Army Implementation of Performance-Based Contracting 29 Jun 05 Mr. Jim Daniel Chief, Cleanup Division, USAEC

Army Implementation of PBC Why Use PBC? Performance-Based Contracting is intended to improve cost and schedule performance without compromising cleanups that are protective of human health and the environment Lower risk of cost growth Accelerates cleanup / property transfer Can be aligned to exit strategies or used to optimize systems Cost effective / lower remediation costs There are several reasons to use PBCs; however, the overall objectives are to improve cost and schedule performance without compromising protection of human health and the environment. Because PBCs are contracted on a Firm Fixed Price basis (either with or without environmental insurance) the Army is essentially able to cap the costs of environmental cleanup at its installations. PBCs are designed to restrict use of change orders because the contractor has agreed to an objective rather than specific steps to achieve an objective. Therefore, there is a lower risk of cost growth at installations implementing PBCs. Based on results to date, the Army is seeing that PBC contractors are nearly all ahead of or on schedule. This is partially due to the fact that the PBC contractors are highly motivated to achieve their payment milestones, but also because the PBC contracts afford more flexibility to the contractors than some of the more traditional contracts. Accelerating the cleanup often times facilitates either early transfer of the property, or in the case of an active installations, allows for the property to be placed back in active mission support activities. From the installation personnel perspective, the PBC allows less time to be spent on overseeing individual task orders and more time spent overseeing the overall cleanup strategy and approach. In addition to the cleanup objectives, the PBC contractor also is given the task of developing site/installation exit strategies and optimization strategies to help reduce overall long-term mortgage costs.

Army Implementation of PBC PBC for Environmental Cleanup Goal is for Contractor to achieve one or more of the following performance objectives for each site identified in the PWS: Remedy in Place with successful 5-year review Response complete Long-term monitoring with successful 5-year review Operating and performing successfully (OPS) Implementation of ramp down and/or exit strategy

Army Implementation of PBC Metrics Installation Restoration Program PBC goals: FY03: 3-5% of total program – achieved 9% ($37M) FY04: 30% of total program – achieved 36% ($141M) FY05: 50% of total program  GOAL ~$200M FY06: 60% of total program FY07+: 70% of total program Since its inception, the goals of the Army PBC initiative have increased. To date, we have met these goals, and are on target to do so again in FY05. As you can see, the overall goals eventually level off at 70% of the total program, recognizing that there are installations/sites where a PBC may not be the best tools to get the job done, and also recognizing the need for program management funds to remain in place.

Army Implementation of PBC Results of the PBC Initiative Since 2000, Army has awarded more than 30 PBCs $300 million in contract capacity Range in value from $700,000 to $52.4 million In FY04, 36% of Army’s restoration program was put on performance-based contracts (~$140 million) Contracts in 24 states and all 10 EPA Regions FY05 Summary: $130M applied to PBC through May 05 9 new PBC awards through May 05 16 others at some stage of procurement The $700,000 contract is for Fort Irwin, CA. The largest contract let to date is for $52.4 Million for the work at the Lake City Army Ammunition Plant in Missouri. Although we have $300 Million in awarded contract capacity, most of the contracts are not fully funded up front. Rather, awards are made each year as new funding becomes available.

Army Implementation of PBC Army PBC Awards to Date* This slide shows the approximate distribution of PBCs to date. As mentioned on the previous slide, the Army has PBCs in place in all 10 EPA Regions, and 24 states. That number is expected to increase this year as the FY05 contracts work their way through procurement. Hawaii BRAC Active * Installation locations are approximate

Army Implementation of PBC The Army PBC Process Preliminary Screening / On-Site Evaluation Draft and/or refine PWS/RFQ and IGE Is installation good PBC candidate? Is there agreement on the PWS/RFQ and IGE? This slide outlines the basic PBC candidate evaluation, procurement, contract award, and implementation framework. Each of the yellow diamonds represents a decision point along the path. The Army has established a process also for resolving differences of opinion between AEC and the installations as to whether a site or the installation is a good candidate for a PBC. Y N Seek input on PWS/RFQ and IGE N Can additional activities help candidacy? Y Is there a technically acceptable proposal? Conduct additional activities to prepare for PBC in future Release RFQ Y Y Bidders Site Visit Award PBC N N Proceed with current path forward Conduct technical evaluation Post-Award / Contract Implementation Regulator Involvement

Army Implementation of PBC The Future of the Army Initiative Continue current path for active and BRAC sites Nearly 30 evaluations or procurement actions on-going Evaluate viability for use in other areas Military Munitions Response Program SI pilot Regional Long-term Management Contracts Slow to develop (demand has to mature) Continue to learn from awarded contracts Because of the success of the Initiative, the Army plans to continue its current path for both the Active and BRAC sites. As shown in the previous slide, there are more than 20 procurements currently being worked. Several other installations were evaluated during the course of the year and determined either not to be candidates, or that the installation would be better suited for a PBC in FY06. In addition, the Army is currently evaluating the viability of using PBC in other areas: Site Inspection pilot for the Military Munitions Response Program is currently underway Pilot for a Regional LTM contract will be awarded this year Currently evaluating use of PBC for FUDS sites as well.

Army Implementation of PBC Observations and Challenges from the Past Four Years Project planning needs to be a team effort Clearly defined endpoints and objectives are required Including regulators throughout the process significantly increases acceptance Knowledgeable Contracting Officer and Contracting Officer Representative are required Timely input of evaluations of contractor performance into database is essential

Army Implementation of PBC Observations and Challenges from the Past Four Years Competition is key to a fair price Contractor transition is critical There is a short-term impact to the installation program during the transition to a PBC

Army Implementation of PBC Continuing Challenges Balancing contractor risk, cost for the work, and desire to achieve site closeout against the uncertainties Ensuring sufficient contractor pool Determining appropriate performance objectives

Army Implementation of PBC Resources Performance-Based Contracting web page http://aec.army.mil/usaec/cleanup/pbc00.html The PBC web page contains a great deal of information about the Army’s initiative, including frequently asked questions, updates on procurement status for the FY05 installations, and links to other resources within the Federal government.

Army Implementation of PBC BACKUP SLIDES

Army Implementation of PBC PBC Accomplishments   Installations Sites CTC ($M) IGE ($M) Contract Award ($M) CTC - Contract ($M) IGE - Contract ($M) FY01-02 Fort Gordon, Fort Leavenworth 39 42.200 39.167 3.033 FY03 Fort Dix, Fort Jackson, Lake City AAP, Ravenna AAP, Sierra Army AD 70 123.680 117.300 98.795 24.885 18.505 FY04 Aberdeen PG - Graces Quarters, Aberdeen PG - Other Aberdeen Areas, Fort Detrick, Fort Irwin, Fort Rucker, Holston AAP, Hunter AAF, Iowa AAP, Louisiana AAP, Milan AAP, Reserves, Riverbank AAP, Rock Island, Fort Leonard Wood 147 269.351 207.616 165.903 103.448 41.713 FY05 Hawaii Installations, Camp Navajo 17 12.38 9.06 10.08 2.3 -1.02 Cumulative 273 447.61 376.17 313.94 133.67 62.23 Cost Avoidance on all PBCs (based on CTC) 29.9% Cost Avoidance on all PBCs (based on IGE) 16.5% While cost avoidance has never been the Army’s primary goal for the PBC initiative, there is a clear indication that the PBCs are being awarded at numbers significantly less than the Army had planned (in the case of comparing to the CTCs), and on what the Army had estimated (in the case of comparing to IGEs). While one can argue the validity of the IGE and/or the CTC, the fact remains that because these costs are now locked, the Army can shift a minimum of 16.5% of the resources originally planned for these sites to get work started at other sites. That means more funds are getting on the ground quicker at the Army’s installations.

Army Implementation of PBC FY05 Planned Procurements Aberdeen Proving Ground, MD (3 procurements) Alaska installations (Fort Richardson / Haines Terminal) (2 procurements) Camp Bullis / Fort Sam Houston, TX Camp Crowder, MO / Fort Chaffee, AR Dugway Proving Ground, UT Fort Drum, NY Camp Navajo, AZ (Awarded) Fort Gillem, GA Fort Knox, KY Fort Meade, MD Fort Pickett, VA Joliet Army Ammunition Plant, IL Hawaii installations (Tripler / Schofield Barracks) (Awarded) Longhorn AAP, TX Los Alamitos / Camp Roberts, CA Picatinny Arsenal, NJ Ravenna AAP, OH Redstone Arsenal, AL Soldier System Center, MA As shown on the metrics slide, the FY05 program is aggressive. All of the above installations are being (or have been) evaluated in FY05. Most will be moving forward with a procurement. Several different contract mechanisms are being used, including the ACSIM ID/IQ, and multiple Corps of Engineers contracts. Information on the procurement status of these installations can be found on AEC’s website (provided at the end of this presentation)