By Anonymous on Thursday, March 22, 2001 - 12:15 pm:

I'd like to start of discussion on PBSA. Does anyone have a good internet site(s) for best practices that resulted from beginning the process of changing the way you acquire services to performance based. If a contracting office has not used PBSA in the past and wants to start, is there a good starting point. I guess to me, it would seem best to start by, 1) identifying all service requirements; 2) identify which could be converted to a performance base SOW easily; 3) which need further research; and 4) which do not fit into the performance base method. But then what? Being a contracting office, we don't write the SOW, we don't supervise the program office or customer, we can't force them to change. Any thoughts will be appreciated!

By bob antonio on Thursday, March 22, 2001 - 12:26 pm:

I think I have captured a large number of the "how-to" items here.

http://www.wifcon.com/procurementplanning.htm

By formerfed on Thursday, March 22, 2001 - 12:42 pm:

For starters, someone in your organization or a higher level person that oversees procurement needs to convey to agency management that PBSA is here to stay. No only is there new requirements to increase the number of new awards, but there's strong evidence that agencies save money and get better performance. In other words, if you have problems getting PB work statements, someone needs to change the mindset and culture.

You'll find lots of good things that Bob captured. The problem you might encounter is that most examples are for things like maintenance, janitorial, and routine type work. Many agency contracts don't fit into that mold, and they buy unique and rather complex services. However, if that's the case, the examples get you thinking along the right lines.

Another thing is that just writing a PB spec isn't enough. To reap maximum benefits, the effort needs to start with a consolidated team of all the key players, including customers of the process. The group needs to brainstorm, and come up the needs/objectives stated in the highest functional level possible. The question that needs answered is what is this procurement all about and what makes a good outcome. Once you have that information in a concise statement, that becomes part of your solicitation. Let industry in their responses have lots of flexibility to propose solutions. Also, let them propose performance measures. Remember this all is negotiable. Take it to the point where the company can earn more for superior performance, and get penalized for poor work.

You'll find that once you get started, very few contracts won't lend themselves.

By bob antonio on Thursday, March 22, 2001 - 01:25 pm:

Formerfed:

I would go back one step further. In 1993, Congress enacted the Government Performance and Results Act. That act requires strategic plans (strategic goals and objectives for 5 years or so), annual plans (annual goals and objectives to meet those in the strategic plan), and an annual performance report that shows the results. It also provided for a test of performance-based budgets. The Office of Management and Budget then moved forward with performance-based budgets.

If an agency looks at its enacting legislation, it can determine what it must do. For simplicity, they are the strategic goals and objectives. At this point, I believe a decision should be made--together with the implementation of the Federal Activities Inventory Reform Act (FAIR)--whether the work should be done in-house, whether industry or outside entities shoul be encouraged to do the work while the government moves out of the area ( e.g., should firstgov.gov be scrapped when google uncle sam is doing it), or whether the government should do the work but contract it out.

For any work contracted-out, the agency should make every effort to link the goals, objectives, and incentives, to the agency's strategic goals and objectives and annual goals and objectives.

This is not easy, takes a great deal of pounding into program heads, and takes practice.

By Anonymous on Thursday, March 22, 2001 - 02:45 pm:

BOB
Your last sentence is the crux of this matter. In GOVEXEC this week was an article about an OMB memo directing agencies to re invigorate their PBSc efforts. What astounded me was the people responsible for carrying out this agenda is limited to procurement offices or contracting officers. This is the kind of pointy-headed thinking that cause many of us PTSS. It is almost as if we had a "the tail shall wag the dog" mandate. And what makes matters worse is when requirements folks read memos of this nature and state,without fear of contradiction, that its my problem because it only mentions procurement offices and then pours salt in the wound
by charging us with the responsibility of convincing program folks its in their interest . Why doesn't someone mandate that requisitioners be held accountable for this implementation.

By bob antonio on Thursday, March 22, 2001 - 03:53 pm:

Anonymous:

That OMB memorandum is on the "last week's" news page. OMB is responsible for federal contracting policy and the implementation of GPRA. At times that Office is forceful and at other times it acts like a scolded puppy. I do not see a good melding of GPRA and PBSA there. I cannot explain--it is the executive office of the president.

The agency that may be the furthest along is the Department of Energy. I spent about 5 years cajoling and speaking with Department of Energy strategic planning, program, contracting, and contractor staffs about GPRA and PBSA. The last time I looked--about 2 years ago--I had high hopes for them. Since about 70 percent of DOE's funds go to its major contractors, they were ideal for linking it all together. NASA with its large facility operators and programs also would be ideal.

At the same time that GPRA was moving forward, DOE began converting their major contracts to a form of performance contracts. The key was linking the contract goals to the program goals. There were some ups and downs.

Here is a link to DOE's strategic planning group. I think you will find some ideas about linking programs and contracting.

http://www.cfo.doe.gov/stratmgt/index.htm

By Anon2 on Thursday, March 22, 2001 - 04:04 pm:

Anonymous:

Beyond the point of saying that agencies should not overspecify their requirements, PBSA is a crock.

By joel hoffman on Thursday, March 22, 2001 - 05:56 pm:

A couple of observations concerning cost contracts. Most of the ones I deal with are way too prescriptive. The contractors seem to be "lackeys" - will do little on their own initiative, even to develop strategic plans. In most cases, the Government specifically tell them how to staff the job.

On the other hand, one would have to have STRONG incentives for performance and "disincentives" for lack of performance for performance based contracting to succeed on a cost reimbursible basis. These observations are particularly applicable to the service and systems contracts in our program. Happy Sails! Joel

By Anonymous on Friday, March 23, 2001 - 09:34 am:

Anon 2, you sound a little cranky. Bad experience? Share it with us, if you can.

By Anon2 on Friday, March 23, 2001 - 10:14 am:

Anonymous:

The policy about performance-based service acquisition (PBSA) is poorly worded and ill-adapted to the practical realities of large government service requirements. Its authors have ignored an extensive literature (more than one hundred books and articles in economic and legal journals) that explains why the specification of results in measurable terms is usually impracticable for any but the simplest service requirements and why an emphasis on contract writing in the acquisition of services is misplaced. They have also shrugged off the obvious and persistent difficulties that agencies have encountered in trying to write performance work statements.

In short, PBSA is not just unintelligent, it is positively anti-intellectual to the extent that it goes beyond telling agencies not to over-specify. The persistent ballyhooing of PBSA reflects the "success-story," rah-rah, get-on-board mentality of the acquisition "profession," a mentality which explains why we never really fix our goofy processes.

This topic has been discussed extensively in this forum and at the old OFPP Water-Cooler. There is nothing more to say.

By Anon3 on Monday, March 26, 2001 - 11:10 am:

I agree with Anon2.

I work in the Dept of Energy, and as Bob said in his message, we have spent a great deal of resources and effort implementing performance-based contracting. These efforts have paid tremendous benefits to the agency. Our largest contracts are currently much better aligned to our agency missions, with fee tied to the achievement of specific mission milestones.

Having said that, all you have to do is read the OMB/OFPP Performance-Based Service Contracting (PBSC)Solicitation/Contract/Task Order Review Checklist (located at www.arnet.gov/References/
Policy_Letters/pbscckls.html) to see why OMB/OFPP's guidance is so "unintelligent" and "positively anti-intellectual," in Anon2's words. DOE, in spite of years of efforts, continues to argue with OMB/OFPP over the PBSC designation of individual service contracts. OMB/OFPP turned a great idea into a numbers game, rigged the definition of PBSCs so that no one can tell whether a contract is or isn't a PBSC, then harrassed agencies over their implementation of PBSC policies.

No wonder so many agency contracting personnel think PBSCs are a joke. We don't even know what they are, because every time we negotiate a PBSC, OMB/OFPP tells us it isn't one.

By formerfed on Tuesday, March 27, 2001 - 08:36 am:

Anon3,

I wasn't aware that OFPP split hairs on the definition. In any event, you say that DOE reaped tremendous benefits. Isn't that the bottom line?

As I mentioned before (and Bob added a key point that I left out), performance based contracts have the potential to do great things. To me, anything that promotes competition, allows for more flexibility for industry to be innovative in their approaches, links activity to agency goals and objectives, and provides incentive for contractors in what are truly the important matters is good. Whether a particular contract meets a definition or not is immaterial.

By Anon2 on Tuesday, March 27, 2001 - 10:40 am:

formerfed:

I think you missed Anon3's main point, which is that OFPP is insisting upon an unreasonable standard for PBSOWs. Look at the OFPP checklist that s/he mentioned, especially items 1 through 4.

The problem is in the requirement in FAR 37.601(b), 37.602-1(b)(2) and (3), and 37.602-2 for "measurable" performance standards and inspection and acceptance criteria in statements of work and quality assurance surveillance plans. To most people, "measurable," taken literally, entails objectivity and quantification. But most of the time, objectivity and quantification are impracticable in the specification of services.

Unfortunately, we've got people running around trying to establish measurable standards for "clean" in janitorial contracts instead of saying "mop the floor every night," because "mop" specifies how the work is to be done. Goofy. But don't blame it on the folks in the field. Blame it on an ill-conceived concept and a poor expression of policy. Like almost all such policies it says to use PBSOWs "when practicable"; but to staff wienies, that almost always means "always."

See the article November 2000 issue of The Nash & Cibinic Report by Michael Love and the letter in the January 2001 issue by Vernon Edwards for two other critiques of PBSA.

Look, formerfed: if PBSA means leaving out unnecessary "how to" requirments, then yes, PBSA can enhance competition and save money and is a worthwhile policy objective. But if PBSA means trying to come up with a measurable performance standard for each and every task and subtask, then it is an exercise in futility and frustration in all but the simplest of service acquisitions. That is so for two reasons: first, no matter how hard you try, you cannot think of or fully specify every task you want the contractor to perform in complex and extended services; second, even if you can, the standard of performance may not be readily measurable in any objective sense and/or the standard may be different from one instance of performance to another.

Insistence on measurable performance standards often leads agencies to specify relatively trivial requirements, like timely report preparation, because they are more readily subject to measurement. It also leads to the excessive breakdown of requirments into small parts or "micro-requirements," because it is sometimes easier to establish measurable standards at very low levels of the work breakdown structure (what OFPP calls the "tree diagram"). Such "micro-requirements" can distract the parties from the overall objective(s) of the contract.

PBSA wouldn't be so bad if it were not for the Bandwagon Bunch, who have ballyhooed and celebrated the policy without thinking clearly about what "measurable" means. When they say, "measurable," do they literally mean "quantified"? If not, then what do they mean?

Now, if you want to see an example of a good PBSOW, look at the one in the 1997 NASA contract with Thiokol for the manufacture, delivery, recovery, and refurbishment of the Space Shuttle solid rocket boosters. It is short (about 3 pages), to the point, includes no unnecessary how to, trivial, or micro-requirements, and includes no quantification. NASA's Associate Administrator declared it to be an "agency model of excellence."

By formerfed on Tuesday, March 27, 2001 - 11:12 am:

Anon2,

Thanks for taking the time to elaborate on your position. I don't disagree at all. I also understood Anon3's point, but perhaps I didn't express it well. What I meant to say is that performance based works, but maybe not what OFPP and the policy has in mind. Too many measurable standards doesn't cut it, particularly at the subtask level - but a few that assess the right ones do. I believe that even the most complex service contracts lend themselves to the concept, but a lot of preliminary work needs done before a competition. This includes talking lots with industry and letting potential offerors see what the job is all about. Let companies bidding propose measures that tie in with their unique solutions. I think standards are necessary for two reasons - define level of acceptance and motivate for exceptional performance.

By bob antonio on Tuesday, March 27, 2001 - 12:22 pm:

Anon3:

Could you elaborate on the specifics that OMB is using to claim that DOE's Performance Based Management Contracts are not Performance-based. Can you tell me if it is OMB, OFPP, or both that are saying the contracts are not performance-based. Although everything performed under one of these contracts, such as basic research, cannot be performance-based, there are things that fit.

Several examples of performance come to mind. On one contract, I remember a goal was to keep a science facility online for scientific experiments for a specified percentage of a day. In the environmental remediation area, a contract used long-term mission goals to identify tasks and the importance of those tasks in fulfilling the agency mission. The amount of fee was allocated in accordance with the long-term goals and their level of importance. With a way to determine if these goals were achieved, I view them as performance-based.

On the other hand, at another agency, I remember the agency was under a mandate to implement performance-based contracting. Two information technology acquisitions were selected. The performance-based efforts were applied too early in the acquisition and the contract goals became reports, etc. to set up the acquisition process. I cannot remember the exact details but they were trying too hard. When I read anon2's note, it made me remember and cringe.

By Anon3 on Tuesday, March 27, 2001 - 06:15 pm:

It's been a while since I've waded into the fray between DOE Headquarters and OFPP on this -- for the last three years, I've told HQ that I won't be engaging in the arguments or the "bring-me-a-new-rock" exercises.

First of all, it's OFPP rather than OMB. It may even be limited to a few individuals within OFPP.

Most of my counterparts have reached the conclusion that if the contract isn't firm fixed price, OFPP will say it isn't PBSC. Even though type of contract is not one of the Mandatory Criteria listed in the policy. The example you gave, Bob, goes right to a second point. Unless the fee for a given performance measure goes both positive and negative, it doesn't meet the standard. That is, it isn't enough to earn a smaller fee. Or even zero fee. You know enough about DOE's contracts to know that many of DOE's largest contracts are with non-profit entities -- Princeton, Stanford, the University of Chicago, etc. Their boards of regents don't allow them to enter into contracts presenting an opportunity to jeopardize the universities' endowments.

Like I said, it's been very frustrating to develop workable, performance-based approaches, only to get caught up in useless numbers games, narrow interpretations and "gotcha" exercises.

By bob antonio on Tuesday, March 27, 2001 - 08:05 pm:

Anon3:

When I wrote the example about fee, I thought about the non-profits and the universities and I twitched. Then I thought about the fact that the fee (for profit-making firms) may not include a moving scale for level of performance. You would lose on the incentive and disincentive issue. I twitched again. When I read the part about firm-fixed price in the OFPP document, I knew we were in trouble.

When I first looked at DOE Management and Operating contracts (M&O) in 1990, it took me about a year to accept them as contracts. They are unlike other contracts in many respects. For individuals that have not seen an M&O contract, consider that the M&O contractors prepare the initial budget for about 70 percent of the Department of Energy's (DOE) budget. For the most part, these contracts are budget-based and not price- or cost-based. Maybe OFPP could find the price negotiation section in DEAR Part 70.

In one of the very first incentive provisions attached to a performance goal, a contracting officer used a budget request submission to analyze proposed budget amounts and used DOE's accounting system (Yes, DOE's accounting system) to evaluate incurred costs for similar contractor work. M&O contracts, for the most part, are integrated into DOE's accounting system. Her technical evaluators were DOE's field office budget examiners. This was a novel effort to say the least. Although novel, you can see how the contracting officer attempted to apply general contracting policy to her situation. In the end, the contractor and DOE believed it had an effect on contractor performance. I don't know if this is the way to go but testing of the approach would have answered it.

DOE's programs, in large part, can be helped by the concepts of the Government Performance and Results Act (GPRA) and the basic concepts in OFPP Pamphlet Number 4. You cannot apply the detail of the pamphlet to all M&O work but the basic concepts are there. You cannot apply the OFPP document on arnet either. However, the concept is the same. When DOE's M&O contracts include performance goals that match the mission goals of the agency as provided in the strategic goals and objectives, these are performance-based contracts. In judging these contracts, a reviewer must have the intelligence and competence to apply contracting theory and policy to the specific situation.

By Anonymous on Tuesday, April 10, 2001 - 10:52 am:

How much work will it take to develop a PBSC A-76 effort? How would you price it?

By Heironymous on Tuesday, April 10, 2001 - 03:31 pm:

Anonymous:

Your question is impossible to answer. You have provided no information about the nature and scope of the requirement. And are you asking "how much work" it would be for an expert, a journeyman, or a novice?

Come on!

By formerfed on Wednesday, April 11, 2001 - 10:51 am:

Anonymous,

18 months seems to be an average time for A-76. Doing a PB work statement might require an additional 90 days to 6 months if done properly. The problem with doing PB procurements is industry (at least the marketing types that deal with the Federal side) doesn't know how to bid. Their commercial counterparts are better suited, so you need to allow lots of preparation time in the pre-proposal arena to get industry up to speed. This all adds time upfront in the procurement planning and market reseach components. You really need to have extensive dialogue with industry so they know what you want and how to bid.

So, bottom line is 12 months under a very concentrated effort and perhaps 2 years at a more relaxed pace. This is a just a guess and so many other factors come in play such as: (1) how complex your requirement is, (2) how much support you get from your agency in preparing the MEO, (3) how much opposition your union presents, (4) the overall urgency, and (5) how effective you are in communicating with and informing industry.

Hope this helps.

By formerfed on Wednesday, May 02, 2001 - 08:42 am:

I just got around to look at the various "how to" documents Bob referred us to above at this site. The DoD "Guidebook for PBSA" - http://www.acq.osd.mil/ar/#pbsa - I believe is the best guidance I ever read in a single source (outside of Cibinic and Nash;s "Formation of Government Contracts"). Not only does it give lots of advice on how to do performance based SOOs, it encompasses practical "how to's" using all the tools and techniques I found to work - IPT's, every team member contributes in all phases, thorough and early market research and planning, focus of outcomes in defining requirements and assessing performance, incentivise industry to be innovative, and open and constant communication with the contractor as a partner.

This should be required reading for everyone.