1. Seven Steps to Performance Based Acquisition 1 Chris Hamm Operations Director General Services Administration GSA Training Conference and Expo 2010

2. Seven Steps to Performance Based Acquisition 2 This session is sponsored by the Federal Acquisition Institute The primary organization providing knowledge and support to the federal civilian acquisition workforce. For more information about FAI, please visit our website at www.fai.gov

3. Seven Steps to Performance Based Acquisition 3 Topics  Introductions  PBA History  FAR References  PBA Goals  Perspectives  Seven Steps  Training

4. Seven Steps to Performance Based Acquisition 4 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GPRA  1994 – FASA and OFPP Pilot Project for PBSC  1997 – Changed the FAR to incorporate OFPP Policy Letter 91-2 and rescinded the policy letter in 2000  2001 – Public Law 106-398, Section 821 – Added to the FAR a PBC preference and order precedence  2004 – SARA PBC change (Section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 and report on these contracts and orders in FPDS 2004 published an interim rule under FAR Case 2004-004 2005 published final SARA PBA changes *PBA formerly Performance-Based Contracting (PBC)

5. Seven Steps to Performance Based Acquisition 5 PBA FAR References  FAR 1.102 - Statement of Guiding Principles – highlights PM role  FAR Part 2 - Definition  FAR Part 7 - Acquisition Planning  FAR Part 10 - Market Research  FAR Part 11 - 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

6. Seven Steps to Performance Based Acquisition 6 PBA Goals Fiscal YearsTarget 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 40%51% 2006 40%+49% 2007 45+45%+ approx 2008 50%TBE

7. Seven Steps to Performance Based Acquisition 7 Performance Based Services Acquisition 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 16.402-2).

8. Seven Steps to Performance Based Acquisition 8 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: Architecture and Engineering Construction Utility services Services incidental to supplies Research and Development Professional medical services Tuition Registration Membership fees

9. Seven Steps to Performance Based Acquisition 9 Government Perspective Compliance – We have to do it Funding – Less $ to do more work Lower Contractor Costs – Creating better value for the taxpayer Performance – Use of commercial best practices Schedule – Congressional and 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

10. Seven Steps to Performance Based Acquisition 10 Contractor 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 Innovation – Increases competitor’s chances to offer a new solution and unseat an incumbent contractor

11. Seven Steps to Performance Based Acquisition 11 Achieve innovative solutions from industry Maximizes competition Increases customer satisfaction because results are improved Shifts the risk to the contractor Improves contractor performance Encourages frequent communication between the COR and the contractor Requires good contract management to ensure results are achieved Why Use Performance Based?

12. Seven Steps to Performance Based Acquisition 12 PBA Contract Type Order of Precedence ResearchDevelopment Government assumes more cost risk Contractor assumes more cost risk Production / Sustainment Greater Performance Risk = Government Assumes More Cost Risk Higher risk, less-defined requirements CPFFCPFF / CPAFCPIF/CPAF R&DDevelopment FPAF/FPIF/ FFP FPIF /FFP Enhancements / Production Operations & Maintenance Lower Risk, well-defined requirements

13. Seven Steps to Performance Based Acquisition 13 http://www.acquisition.gov/comp/seven_steps/index.html

14. Seven Steps to Performance Based Acquisition 14  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  Start early! Get the team formed and functioning well before the procurement. Waiting until the last minute reduces your ability to increase innovation and get competition Establish the Team

15. Seven Steps to Performance Based Acquisition 15  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. Describe the Problem that Needs Solving

16. Seven Steps to Performance Based Acquisition 16 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!

17. Seven Steps to Performance Based Acquisition 17 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!  GSA has dozens of established templates for just about every type of acquisition, including Acquisition Plans, Request for Quote, Request for Proposals, Cost Estimates, and Determinations & Findings.  www.gsa.gov/fedsim Click on “Information Library” Or email chris.hamm@gsa.gov and I’ll provide a customized set for your requirement.

18. Seven Steps to Performance Based Acquisition 18 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”

19. Seven Steps to Performance Based Acquisition 19 Conduct Market Research  Contractual  Research existing contract vehicles to see if they can be used to meet your needs There are many 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.  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

20. Seven Steps to Performance Based Acquisition 20 Developing the PWS Conduct analysis – What do you really want to accomplish? What are your outcomes? Apply the “so-what?” test Capture the results of the analysis in a matrix Write the Statement of Objectives/Work/PWS Let the contractor have the opportunity to solve the problem

21. Seven Steps to Performance Based Acquisition 21 PBA Matrix Template

22. Seven Steps to Performance Based Acquisition 22 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....

23. Seven Steps to Performance Based Acquisition 23 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. Use FAR 15.201 - Exchanges with industry before receipt of proposals!

24. Seven Steps to Performance Based Acquisition 24 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

25. Seven Steps to Performance Based Acquisition 25 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

26. Seven Steps to Performance Based Acquisition 26 Performance Metrics Process (Pre-Award)  Draft Incentive/Award Fee Plan and Format Evaluation Decision: –Option 1: Specify metrics and have all vendors bid the same –Option 2: Let vendors chose metric & targets  Review requirements before release and see if tasks are sufficiently defined to create notional metrics 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) Option # 2 is harder to evaluate but better post award: Better measures, more leverage after award.

27. Seven Steps to Performance Based Acquisition 27 Performance Metrics Process (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  - Incentive fee pool is 100% by default (Objective Measures)  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

28. Seven Steps to Performance Based Acquisition 28 Select the Right Contractor - 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 Best Value Process Oral Presentation Recommended Down Selection Procedures Advisory Multi-Step vs. Competitive Range

29. Seven Steps to Performance Based Acquisition 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!

30. Seven Steps to Performance Based Acquisition 30 Quality Assurance  37.604 Quality assurance surveillance plans.  Requirements for quality assurance and quality assurance surveillance plans are in Subpart 46.4. The “Biggest Loser” effect – the mere act of weekly surveillance drives performance  Performance Metrics presentation at GSA EXPO

31. Seven Steps to Performance Based Acquisition 31 Metrics 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 metrics to stakeholders so there are no surprises when it comes time to pay the contractor  In general, contractors prefer metrics because they have control over their own destiny in terms of meeting their metrics and can obtain a very high fee amount relative to subject evaluations

32. Seven Steps to Performance Based Acquisition 32 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 www.fai.gov.  Questions about this training should be directed to FAI student services at 703-805-2300.

33. Seven Steps to Performance Based Acquisition 33 More Free Training - DAU & OFPP  DAU  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 https://acc.dau.mil/ace.  OFPP  Pamphlet Number 4 – Supplement to OMB Circular A-76  A Guide for Writing and Administering Performance Statements of Work for Service Contracts. OFPP literally wrote the book on PBA.

34. Seven Steps to Performance Based Acquisition 34 Even More Free Training: DAU Online  On-Line, Free, 24/7, Self-Paced, Continuous Learning Modules: http://clc.dau.mil/  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: https://acc.dau.cor  Connects you with training, policy, samples, community forum

35. Seven Steps to Performance Based Acquisition 35 Questions