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Return to Article: Performance-based contracts found to be risky for industry

• 36249
  

  PBSC absolutely works for service contracts, for small and large business, if you do your up-front work. The Army's problem is that the HQ Army is not training the right people on how to do PBSC. Because OFPP policy and the FAR are based on Air Force Contracting structures, the 1102's get 100% of contracting training, including PBSC. Yet, in the Army, 1102s do not perform the job analysis or technical document development (PRS, PWS, IGE, QASP, TEs, . . ). I have been following the OFPP Pam 4 process since 1980--DOING THE JOB ANALYSIS--and so describing the work tasks, standards, Quality Assurance processes including a bonafide PRS, based on a built-from scratch IGE, and building an SSEP to hire best value contractors with good past performance. My first-hand PBSC results over 27 years are consistent: we have achieved significant savings, along with increased service to the customer, along with enforceable contracts. Most of which were awarded to small businesses who did well. When PBSC is done correctly, the work is adequately described, biddable, measureable, and enforceable. But to do it correctly, you have to expend the up-front effort on JOB ANALYSIS--which Army has to staff.

  Kathy McPherson Posted October 31, 2007 1:24 PM
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  JUst like Like any other discipline, successful implementation of Performance Based Acquisition requires rigor, expertise and attention to details. When looking at the root cause of failures associated with some early adopters, one would likely find that the agency relied on "born again experts" who had the right "bumper sticker" but failed to tap into real best practices and lessons learned. Had they done their homework, they would have found that Statements of Objectives without realistic SLAs is a formula for failure.

  We are now seeing simular problems with SOA. Every agency and contract has the bumper sticker, and rushing to buy SOA Products.

  Hello,.... its not about technology...... its an architecture style that defines solutions in a Services context, and having the business define the drivers and criteria.

  John Weiler Posted October 30, 2007 9:26 PM
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  PBSA is a good contracting tool and like all tools in the toolbox, it must be used appropriately. To mitigate risk, it is best used with FAR Part 15, negotiated procurments and Section L should be used to ask questions of each offeror to fully understand key functions to be performed. It isn't business as usual. And, there are always two sides to every story.

  FMFS ONE Posted October 30, 2007 10:45 AM
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  Performance-based contracting is not the problem. The problem is that there are no consequences to lack of performance. How many thousands of reports does the GAO issue and little to no action is taken? Case and point, I know of a company was awarded a contract where the incumbent was not performing. But, the incumbent ended up winning the recompete, despite all of their past performance problems with the customer. So, tell me, where are the consequences to their bad actions? There are none - instead they get rewarded.

  Those of us in the commercial world are used to performance-based contracting and individual performance, where accountability rules.

  T Dante Posted October 30, 2007 10:14 AM
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  I don't think performance-based contracting began with the Clinton administration. It was around long before that. You want some examples of its successes? How about the SR-71? How about the C-130 that's in its 50th year of production? They both had specifications that totaled less than a dozen pages. In the first case we wanted a Mach 3+ spy plane and that's what we got. In the second case we wanted a turboprop cargo hauler, and that's what we got. What's the big mystery?

  The only thing "hard" about performance-based procurement is the threat it poses to hundreds of thousands of bureaucrats' jobs. In the capitalist system, risk = profit. If there is no risk, there is no profit. In the inane system by which we procure goods, we pay a contractor more if they fail. The worse they fail, the more money we throw at them because process is all that's important. That's how the F-22 and F-35 achieve their current 20+ year development cycles. What we have now is insanity. Let's go back to the way we bought things when the process worked.

  Dfens Posted October 30, 2007 9:41 AM
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  The problem with performance-based contracting IS the concept. Agencies have been trying to use performance-based contracting since 1971, when Donald Rumsfeld tried the idea in educational services contracting as head of the Office of Economic Opportunity. OEO conducted a two year experiment and declared it a failure. Rand Corporation produced a multi-volume study of the project. Then the Air Force tried it in 1979, with its AFR 400-28. That, too, was a failure and after 10 years of trying the Air Force dropped it. OFPP adopted AFR 400-28 as OFPP Pamphlet No. 4, in 1980. That, too, failed and was dropped in the mid-1990s. OFPP tried to revive the concept, beginning in 1992. They have been pushing it since then. Advocates always call for more (expensive) training, saying that the concept is sound but the implementation is poor. Implementation is poor because the concept is fundamentally unsound. The notion that one can specify requirements for complex services in clear, specific, objective, and measurable terms at the outset of contract performance is demonstrably untrue. When someone claims that they have managed to do it an examination of the "performance work statement" invariably shows that it is not clear, specific, objective, or measurable. A lot of time and money has been spent fruitlessly chasing a mirage. The pursuit of performance-based contracting has kept us from finding better ways to contract for services. We are paying the price for the congressional testimony of higher level agency officials and consulting firms, who have convinced our ever-gullible politicians that they have found the holy grail.

  Vern Edwards Posted October 30, 2007 3:21 AM
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  It is strange that the author doesn't reach back and acknowledge the fact Performance-based contracts have been touted as the preferred model since at least 1998 under the previous administration. (See http://www.whitehouse.gov/omb/procurement/pbsa/guide_pbsc.html) It is always the current administration under scrutiny, not the one that enacted/emphasized the process.

  With respect to the risk to industry, risk is also laid squarely on the shoulders of the agency that writes the contract. I agree with Mr. Soloway, contracts are only as good as the effort expended to make a good product. There are no perfect contracts. If the performance outcome and measurements are properly defined, the risk is decreased for both industry and agency alike.

  It is imperative that industry engage in the development of the requirements (i.e., Performance Work Statement (PWS), Statement of Work (SOW)), and provide input concerning standards and thresholds used in measurement of performance. If requirements or performance measures are vague or poorly defined, industry should be knocking down the door to get some answers. In a recent acquisition, our office fielded in excess of 500 questions/suggestions from industry. The interaction definitely improved our final product (contract). If answers are not satisfactory, or are not forthcoming, maybe it is too risky to pursue.

  Jan Christensen Posted October 29, 2007 12:27 PM
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  I've seen several "performance-based contracts" at two agencies and they have all failed miserably on both large and small scales. Perhaps, those who have seen success with this approach can let the rest of us in on the secret. In other words, if anyone has some "performance-based contracting" success stories, please share them...thus far - their scarce. The failures (many of which are bravely reported on Govexec.com) are numerous. Please refrain from scenarios that logged short-term savings while putting missions at risk. We are all interested. I've issued this challenge on several occasions (though not here) and recieved only silence.

  Don Posted October 29, 2007 7:49 AM
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  The problem with performance based initiatives are in the manner that they are presented, as an end-all be-all that requires most agencies to align their strategic goals and day to day operations to require the use (or at least the documentation of non-use) of these initiatives no matter what the contracting effort is. Performance based contracting is not new, or even innovative. It has been around in some form for decades. It's a tool, not a toolbox and as such needs to be examined to determine where it will best fit. It's as if the flavor of the month mandated the use of a hammer at least 30% of the time in everyone's job. If you were a carpenter, it would be easy. If you were a window washer, you'd probably have to fudge some results to comply, but comply you must. Sometimes even I am amazed.

  Jim Posted October 28, 2007 2:30 PM
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  The "problem" with performance-based contracting is not the concept, but the federal government's implementation, or perhaps more adequately put, lack of implementation of key performance-based contracting concepts. The goals behind PBA are great. Some critics might argue that PBA's goals cannot be realized. However, they are within in reach and worth the effort to obtain.

  A key obstacle to the successful implementation of performance-based acquisition is the government itself. The government, for years, has not done business this way. Contracting and program personnel alike are accustomed to the old way of doing things, namely, giving contractors step-by-step instructions on how to do a task. Hopefully this was done only through the statement of work, but, it was, and, is still, improperly given during contract performance via improper technical directions, constructive modifications, etc.

  The government is not used to defining, or maybe, even thinking about what outcome is truly needed. Of course it is easier to instruct a contractor to do a certain sequence of steps than determining the government's desired outcome. However, the government needs to figure out where it really wants to go instead of simply instructing contractors to perform arbitrary steps in some predetermined sequence

  Nathan Posted October 26, 2007 4:58 PM
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  The "problem" with performance-based contracting is not the concept, but the federal government's implementation, or perhaps more adequately put, lack of implementation of key performance-based contracting concepts. The goals behind PBA are great. Some critics might argue that PBA's goals cannot be realized. However, they are within in reach and worth the effort to obtain.

  A key obstacle to the successful implementation of performance-based acquisition is the government itself. The government, for years, has not done business this way. Contracting and program personnel alike are accustomed to the old way of doing things, namely, giving contractors step-by-step instructions on how to do a task. Hopefully this was done only through the statement of work, but, it was, and, is still, improperly given during contract performance via improper technical directions, constructive modifications, etc.

  The government is not used to defining, or maybe, even thinking about what outcome is truly needed. Of course it is easier to instruct a contractor to do a certain sequence of steps than determining the government's desired outcome. However, the government needs to figure out where it really wants to go instead of simply instructing contractors to perform arbitrary steps in some predetermined sequence

  Nathan Posted October 26, 2007 4:58 PM
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  Whoa, this is way too risky! What would happen if a contractor agrees to build an airplane that, you know, actually flies and then can't make that happen? I mean, heck, as long as they followed the process, who cares if the airplane actually flies? That would be a total waste of the taxpayer's money!

  Dfens Posted October 26, 2007 3:00 PM
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  Don, you wrote "The concept makes no sense what-so-ever if mission accomplishment is an objective."

  I would have to ask what is wrong with outcome focused performance contracting, if mission accomplishment is an outcome/objective?

  Perhaps, what we reveal, is that when it comes to government agencies defining requirements, they are unable to articulate what their actual outcomes are, and thus take the more "convenient" way out, and simply tell a contractor exactly what to do.

  If an agency clearly understands their mission, and what outcomes they wish to achieve (and that Congress is funding) then it will be far better to hold a contractor to THOSE outcome focused requirements rather than transactional and task oriented metrics.

  Steve Posted October 25, 2007 2:19 PM
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  One problem with performance-based contracting is that most services previously performed by the Government were heavily regulated as to the process. When the Government outsources the services in a Performance-Based contract, the regulations pertaining to process are no longer guaranteed. Many of the regulations as to process were implemented to protect rights such as equal protection, due process, privacy, etc. Performance Based contracting can and should be used in those instances where the Government is truly interested only in a result. Most service contracts are not really interested solely in the result and therefore performance based contracting is inappropriate for those types of acquisitions.

  Rob Posted October 25, 2007 12:45 PM
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  The government would be better off by going back to the old basics of doing business with the commercial sector. Many of these new inovative contracting initiatives are proving to be less cost effective, in the long term. The less scrupulous contractors always find ways to outsmart the changes that the Government is implmenting to save money and give incentves to contractors.

  Sophie C Moore Posted October 25, 2007 10:53 AM
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  Isn't it fascinating? Look at the parallels between "performance based contracting" and "performance based" personnel systems.

  What's the common thread? The Federal Government really has a hard time defining "end-stage" performance.

  Now the private sector contractors are facing the same challenges that federal employees under NSPS have been dealing with - and guess what? They are voicing the same complaints.

  Old Tar Posted October 25, 2007 10:07 AM
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  "Performance-based contracting" is a joke. In my experience, they have all been failures...worst of all for the agency missions affected. The model itself requires agencies to yield too hand over too much control to the vendors. Also, they are encouraged to be vague and eliminate detailed requirements from the Statements of Work. The concept makes no sense what-so-ever if mission accomplishment is an objective. A complete severing of authority and responsiblity from agency to vendor will always be a disaster and can never result in any other outcome. At best, the outcome can be disguised - which is often uncovered by IG follow up. If you have not yet abandoned "performance-based contracting" (unfortunately pushed by A-76), listen to those who have experienced it first hand.

  Don Posted October 25, 2007 9:47 AM
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  PBA has it's advantages however it used to often for acquisition of systems designs and operations that are government "core competencies". In so doing the government is rapidly loosing core skills to private sector industries that come and go based on market whims.

  myles Posted October 25, 2007 9:41 AM
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  The problem lies with what entity writes the SOW. In many federal agencies, non contracting people are ill trained and are not aware that as the originator of a need they are part of the acquisition process. In fact they are at the beginning of it and oftern the task of writing the PWS falls to contracting people. The contracting community for services, and especially the 1102s, then tries to push everything into a FFP - hence the risk on the contractors. Added to this is that the Requiring activities do not understand the process and there is NO training for requiring activity people it is no wonder that the end result is as reported in this article.

  Kim K Judd Posted October 25, 2007 9:11 AM
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  Among the more surprising lessons of performance-basing is that so few program managers and contracting officers are able to describe a required "performance." A tendency among feds to over-complicate descriptions and "tend to the details," may stem from fear of being "cheated" by a contractor who is able to satisfy a requirement in an innovative way. The problem may be feds penchant to control, rather than any inherent flaw in contracting for what the government wants instead of how it wants its need met.

  Howard Kernodle Posted October 25, 2007 9:00 AM
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  A better method for procurement of contracts that are Performance based is to issue an RFQ with a Statement of Objectives instead of a SOW. This would allow the contractors to propose a solution instead of proposing hours or rote quoting (mirroring the requirements, which may not be fully developed or understood by the client).

  R. Shelton Posted October 25, 2007 8:27 AM
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  Stan Soloway is correct, PBA must include solid statements of work and provide potential vendors with all necessary information. Unfortunately all too often they don't. The acquisition workforce is ill equipped to accomplish this fundamental requirement and often not inclined to embrace the PBA approach either, often looking for ways to avoid using PBA's. Wonder why so many service contracts run over budget, delivery late, or Govt receives less or something other than they desired? my experience has been clearly poor PBA SOOs/PWSs. Seen it, been there.

  Art Posted October 25, 2007 8:22 AM
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  Having written scopes for performance-based contracts, I find it erxtremely diffucult to identify incentives for the contractor. Typically, the agency contracts for a needed good or service. The agency needs and extpects quality, on-time, cost effective service from the contractor. There may not be any advantage to the public by having the good or service quicker or "better" than the agency would put into a normal contract scope, and "cheaper" is ruled out by the very design of these contracts. Performance based scopes are particularly fustrating and wasteful for small aquistions.

  Dan Posted October 24, 2007 7:11 PM