The Energy Department has not figured out whether performance-based contracting is a good way to manage its laboratories, according to a new General Accounting Office study.
The GAO study, "National Laboratories: DOE Needs to Assess the Impact of Using Performance-Based Contracts" (RCED-99-141), found that DOE does not know whether performance-based contracts improve contractor performance and lower government costs.
But the Energy Department defended its attempts to tie contractor pay to performance, saying its assessments show that the effort is having a positive impact on the laboratories.
"Although it is unlikely that in the future we will identify some scientifically conclusive mechanism to confirm or deny these early assessments, it would appear intuitively obvious that defining performance expectations and measuring results is an effective management tool," Richard H. Hopf, DOE's director of procurement and assistance management, wrote in response to the GAO report.
Under the performance-based contracting approach, an agency develops outcome-oriented goals and ties contractors' compensation to those objectives. Proponents say the approach leads to better communication between agencies and contractors and better incentives for contractors to achieve agency-specified results.
Performance-based contracting measures have been included in all 18 of the Energy Department's laboratory contracts, with the number of measures in each contract ranging from seven to 250. In half of the contracts, fees have been linked to performance objectives.
DOE is struggling to develop the right performance measures for its contractors, GAO said.
"A large number of measures diminishes the importance of any single measure, whereas a small number results in measures that are too broad to be meaningful," the report said.
DOE's task is made difficult by the nature of its work. Science and technology research and development do not always lend themselves to easily defined performance objectives. In addition, a DOE field official told GAO, early performance-based contracting attempts led contractors to focus on activities tied to performance fees while neglecting other important tasks.
DOE's Hopf pointed out that defining the right mix of performance measures is a process major corporations and government agencies struggle with.
"GAO itself has not found the subject matter easy," Hopf wrote. "Its own lack of expertise in this area is reflected in the fact that it has hired consultants to advise it on the subject and that it has used other organizations, including DOE, for benchmarking purposes."
Another challenging area for DOE is how to set performance fees for lab contractors. Such fees typically are assigned to tasks that can be easily measured, like cleaning up a specified number of toxic waste barrels over a certain period. At some labs, DOE has tied payments to performance. But at other labs, contract managers say performance-based fees might distract contractors from doing all essential work. Stanford University, which runs the Stanford Linear Accelerator Center in California, does not want performance-based fees because "a fee would not motivate performance and may be a detriment to the conduct of outstanding science."
GAO recommended that DOE study the overall impact of performance-based contracting on contractor performance and government costs. But DOE says it does not know how to conduct such a cost-benefit analysis.
"We are not aware of any model that has been developed or used by any agency for such an assessment, and as far as we could determine from GAO auditors, neither has GAO," DOE's Hopf wrote.
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