor begins even before award by working with industry to discover the best of commercial practices that may be applied to contract requirements. The Government continues to work closely with the contractor both during source selection and after award to establish meaningful performance objectives and thresholds to satisfy the Government's specified needs. During the initial contract performance period, CORs, Government functional managers, quality personnel, and customers must work together with the contractor to validate and modify, as needed the performance objectives, standards, and thresholds. Once the contractor has achieved a satisfactory level of performance, the primary element of Government surveillance then is to continuously evaluate the contractor’s control of quality.
Evaluation of the contractor's quality control program is an on-going effort and the nature of the validation effort changes with time. Changes occur in the service delivery environment continuously and these changes impact on the contractor's ability to control quality. The contractor's management and labor mix changes as employees are reassigned, quit, retire, or are hired and fired to account for increases and decreases in workload. Worn and broken tools and equipment are replaced, often with newer and more state-of-the-art items which must be addressed in the processes, procedures, and training programs underlying the contractor's service delivery efforts. Likewise facilities change with time, along with regulatory requirements, the availability of supplies and materials, the contractor's financial condition, and a host of other elements, any of which can impact significantly on the quality of service output. A contractor with a successful past performance record will routinely account for such changes in the continuing effort to control quality. The Government must be assured that the contractor is successful in this effort and must insist on the contractor's maintenance of the system in an acceptable manner at all times during the contract performance period. To do this, the Government measures the contractor's control of quality by establishing a performance threshold for each required service. Service output that does not meet the established performance threshold is unsatisfactory. This means that the contractor's control of quality for that service, during that observation period, is unacceptable. When performance is thus found to be unacceptable, the record must objectively document the failure to control quality. Quality control for a service period, once performed, cannot be reperformed, so unsatisfactory quality control for any given observation period for a required service becomes a part of the contractor's permanent past performance record. The Government should identify the nonconformances which were the basis for the unsatisfactory quality control finding and require corrective action, both to correct the observed nonconformances and more importantly, the root cause of the nonconformances.
The primary element of the Government Contract Quality Assurance Program is simply to validate the contractor's quality control system and monitor contractor metrics. This approach to performance assessment requires less effort on the part of Government quality personnel and yet it still presents acceptable risk. The risk of accepting unsatisfactory service delivery is greatest during the initial phase in period of contract performance. It is during this period that the Government must work diligently with the contractor to establish meaningful expectations and metrics for the required services.
PBSA is here now, it is here to stay, and it is mandatory.
Article written by James E. Hutcheson, of MSC Associates, Inc.