Brief overview of Performance Based Contracting

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Management/Administration of a Performance Based
Contract
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Management/Administration of a Performance Based
Contract
Susan Thibodeaux Asst General Manager/Contract
Administration Manager IAP Worldwide
Services Session 1, 1205pm-1235pm ET NCMAs
1st Performance-Based Service Acquisition
Community of Practice - Virtual Conference
Wednesday, March 31, 2010 1200pm - 400pm ET
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Brief Refresher Performance Based Contracting

• What a method of contracting where the results
  are defined rather than the process.
• Includes measurements
• Incentives
• Why FAR 37.102  Policy. (a) Performance-based
  acquisition (see Subpart 37.6) is the preferred
  method for acquiring services (Public
  Law 106-398, section 821).

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PBC Refresher cont.

• Benefits
• Better performance
• Results oriented
• Better price
• Best and commercial practices and less mandated
  how tos reduces costs
• Contractor has flexibility and incentive to be
  innovative
• Contractor motivated to save money

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FAR

• FAR 37.106 and 37.602-4
• Ensure that performance-based contracting used to
  the maximum extent practicable.
• Use contract types that best fits the work and
  likely to motivate contractors.
• Use positive or negative performance incentives
  to the maximum extent practicable.
• Quality assurance surveillance plan shall contain
  measurable inspection and acceptance criteria
  corresponding to the performance standards of the
  SOW.

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Refresher cont.

• Key Elements
• PWS or SOO
• What, where, when, how many
• Not HOW!
• Performance Standards
• Quality Assurance Plan
• Metrics
• Incentives/penalties

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Key Elements of a PWS

• A statement of the required services in terms of
  outcome
• A measurable performance standard for each
  outcome 
• An Acceptable Quality Level (AQL) for each
  outcome.
• The PWS draws its information from the Work
  Breakdown Structure (WBS)
• PWS is written concurrently with the Quality
  Assurance Surveillance Plan (QASP)

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Results orientation

• The standards of measurement are
  results-oriented
• quality of work or product
• quantity of work or product
• accessibility
• timeliness
• accuracy
• customer satisfaction
• not unduly burdensome.

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Example

• Provide taxi service
• Old type SOW drive to passenger pickup, pull
  over to curb, put vehicle in park, wait for
  passenger, open door, drive to destination.
• New PWS pickup passengers on time
• better gt pickup passengers within five minutes
  of an agreed upon time
• Standard could be 95 on time (within the five
  minutes)
• Metrics would be percentage of pickups that
  comply with the standard (or the percent that
  dont)
• Failure to perform within the standard would
  result in a contract price reduction.

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Performance Standards

• According to the GAO, its important
• that standards are not set so high that they
  could drive up the cost of service or too low
  that they may act as a disincentive to good
  contract performance.

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Metrics more later

• Performance indicators and standards
• Collect, track, and share data
• Conduct surveillance systemically
• Document results
• Review periodically and jointly with the
  contractor
• Are we measuring the right things?

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Plans used in PBSC Mgt

• Quality assurance surveillance plans (QASP)
• Details how and when the Government will survey,
  observe, test, sample, evaluate, and document
  contractor performance according to the
  Performance Work Statement (PWS).
• Performance requirements summaries (PRS)
• Reflect the relationship of the PWS and QASP
• Details each critical task, the performance
  standard, the Acceptable Quality Level (AQL), the
  surveillance method, and the incentives/disincenti
  ves in an easy to use matrix format.
• Acceptable quality levels (AQL)
• A quality standard that allows a prespecified
  number of defects
• Worst case quality level

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QASP

• Quality Assurance and Surveillance Plan
• Government's QASP and the contractor's Quality
  Control Plan work together to ensure project
  performance standards are met.
• Is the primary contract administration tool
• directly corresponds to a contracts specified
  performance standards,
• is used to measure contractor performance
• ensures that the Government receives the quality
  of services called for under the contract and
• pays only for the acceptable level of services
  received.
• Living document

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QASP

• A good QASP includes
• measurable inspections
• acceptance criteria
• Surveillance schedule
• Surveillance method
• corresponds to the performance standards of the
  SOW
• Documentation and records requirements

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QASP cont.

• A NASA study found that many service contracts
  were missing QASPs. QASPs apply even if its
  a(n)
• Award fee contract
• Research Development (RD) contracts
• Contract where the services are performed
  off-site
• Small dollar value contract
• Contract with a small business contractor
• Contract where the contractor has an established
  internal quality control plan

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Quality Assurance Surveillance Plans

• According to the GAO The plan should focus on
  the quality, quantity, and timeliness of the
  performance outputs to be delivered by the
  contractor, among other things, and not on the
  steps required or methods used to produce the
  service.

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Using the QASP

• Meet with all concerned parties on a regular
  basis to address issues
• Track performance and assess progress against the
  QASP
• Address performance risks or deficiencies early
• Update the CMP as necessary
• Update the QASP as substantive changes to the
  contract requirements, performance, or contract
  surveillance approaches occur.

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Surveillance Methods

• Measure the outputs not the method
• 100 inspection
• Only when risk to life, safety or health
• Periodic inspection
• Requires planning
• Random sampling
• Used for production or recurring requirements
• Customer feedback
• Random
• Surveys
• Contractor self-reporting

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Incentives

• Use to force compliance with standard or
  encourage better performance
• Can be positive or negative (or both)
• Use incentives for priority/important tasks
• Should be challenging but achievable

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Incentives cont.

• Must be defined in solicitation/contract
• Incentives can be monetary or non-monetary
• Deducts should be somewhat equivalent to value of
  task or value of the output
• There must be specific formulas for calculating
  payment due for deductions

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Contract Management

• Starts early
• Begins during the acquisition planning phase
• Recognizes the performance-based elements of the
  contract
• The Contract Management Plan is in place before
  or shortly after the time of award
• Takes a team
• Contract Specialist
• Program Manager/technical representative
• Representative from the customer
• Contractor

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Contracting Officers Role

• Ensures performance of all necessary actions for
  effective contracting (FAR Part 42),
• Ensures compliance with contract terms
• Safeguards the interests of the contractual
  relationships
• Govt customer
• Contractor
• Accepts deliverables
• Monitors performance
• Enforces the Governments rights when necessary

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Contracting Officers role cont.

• Modify contracts.
• Assist in monitoring contractor performance.
• Claims and REAs
• Disputes and litigation,
• Partnering agreements and MOUs
• Records management
• Process invoices provide funding as required
• Process deductions
• Terminate contract if necessary

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Contractings role

• KO is responsible for receiving the contract
  performance reports, approving changes to the
  contract, and generally ensuring that the
  contract requirements are being met
• The KO relies on subject matter experts for
  advice
• Technical, legal, financial, etc
• The KO is responsible for enforcing the terms of
  the contract and requesting corrective action as
  necessary
• Manage the contract not the people or the process

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Contracting Officers Technical Representative
(COTR)

• Must be competent and familiar with technical
  requirements
• Monitor contractor performance
• Must be detailed
• Record keeping
• Complete and accurate
• Use the contract as the base
• Track deliverables
• Professional working relationship with the
  contractor
• KNOW the contract!
• Build checklist for monitoring performance
• Per inspection and acceptance guidelines in
  contract

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After contract award

• Post Award Meeting
• Meet with the contractor
• Stakeholders
• Review
• Requirements
• Communications
• Deliverables
• Performance monitoring/QASP
• Partnering
• Incentives/penalties

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Contractors role

• Adhere to contract's terms and conditions
• Establish Quality Plan
• Measurements and metrics
• Monitor and measure performance
• Documentation
• Process improvements
• Communications with team members
• Open and honest
• Suggestions
• "to deliver on a timely basis the best value
  product or service to the customer

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Documentation

• Inspection/surveillance results
• Detailed notes and records
• Minutes of meetings
• Formal working agreements
• Joint processes
• Informal agreements capture in writing

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The New Paradigm

• FAR 1.102(c) provides
• The Acquisition Team consists of all participants
  in Government acquisition including not only
  representatives of the technical, supply, and
  procurement communities but also the customers
  they serve, and the contractors who provide the
  products and services.

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PBSC Leads to Partnering

• Seven Steps To Performance Based Acquisition
  states The integrated project team should plan
  to rely less on management by contract and more
  on management by relationship. At its most
  fundamental level, a contract is much like a
  marriage. It takes work by both parties
  throughout the life of the relationship to make
  it successful.
• Common characteristics of successful partnering
• Trust and open communication
• Strong leadership on both sides
• Ongoing, honest self-assessment
• Ongoing interaction
• Creating and maintaining mutual benefit or value
  throughout the relationship

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Partnering

• Meet with the contractor to identify ways to
  improve efficiency and reduce the effect of the
  "cost drivers."
• The contractor and government work together to
  identify more effective and efficient ways to
  measure and manage the program.
• Establish a Customer Process Improvement Working
  Group that includes contractor, program, and
  contracting representatives.

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Performance reviews

• Performance reviews should take place regularly
• ALL performance should be documented, whether it
  is acceptable or unacceptable
• Contract management performance reviews,
• Assessment - not for formal reporting and
  rebutting,
• Review performance levels and metrics
• Monthly or bi-monthly performance reviews
• Contracts, technical, customers and contractor
• Require improvement plan if downward trend
• Joint actions
• Meet more often if necessary

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Contract Management is Vital

• Poor performance monitoring, sporadic quality
  assurance, and little effort expended into
  managing changes or settling disputes results in
  damages to both government and contractor.

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Re-Cap

• Culture change
• Start early with planning
• Manage performance not process
• Manage the contract not the people
• Use the QASP
• Partner