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Managing Performance Based Contracts For Success

As I closely follow developments in the current wave of acquisition reform, there certainly seems to be a focus on awarding more fixed price contracts, and the reduction of other contract types such as cost type and time and materials. What I find interesting in all this talk about commercial best practices and streamlining the acquisition process, one cannot seem to find much interest or talk about performance-based service acquisition (PBSA). Why is that?

The focus right now in the acquisition reform arena entails demonizing contractors, rebuilding the acquisition workforce, and creating oversight and regulation to reign in defense programs. What I also find interesting is what I believe to be a lack of focus on current processes and either making them better, or eliminating redundancy. I am all in favor of reform, but it has to be done in a way that provides objective analysis on impacts of change and risk, specifically from legislation that deals with reform and further oversight. I think a focus on PBSA is worth taking a serious look, because I am not all convinced that it is being done to the level of efficiency that brings to bear the benefit of using this contracting method.

To be successful, PBSA requires a level of commitment and team integration from both the government and industry to be successful. Here starts the breakdown as an endemic paradigm shift needs to occur by the government to see industry as strategic partners and not the enemy. Further, the success of PBSA implementation is also highly dependent on the efforts of monitoring performance. This monitoring entails using performance indicators and standards, quality assurance surveillance plans (QASP), performance requirements summaries (PRS), acceptable quality levels (AQL), in addition to appropriate incentives, both positive and negative. The problem is that the acquisition workforce is under siege, being undervalued and under trained, so these efforts are not always successful simply because of the lack of trained personnel to perform the oversight mission. The reality is that most contracting offices are not equipped with the resources to manage PBSA, specifically when they face constant pressures of budget constraints.

I also think industry does a poor job in training the federal government on performing PBSA. Many firms provide training on metrics, techniques, and making a contract PBSA focused (i.e. writing a Statement of Objectives, QASP, Service Level Agreements, etc.). However, I think industry is not doing enough to help bridge the capability gap in transferring knowledge to help the government with execution and contract administration in a PBSA environment. This is where I think the breakdown in communications is occurring with industry. Agencies focus all their attention on awarding PBSA contracts, but there is not enough of a concerted effort to leverage the benefits of a PBSA arrangement and managing these contracts once awarded. Communication is vital to the success of PBSA throughout the life-cycle of the contract, and strategic partnerships need to be formed and managed to make the benefits of PBSA a reality across government.

I hope that in all this talk of reform comes the outcomes of making processes better, eliminating true waste in the system, and creating an environment where streamlining and commercial best practices are the norm and not the exception. This can not be done in a vacuum, and I hope Congress gives the acquisition community, including industry, the opportunity to focus on what is really wrong with the current acquisition environment and make lasting reform that benefits all in the long-term, and not just the short-term.

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Profile Photo Peter G. Tuttle

Jaime – great thoughts. I think Congress may find it somewhat tough to listen to industry while demonizing them at the same time. With the demand for more transparency, oversight and reporting associated with the Recovery Act, my opinion is that Congress will become spoiled and attempt to extend those requirements to the rest of acquisition as well sometime in the future. Industry, instead of hunkering down in their foxholes waiting for the next blast, should continue to engage their legislators with thoughtful, well-reasoned feedback to ensure that their voices are heard. I don’t just mean large business here either. Small business, who has the least infrastructure to support greatly enhanced reporting and oversight requirements, will be greatly impacted and should make their legislators know of this impact. A proactive communications campaign to educate our elected representatives on these and any other acquisition concerns may help in the long-run. Peter G. Tuttle, CPCM