Chapter 1

General and Introduction

1-1. -- New Role of Contractors.

Each year the government contracts for a large part of its mission support.  As a result, civilian contractors have assumed a major role in day-to-day operations in the area of services.  Contractors do such work as transportation, refuse collection, food services, and janitorial services.  At some places they provide an entire support function, including engineering and supply.

a.       Whenever the government contracts out a job, it is entitled to receive quality service.  So that the government can define and measure quality, this document presents a method of identifying and stating requirements in such a way that the statement of work (SOW) will state accurately our minimum requirements.  It also explains how to assure that the contractor has actually performed the services required.

b.       This document is also designed to show non-contracting personnel how to write a SOW and a Quality Assurance (QA) surveillance plan for service contracts.  It explains how contract administration personnel should take action based on surveillance results.  (The example used is a service contract for vehicle operations and maintenance but, the method can be used for other service contracts, including total support contracts.

1-2. -- Terms Explained.

Following are terms used frequently in this document.

a.       Acceptable Quality Level.  The maximum percent defective, the maximum number of defects per hundred units, or the number of defects in a lot that can be considered satisfactory on the average.  The allowable leeway or variance from a standard before the government will reject the specific service.  And AQL does not say that the contractor may knowingly offer defective service.  It implies that the government recognizes that defective performance sometimes happens unintentionally.  As long as the percent of defective performance does not exceed the AQL, the service will not be rejected by the government.  The contractor, however, must reperform the defective service when possible.

b.       Acceptable Sampling.  A form of sampling used to determine a course of action.  A procedure that gives a specified risk of accepting lots of given quality.

c.       Activity.  Another name for a work process.  (An activity uses inputs and generates outputs).

d.       Administer.  That stage of the contracting cycle in which the contracting officer insures that the total contract is being followed, makes necessary changes to the contract, and insures progress toward contract completion.

e.       Analyst.  A non-Contracting person charged with developing a SOW and a QA surveillance plan; also, the person who analyzes a function to develop the required documents.

f.        Attribute.  The property a unit has of being either bad or good.  That is, the quality characteristic of a unit is either within the specified requirement or it is not.

g.       Attribute Sampling.  A form of acceptance sampling that grades a service as defective or non-defective.

h.       Buy.  That stage of the contracting cycle in which the customer state what he or she wants contracted.  This stage includes funding the requirement, writing the SOW and writing the surveillance plan.

i.        Define.  That stage of the contracting cycle in which the customer states what he or she wants contracted.  This stage includes funding the requirement, writing the SOW and writing the surveillance plan.

j.        Input.  Anything put into a system or process or expended in its operation to achieve a result or output.

k.       Interface.  A common boundary between two organizations or activities.

l.        Job Analysis.  The act of looking at a job as it is being done in-house or a contractor to determine what actually results.  Job analysis looks at organization, workload, performance values, and resources.

m.      Lot.  A collection of service outputs from which a sample is to be drawn and inspected to determine conformance with the standard.

n.       Lot Size.  The number of service outputs in a lot.

o.       Organizational Analysis.  The act of looking at an organization to determine what kind of services it provides.

p.       Output.  The amount of something produced by a system or process during a given span of time.

q.       Percent of Sample Found Defective.  Determined by dividing the number of defects by the sample size when the reject number has been equaled or exceeded.  The resulting number is used to make an equitable deduction from the contract price for non-performance by the contractor.

r.        Performance Indicator.  A characteristic of an output of a work process that can be measured.

s.       Performance Value.  A composite of a standard and an acceptable quality level which describes the quality of an output of a work process.

t.        Qualify.  That stage of the contracting cycle in which one determines that the contractor’s work satisfies the requirements of the SOW.

u.       Quality Assurance.  Those actions taken by the government to check goods or services to determine that they meet the requirements of the SOW.

v.       Quality Assurance Evaluator (QAE).  That person responsible for checking contractor performance.

w.      Quality Control.  Those actions taken by a contractor to control the production of goods or services so that they will meet the requirements of the SOW.

x.       Random Number Table.  A table of numbers arranged in a random fashion.  A table used to make random samples.

y.       Random Sample.  A sampling method whereby each service output in a lot

z.       Random Sampling.  A method of looking at a few individual items in a lot to determine the quality of that lot against a standard.

aa.     Release.  That stage of the contracting cycle in which goods and services are accepted as meeting contract requirements and payment is made to the contractor.

ab.     Reliable Service.  A service that is dependable and is provided when required.

ac.     Sample.  A sample consists of one or more service outputs drawn from a lot, the outputs being chosen at random.  The number of outputs in the sample is the sample size.

ad.     Sampling Guide.  The part of the surveillance plan which contains all the information needed to perform a random sample.

ae.     Sampling Plan.  A plan which indicates that AQL, the number of units from each lot which are to be inspected (sample size) and the criteria for determining the acceptability of the lot (acceptance and rejection numbers).  Used to develop the sampling guide.

af.      Service.  A job performed to the standard and within the acceptable quality level.  The contractor must do the specific job, and meet the standard, and meet the acceptable quality level before one can say that performance has been acceptable and that he/she should be paid.

ag.     Source.  That stage of the contracting cycle in which the contracting office prepares the bid package, finds potential contractors to do the work, and accepts bids from proposed contractors.

ah.     Standard.  An acknowledged measure of comparison.

ai.      Statement of Work.  A document that describes accurately the essential and technical requirements for items, materials, or services including the standards used to determine whether the requirements have been met.

aj.      Surveillance Plan.  An organized written document used for quality assurance surveillance.  The document contains sampling guides, checklists, and decision tables.

ak.     System.  A group of interacting, interrelated, or interdependent elements forming a collective entity.

al.      Tree Diagram.  A visual representation of the major functions performed by a system which shows logical parts and subparts.

am.    Uniform Service.  A service that is, within defined limits, always the same.

an.     Work.  A series of actions, changes, or functions that bring about an end result.

Figure 1-1. -- Contractor Operated System.

Figure 1-2. -- Transportation (Partial)

1-3. -- Government Policy.

The government policy in service contracting is as follows:

a.       The performance oriented statement of work (SOW) for a service contract includes the standards of performance and acceptable quality levels.

b.       Standards must be measurable.

c.       Quality control is a contractor responsibility.

d.       A performance oriented SOW must not contain detailed procedures unless absolutely necessary.  Rely on a statement of the required service as an end product.

e.       References to directives in the SOW should be held to a minimum.

f.        The surveillance plans described in this document are an acceptable way of performing quality assurance.

g.       The most qualified persons available must write the SOW and the surveillance plan.  Standardized government documents, when available, will provide valuable basic information.

1-4. -- A Systems Approach.

The design of a SOW and the surveillance plan is based on a systematic analysis of the function to be put under contract or already under contract.  The procedure for deriving these two products is called job analysis.  The procedure consists of a step-by-step review of the requirement to arrive at the specific output services and associated standards.

a.       Jobs as Systems.  The analysis assumes that an operation is a system.  An operation can be called a system because it consists of a job or a combination of jobs carried out by people, and sometimes, machines for a certain purpose.  The parts of a system are usually called input, work, output, and control loops.  These parts are shown in figure 1-1.

(1)     From a contractor’s view, the system consists of taking people, facilities, material, and the SOW and inputting it into a work process.  The result of this work is a contract output.

(2)     Two major control loops are at work in this system.  Both loops use standards as the basis for determining acceptability.

(3)     The contractor quality loop feeds back information from the output into the work process so that the contractor can adjust performance to meet the standard specified.

(4)     On the other hand, government quality assurance looks at the output and determines its acceptability.  This information then becomes an input for contractor management to adjust the quality control function.

b.       Parts and Subparts.  Every service contract operation can be viewed as a system.  Further, each major system can be broken into small parts or subsystems.  For example, the system portrayed in figure 1-1 were called transportation, the major system could be broken into small parts called vehicle operations, vehicle maintenance, and traffic management.  Further, each of these parts could be broken down into the smaller parts or subparts that make up that part, as shown in figure 1-2.

(1)     Note that the transportation work area leads to vehicle operations, which leads to vehicle dispatch, which leads to taxi dispatch and U-drive dispatch.  Each work area has its own set of inputs and outputs.  This chart does not contain all of the work areas associated with transportation.  Rather, it only shows an example of how a system can be broken into its parts.

(2)     The chart looks a great deal like a standard organizational chart, except that this chart shows each thing that happens rather than who performs the task.  Further, by showing an input, it shows what must be there for something to take place.  It shows that each job must have an output that can be measured in some way.

c.       Results of the Systems Approach.  A proposed contract effort must be viewed in a systematic way to arrive at an output or performance-oriented SOW and a means of measuring the service.  Thus, a systematic approach to analysis will result in an enforceable, clear SOW.  It will also produce a quality assurance surveillance plan that tells the government if the service is provided as specified.  Further, the systems approach permits the analyst to identify outputs and separate them from the specific procedures required to create the outputs.

(1)     When the government specifies a given procedure, it assumes responsibility for insuring that the design or procedure will result in the desire output.  On the other hand if it specifies the output performance and its quality standard, the contractor must then use the best management to achieve that level of performance,

(2)     Last, systematic analysis gives a clear picture of what input is needed to get the job done.  This data is most useful in analyzing a contract bid price, conducting a preaward survey, creating a list of government furnished property, and making payment deductions in case of non-performance.

1-5. -- Team Approach.

The development of a quality SOW is a result of team effort.  The leading members of the team are the functional office, the local contracting office, and the manpower/management engineering office.  The latter can provide previous manpower studies to assist in determining jobs performed.

a.       Responsibilities.  During the contracting cycle, responsibilities are assigned as shown in figure 1-3.  This chart shows which major functions occur during the contracting cycle and which important actions take place during each function.  The columns on the right show who is responsible at each stage of the purchase cycle.

(1)     The functional area chief should be considered the team leader exercising authority and responsibility for the function that will be under contract.  Functional persons state the service that will be delivered, measure the quality of service, and accept the service.

(2)     The contracting office is the means of getting a contract and enforcing its provisions.

(3)     The contracting office also provides the necessary authority and technical experience in contracting to make the contract a workable document.

(4)     The manpower/management engineering office performs cost studies required by OMB Circular A-76.

b.       Relationship in Contracting Out.  The lines of authority and responsibility that exist when a function is contracted out, are shown in figure 1-4.

(1)     When a given function is performed in-house, with government personnel, the line of authority flows from the agency chief, to the functional area chief, and then to the function.  However, when authority is delegated in the contract environment, the contracting office (and especially, the contracting officer) become a part of the authority line.

(2)     By law, only a contracting officer may make a contract and may direct a contractor.  Hence, the functional area chief must act through the contracting officer to obtain and manage a service contract.

(3)     In a contract function, responsibility does not follow the line of authority.  Rather, the functional area chief has overall responsibility to see that the service is provided but works through the contracting officer’s authority.  Two major tools for that use are a well-defined quality SOW and a surveillance plan.

Figure 1-3. -- Responsibilities

Figure 1-4. -- Relationships in Contracting

1-6. -- Overview of the Method for Developing a Performance SOW and Surveillance Plan.

The method and the relationship of the tasks are shown in figure 1-5 and described below.  Succeeding chapters explain in detail how to accomplish each step or task in the method.

a.       Job Analysis.  In this phase, the analyst starts with information on how the job is being done and ends with the performance that will be required of a contractor.  The analysis consists of these steps:

(1)     Do Organizational Analysis.  First, the analyst reviews the current organization and identifies the services it provides.

(2)     Prepare Tree Diagram.  A tree diagram breaks a job into smaller and smaller parts.  Each part brings about a final result or service.

(3)     Do Work Analysis.  Take each part of the tree diagram and break it into input, work, and output.  Input is what is needed to do the job, work is what steps are needed to do the job, output is what the work produces.  During this step the analyst decides, with management, what outputs the contractor will provide and what work will remain in-house.

(4)     Gather Data.  After the analyst has picked the services on the tree diagram that are to be contractor supplied, data can be gathered.  In this step, the analyst collects data on how much input is required to do the job, and how often the output is provided.

(5)     Do Performance Analysis.  Each service proposed for contract has a performance value assigned.  The analyst decides how the service can be measured.  With management, the analyst determines what standards apply.  With management, an acceptable quality level is applied.

(6)     Analyze Directives.  During this step the analyst decides what directives, if any, apply to the service to be provided.  Directives are classified as mandatory or advisory.  They must be held to a minimum.

(7)     Deduct Analysis.  During this step the analyst works with the manpower/management engineering office to prepare the estimated contractor cost of each specific service.  These costs are stated in the SOW as a percentage of total contract cost, for a formally advertised procurement.  These costs are used as the basis for deductions for non-performance; in a negotiated procurement, they are used to evaluate contractor proposals.  Actual negotiated costs re included in the SOW.

Figure 1-5. -- Overview of Analysis Steps

b.       Write the SOW.  The previous steps in job analysis are carried out for the dual purpose of writing a SOW and a surveillance plan.

(1)     If job analysis has been done properly, the concurrent writing task should be relatively easy.  Concurrently means that neither task is truly independent; what is written into the SOW influences what is put into the surveillance plan.  Likewise, the surveillance plan will force the writer to make sure that outputs and procedures in the SOW are measurable.

(2)     Writing the SOW consists of:

(a)      Expressing the contract-desire output in clear, simple, concise, and legally enforceable terms.  In determining what level of detail to include in the SOW, the analyst must consider whether to quote from a mandatory regulation or to refer to it.

(b)     Using a format that presents the specified tasks in an easily understood manner.  (See explanation in Chapter 3).

(c)      Determining what exhibits will help convey to the contractor the job that needs to be done.

c.       Writing a Surveillance Plan.  The surveillance plan is a document used to make sure that systematic quality assurance methods are used.  It assumes that the contractor is responsible for managing and controlling the output of service.  The government plan seeks to determine if contractor-provided service meets the quantity and quality standards.  The development of the plan involves these major steps:

(1)     Identifying Key Performance Indicators.  The job analysis phase identified many performance indicators.  Not all of these indicators are critical to the service being provided.  During this step the analyst must decide which indicators to include in the plan, using as criteria, the criticality of the process and its output, the availability of quality assurance manpower, and the adaptability of each indicator to overlap and check many kinds of outputs.

(2)     Identify Information Sources.  Each plan uses many sources of information (for example, existing management information systems, customer complaints, and random sampling).

(3)     Develop Tools.  The writer of the surveillance plan has many tools.  These tools are:

(a)      The Sampling Guide.  The sampling guide is a written procedure which states what will be checked, the standard of performance, and how the checking will be done.  (For a sample guide, see Chapter 4).  The sampling guides used in this regulation are based on statistical techniques called for in Military Standard 105D, Sampling Procedures and Tables for inspection by Attributes.  By sampling a small part of the total service in a random fashion, the QAE can accept or reject the service, based on the standard.

(b)     Decision Tables.  When a service is rejected, a decision must be made as to who is at fault (the contractor or the government).  A decision table is used for this purpose.  The decision table identifies different kinds of unsatisfactory performance, probable cause factors, and the things from which these factors could result.

(c)      Checklist.  The last tool is the checklist.  Checklists as used to record what has been checked by a sampling guide and to record information on contract items not covered by sampling.

(d)     Do Surveillance.  The final step is doing surveillance, that is, taking the written surveillance plan and using it on a daily basis.  In this step, random samples are drawn and schedules of quality assurance inspections made.  Contractor discrepancies are documented and corrective action taken.  If appropriate, money is deducted from a contractor’s payment by the contracting officer.