Outcomes Matter More Than Ever in Services Contracting

Begin with the end in mind.

The second habit of Steven Covey’s influential and long-lived book, The 7 Habits of Highly Effective People, is “begin with the end in mind.” This is the fundamental tenet of outcome-oriented acquisition and its associated methodology, The Seven Steps to Performance-Based Acquisition.

Performance-based acquisition is central to defense and civilian agency initiatives to improve the outcomes of the 63 percent of federal procurement spending that goes to acquire services, some $283 billion of the $447 billion in procurement in fiscal 2014.

For example, the Seven Steps are the foundation of the new Defense Department instruction for services contracting, which accounted for 53 percent of fiscal 2015 defense procurement. Similarly, the new governmentwide category management effort is building performance-based acquisition into the operating instructions for the Professional Services category.

Since PBA requires full acquisition lifecycle collaboration between program and procurement offices and the other functional participants involved, a significant swath of the federal workforce will need to learn or relearn the methods of performance-based buying. So DoD and the General Services Administration are renovating, reviving and requiring PBA tools, templates and training. Industry has joined the chorus with the Outcomes Orientation Working Group, which I’m leading for the Professional Services Council.

Performance-based acquisition has been around in government since the 1990s. Like my company, ASI Government, which was the industry partner to government acquisition leaders in developing the Seven Steps, PBA was founded on the proposition that services contracts result in outstanding outcomes when the government and contractors work in partnership toward shared objectives based on program and mission goals.

However, over the past 10 years or so, in response to a variety of pressures from inside and outside the acquisition system, PBA has faded a bit as the government’s means for buying services. A significant number of acquisition professionals say it is taxing, time consuming and risky in an environment where a tsunami of transactions threatens to engulf the workforce. That and budget pressures have tended to make low-price, technically acceptable (LPTA) the favored approach in recent years.

PBA can seem difficult because it requires intensive early collaboration in generating results-oriented requirements; significant research to understand markets and find high-quality providers; artful writing of outcome-based solicitations; and extensive measurement, reporting and refinement of performance. But the effort pays off in getting true mission value for every dollar of taxpayer money spent.

PBA asks multifunctional government teams to scrutinize expiring contracts and requests for new ones, challenging newly generated needs and creating performance-based acquisition requirements.

Performance-based bid solicitations are written in terms of the results government seeks, rather than specifying how and by whom work is to be accomplished. They use statements of objectives and performance work statements, not statements of work. The idea is to enable contractors to exercise innovation, ingenuity and industry best practices while working with the government team to craft and implement cost-effective solutions for agency problems and needs.

PBA success rests on accurate and well-communicated descriptions of requirements and objectives, thorough market research to identify the state of play in industry for the outcomes sought; smart, knowledgeable and committed teams collaborating through the entire acquisition; and metrics for measuring every element, from team and contractor performance to achievement of contract and program objectives.

The Defense Department’s new instruction on buying services, shepherded into existence by DoD services acquisition chief Kenneth Brennan, enshrines as policy the use of the seven steps to services acquisition “to the maximum extent possible.” DoD’s seven steps are:

  1. Form the Team
  2. Review current strategy
  3. Market research
  4. Requirements definition
  5. Acquisition strategy
  6. Execute strategy
  7. Performance management

The new instruction requires each multifunctional team working on services requirements valued at more than $1 billion to participate in a specialized services acquisition workshop. The four-day onsite workshops are based on DoD’s Seven Steps and teach team members to use the online, interactive Acquisition Requirements Roadmap Tool to create performance work statements and statements of objectives, quality assurance plans and source selection evaluation factors.

Meanwhile, GSA’s Tiffany Hixson, manager of the government-wide professional services category, is leading an update of the guidebook “Seven Steps to Performance-Based Services Acquisition” to put on the Acquisition Gateway Professional Services Hallway. There, it will guide civilian and defense acquisition teams in buying services.

The GSA Seven Steps to Performance-Based Services Acquisition are:

  1. Establish the team
  2. Describe the problem
  3. Examine private-sector and public-sector solutions
  4. Develop the PWS (performance work statement) or SOO (statement of work)
  5. Decide how to measure and manage performance
  6. Select the right contractor
  7. Manage performance

Both sets of steps agree that acquisition is a team sport.  

Success in acquiring the capabilities that federal agencies must have to best serve the American people takes cooperation among many players. They hail from agency program, procurement, finance, legal, information technology and other organizations; as well as from the contractor or contractors performing the work and oversight organizations such as inspectors general offices, the Government Accountability Office, Congress and the Office of Management and Budget.

Like sports teams, acquisition teams must pull together. Shared incentives matter. Performance objectives, and rewards, for everyone involved in an acquisition should be linked to achieving the mission outcomes the purchase was intended to support. In fact, the steps suggest that contractor and government team performance objectives should be program-based, similar and have prospective rewards and recognition based on achieving desired outcomes.

Like PBA, category management-based procurement is outcome-oriented and team-led. Teams comprising the agencies with the largest demand in a category of procurement, experts in supplier markets and contracting professionals manage each category of goods and services. Their goal is to find and engage suppliers with whom government can build relationships to efficiently and effectively achieve mission outcomes.

Category teams build and continuously develop deep understanding of vendors: their supply networks, their markets, current pricing, financials, reputations, new processes, trends and how well companies’ services match government programs’ needs. This analysis can help bolster PBA teams’ market research.

Government-wide category teams coordinate the demand of many agencies and standardize the goods or services they buy to win lower prices. This involves the same skills that performance-based acquisition teams apply in the early PBA steps—scrutinizing the need, exploring potential solutions and shaping requirements.

Both PBA and category management rely on robustly created and actively administered performance management. Contract quality assurance programs are built at the same time as statements of objectives or performance work statements in the PBA process. Successful category management teams build quality metrics for supplier performance into their contracts.

No matter who wins the presidential election in November, the next President cannot ignore the need to get the best outcomes from the nearly two-thirds of annual federal procurement spending that goes for services. Acquisition policy has preferred performance-based methods for services buying through 20 years of Democratic and Republican administrations.

It’s safe to say that PBA is back and here to stay. So now’s the time to adopt it for all services acquisitions.

Tim Cooke is CEO of ASI Government.