1. U.S. General Services Administration
Performance Based Acquisition Chris Hamm Operations Director (acting) GSA FEDSIM

2. Topics Introductions PBSA History FAR References PBSA Goals
Perspectives
Seven Steps
Training

3. History 1991 – OFPP Policy Letter 91-2 (Administrator Allan Burman)
1993 – GPRA
1994 – FASA and OFPP Pilot Project for PBSC
1997 – Changed the FAR to incorporate OFPP Policy Letter 91-2 and rescinded the policy letter in 2000
2001 – Public Law , Section 821 – Added to the FAR a PBC preference and order precedence
2004 – SARA PBC change (Section 1431 and Section 1433)
Treat certain performance-based orders and contracts as commercial items if certain conditions are met
report on these contracts and orders in FPDS
2004 published an interim rule under FAR Case
2005 published final SARA PBA changes
*PBA formerly Performance-Based Contracting (PBC).

4. PBA FAR References
FAR Statement of Guiding Principles – highlights PM role
FAR Part Definition
FAR Part Acquisition Planning
FAR Part Market Research
FAR Part Describing Agency Requirements
FAR Part 16 - Types of Contracts
FAR Part 37 - Service Contracting – recognizes use of SOO when PWS is not suitable
FAR Part 46 - Quality Assurance Requirements

5. Actual PBA Goal (Average Government-wide PBA Goal achieved)
PBA Goals
Fiscal Years
Target Achievement Goals (eligible service contract dollars over $25,000 should be performance-based)
Actual PBA Goal (Average Government-wide PBA Goal achieved)
2001
10%
26%
2002
20%
34%
2003
30%
35%
2004
40%
41%
2005
51%
2006
40%+
49%
2007
45+
45%+ approx
2008
50%
TBE

6. Performance Based Services Acquisition
FY08 – 50% of all eligible services acquisitions should be PBSA
FAR Subpart 37.6
(b) Performance-based contracts for services shall include—
(1) A performance work statement (PWS);
(2) Measurable performance standards (i.e., in terms of quality, timeliness, quantity, etc.) and the method of assessing contractor performance against performance standards; and
(3) Performance incentives where appropriate. When used, the performance incentives shall correspond to the performance standards set forth in the contract (see ).

7. Should Everything be Performance Based?
PBA should be used to the maximum extent practicable on eligible service contracts. Agencies are not required to use PBA on: A&E, construction, utility services, services incidental to supplies, R&D, professional medical services, tuition, registration, and membership fees.

8. Government’s Perspective
Compliance – We have to do it
Funding – Less $ to do more work
Cost – Best Value for the taxpayer
Performance – Use of commercial best practices
Schedule – Congressional & Executive mandated dates
Personnel – More work, fewer 1102s
1991 – GSA had 33,000 Acquisition Professionals, buying $150B
2008 – GSA had 28,700 Acquisition Professionals, buying $560B
17% decrease is in staffing, 400% increase in volume.
PBA is hard, especially when we are overwhelmed with work and are starting with the old SOW

9. Contractor’s Perspective
Profitability – Companies are in business to make money first.
Project Success – Delivering success typically results in more follow-on business
Cash Flow – Regular payments and meeting corporate profitability is essential for publicly traded companies. Missing deliveries and failing metrics/SLAs results may lead to lower stock prices and replacement of personnel
Personal Services – Use of PBA reduces the ability for the Government to dictate the solution

10. PBA Contract Type Order of Precedence
Research
Development
Production / Sustainment
CPFF
CPFF / CPAF
CPIF/CPAF
FPAF/FPIF/ FFP
FPIF /FFP
Enhancements
Operations & Maintenance
R&D
Development
/ Production
Higher risk, less-defined
requirements
Lower Risk, well-defined requirements
Government assumes
Contractor assumes
more cost risk
more cost risk
Greater Performance Risk = Government Assumes More Cost Risk

11. Why Use Performance Based?
Achieve innovative solutions from industry
Maximizes Competition
Increases customer satisfaction because results are improved
Shifts the risk to the contractor
Improves the Contractor’s Performance
Encourages frequent communication between the COR and the contractor
Requires good contract management to ensure results are achieved
After award, it’s “we” and “us!”

12. 12

13. Establish the Team
Create an Integrated Project Team! The IPT should have your technical expert, stakeholders, financial person, and acquisition. Be sure to include contracting so that you start off on the right strategy and discuss the requirement.
Research the requirement to understand the market and research the market to understand alternatives and contract vehicles to meet your needs. 13

14. Describe the Problem that Needs Solving
Create an Integrated Project Team! The IPT should have your technical expert, stakeholders, financial person, and acquisition. Be sure to include contracting so that you start off on the right strategy and discuss the requirement.
Interview all internal and external parties to determine the needs, desired outcome, potential solutions, obstacles. Get Buy IN!
Take notes during the meeting, send them out to everybody. Documentation takes time, but eliminates complaints and issues that may arise. 14

15. Identify the elements of a good requirements document
At a minimum, include this information:
Background to include the current state or level of performance
Scope
Need or problem to solve
Outcomes
Performance measures
Monitoring methods for the requirement
Limitations or Constraints
Consider a
Statement of
Objectives! 15

16. Requirements Documents
Writing is hard! Very few people in most organizations have the skill and interest to write good requirements. Find these people, praise them, and promote them so they can never leave.
Use Templates! Most of the information about your organization remains constant. Have a standard SOW / PWS document template that somebody has ownership and keeps up to date.
If you don’t have one, send me an at and I’ll send you one of ours 16

17. Common Mistakes Let’s start with the old statement of work”
“We really like Vendor X and can’t get along without them, so let’s just wait until it is too late and sole source it to them”
“We are unique”
“Contractor shall do X upon direction of the Government”

18. Conduct Market Research
Contractual
Research existing contract vehicles to see if they can be used to meet your needs
There are tons of GWACs, MACs, and GSA Schedules out there. Generally, if you look hard enough or ask enough people, you can find somebody else has already done all of the work for you.
Document market research in Acquisition Plan
Technical
Research to find out possible solutions and involve your team members in market research
Research the public-sector to see what has worked for your counter-parts in other agencies
Research your industry before structuring the acquisition
Meet with industry one-on-one to learn about your industry. This is best performed before the actual solicitation 18

19. Developing the PWS Conduct an analysis Apply the “so-what?” test
Capture the results of the analysis in a matrix
Write the PWS
Let the contractor solve the problem 19

20. PBA Matrix Template 20

21. Using a Statement of Objectives ( SOO)
Begin with the acquisition’s “elevator message”
Describe the scope
Write the performance objectives
Identify constraints
Develop the background
Make the final checks and balances.
A SOO can be shockingly short 21

22. Due Diligence / Industry Days
What if you don’t know what you want?
Industry Day: This is our current environment and requirement, we give a presentation to interested vendors.
Due Diligence: The Government releases a draft description of the requirement and opens up the doors to interested parties, helping each side clarify the requirement
Industry Day is good, Due Diligence is better. Both will increase the quality of your RFP and the contractor proposal. 22

23. Decide how to measure and manage performance
People get really wrapped up in performance measures and SLAs, but this can be made simple if you want it to be.
Think about the outcomes rather than the processes or org charts
Use the systems that you have in place
Only measure things that are meaningful, not things because you can
Bad Example: Cost Savings over IGCE 23

24. Good Contract Types for Measuring
“Incentive” types (CPIF / FPIP)
Firm Fixed Price (FFP) and Fixed Unit Price (FUP)
Award Fee (CPAF / FPAP)
Note: Time & Materials can have metrics, but cannot have SLAs with financial incentives
GSA FEDSIM typical PBA project with SLAs is award/incentive fee, with a few managed services that are Fixed Unit Price 24

25. SLA Process (Pre-Award)
Draft Award Fee Plan and SLA Format Evaluation Decision:
Option 1: Specify SLAs & have all vendors bid the same
Option 2: Let vendors chose SLAs & targets
Review requirements before release and see if tasks are sufficiently defined to create notional SLAs to include as recommendations
Remember that the Government’s strongest negotiation position is pre-award
Award/ Incentive Fee Plans are unilateral before the period begins, bi-lateral during the period (if the CO allows any changes at all) 25
Option # 2 is harder to evaluate but better post award: Better measures, more leverage after award.

26. SLA Process (immediate Post-Award)
Ensure Contract Award includes any contractor proposed metric and/or changes from Negotiation
Set the percentage of award fee pool that is metric based
- General range from 20% to 50%. Try to increase over time
Set up separate meeting from Kickoff Meeting with key stakeholders to review metrics.
- Ensure that all stakeholders agree to the metrics
- Set the “weight” of each metric
- Make sure the metric is entirely within the control of the contractor (no mixed responsibility)
- Add further definition of the metric and all exclusions 26

27. Select the right contractor – Source Selection Process
Preparation and Planning Phase
Initial Evaluation Phase
Award Without Discussions
Competitive Range Determination
Discussions Phase
Final Evaluations Phase
Recommends oral presentations!
Decision Phase 27

28. Understanding the Source Selection Process
Evaluate Risk and Associate Surveillance and Incentives to the Risk
We can’t monitor everything
Require and evaluate Contractors Quality Control Plan. Put it on contract
Adjust the Government surveillance to the weaknesses and high risk areas
Use award fees and incentive fees to ensure contractor attention 28

29. Manage Performance
Conduct a post-award kick-off meeting with the ENTIRE team
Ensure all parties including the Program Manager understands contract administration roles and responsibilities
Ensure a COR/COTR is assigned to the contract
Conduct performance assessments and performance evaluations as planned and required
Manage the contract to obtain results! 29

30. Metrics & SLA Measurement
Recommend use of Contractor owned automated tools
If not owned by the contractor and proposed at time of award, be prepared to pay for the tool
Some agencies have their own tools. Make sure that you can extend the license to contractors
Use an IV&V contractor to sample the data from the contractor
Send the monthly results of the SLAs to stakeholders so there are no surprises when it comes time to pay the contractor
In general, contractors prefer SLAs because they have control over their own destiny in terms of meeting their SLAs and can obtain a very high fee amount relative to subject evaluations 30

31. Free Training
The FAI offers a FREE three-day workshop on PBA designed as a just-in-time solution for acquisition teams from various agencies.
The participants are encouraged to bring their current PBA documents and are given a chance to refine these documents in the training class.
The FREE training is offered at various locations around the country and is generally available through the Acquisition Workforce Training Fund. Students should register online at
Questions about this training should be directed to FAI student services at

32. More Free Training - DAU Resources
The DAU offers a four and a half day classroom course entitled “Mission Focused Service Acquisitions,” course number ACQ265, and two online learning modules: 1) Performance-Based Services Acquisitions, CLC 013; and 2) Work Breakdown Structure, CLM 013.
Acquisition Center of Excellence for Services Community of Practice, available at

33. Even More Free Training: DAU Online
On-Line, Free, 24/7, Self-Paced, Continuous Learning Modules:
CLC 106 COR with a Mission Focus
CLC 013 Performance Based Services Acquisition
CLM 013 Work Breakdown Structure
CLE 003 Technical Reviews
CLC 004 Market Research
CLM 012 Scheduling
CLC 007 Contract Source Selection
Plus many more…..
COR Community of Practice:
Connects you with training, policy, samples, community forum 33

34. Questions 34

35. Backup Slides

36. Firm Fixed Price
The basic type of fixed-price contract is the firm-fixed-price (FFP). Such a contract provides for a price that is not subject to any adjustment due to the cost experience of the contractor during the performance of the contract. Use of such a contract places maximum risk on the contractor and provides the maximum profit incentive for effective cost control and contract performance. Since the contractor has assumed all the risk, there is a minimum of administrative burden placed on the Government. An FFP contract is suitable when reasonably definite specifications are available, and fair and reasonable prices can be established from the outset by means of adequate competition, prior purchasing history, or reasonably accurate identification of uncertainties and their probable costs.
Generally considered the best contract type & the most performance based.

37. Fixed Price Incentive Fee
A fixed-price incentive contract is a fixed-price contract that provides for adjusting profit and establishing the final contract price by a formula based on the relationship of final negotiated total cost to total target cost.
A variation of FPIF can be performed by measuring cost at the unit level (e.g., number of widgets)
Most of the risk is on the contractor, with an separate pool of fee determined by objective criteria

38. Fixed Price Award Fee
The award fee is an incentive structure that provides the government a method of subjective, after the fact evaluation of contractor performance and affords the Government additional flexibility to reward a contractor for above average performance. Additionally, the award fee is not subject to the disputes clause of a Government contract.
Most of the risk is on the contractor, with an separate pool of fee determined by a combination of subjective & objective criteria (e.g., 60% SLAs, 40% Qualitative)

39. Cost Plus Incentive Fee
Description: A cost-reimbursement contract that provides for the initially negotiated fee to be adjusted later by a formula based on the relationship of total allowable costs to total target costs. This contract type specifies a target cost, a target fee, minimum and maximum fees, and a fee adjustment formula. (FAR )
Application: Under a CPIF contract, you and the contracting officer agree on a target cost, a target fee, and an incentive formula for determining the final fee. The formula provides for an adjustment in the fee, based on any difference between the target cost and the total allowable cost of performing the contract. Unlike the fixed-price incentive contract, however, the contract will provide both a minimum and maximum limit on the fee adjustment.
Limitations: This contract type is appropriate when a cost-reimbursement contract is permissible and a target cost and a fee adjustment formula likely to motivate effective contract performance can be negotiated. There is no statutory limit (e.g. CPFF – 10%)
The Government bears more risk than FFP contract types, but the post award contract administration is governed by objective criteria (e.g., Completion of a project by X date)

40. Cost Plus Award Fee
A cost-plus-award-fee contract is a cost-reimbursement contract that provides for a fee consisting of, (1) a base amount fixed at inception of the contract and, (2) an award amount that the contractor may earn in whole or in part during performance and that is sufficient to provide motivation for excellence in such areas as quality, timeliness, technical ingenuity, and cost-effective management. The amount of the award fee to be paid is determined by the Government’s judgmental evaluation of the contractor’s performance in terms of the criteria stated in the contract. This determination is made unilaterally by the Government and is not subject to the Disputes clause.
The risk shared by the Government and the contractor, with an separate pool of fee determined by a combination of subjective & objective criteria (e.g., 60% SLAs, 40% Qualitative). Significant contract administrative requirements.

41. Bad Contract Types for PBSA
Time & Materials / Labor Hour
Cannot really be made performance based, no matter how hard you try.
Cost Plus a Percentage of Cost
Prohibited. Wrong motivation for the contractor in incur more cost

42. Other Types
Award Term
Successful performance grants the contractor a longer period of performance
Good motivation, but this approach can run into FAR / Agency acquisition regulations limiting the PoP. Less meaningful that profit.