NCMA Norfolk Chapter – 23 January 2008 Performance-Based Acquisition Overview Jeff Brunner, U.S. Joint Forces Command

PBA Concept “Never tell people how to do things. Tell them what to do and they will surprise you with their ingenuity.” George S. Patton

“Never tell people how to do things. Tell them what to do and they will surprise you with their ingenuity.”

George S. Patton

Why the Focus on Service Acquisition FY 05 Over Half DOD Contract Dollars DOD Total: $ 269.20 Billion DOD Services: $141.62 Billion

Performance-Based Acquisition… Goals of PBA Link Mission performance results with measurable acquisition performance results Description in FAR 2.101 Structures all aspects of an acquisition around the results to be achieved Describes contract requirements in clear, objective terms Contains measurable outcomes Objectives measures Subjective measures

Goals of PBA

Link Mission performance results with measurable acquisition performance results

Description in FAR 2.101

Structures all aspects of an acquisition around the results to be achieved

Describes contract requirements in clear, objective terms

Contains measurable outcomes

Objectives measures

Subjective measures

What is Performance-Based Acquisition? An acquisition strategy Not a contract type Strategy applicable to most contract types Results-oriented “ What” not “How” Good business sense Requires the contractor to manage performance Promotes innovation and creativity Drives accountability for results

An acquisition strategy

Not a contract type

Strategy applicable to most contract types

Results-oriented

“ What” not “How”

Good business sense

Requires the contractor to manage performance

Promotes innovation and creativity

Drives accountability for results

Performance Based Examples Examples of Performance Based Strategies Exxon Mobile Marriott Aircraft Engine Performance Space Launch Aircraft Tires Performance Based Logistics

Examples of Performance Based Strategies

Exxon Mobile

Marriott

Aircraft Engine Performance

Space Launch

Aircraft Tires

Performance Based Logistics

Performance-Based Acquisition Recognizes contractor’s ability to manage work, and perform efficiently Encourages innovation and performance improvement thru effective incentives Links contractor payment to contractor performance through measurable performance standards

Recognizes contractor’s ability to manage work, and perform efficiently

Encourages innovation and performance improvement thru effective incentives

Links contractor payment to contractor performance through measurable performance standards

In the beginning… The concept of Performance-Based Acquisition isn’t new…

PBA has been around for a while Contract for Production of a Coat of Mail : “ One coat of mail, insignum of power which will protect, is to be made by the woman Mupagalgagitum, daughter of Qarikhiya, for Shamash-iddin, son of Rimut. She will deliver in the month of Shebat one coat of mail, which is to be made and which will protect.” Taken from clay tablet dated in the thirty-fourth year Darius I (488 B.C.)

Contract for Production of a Coat of Mail :

“ One coat of mail, insignum of power which will protect, is to be made by the woman Mupagalgagitum, daughter of Qarikhiya, for Shamash-iddin, son of Rimut. She will deliver in the month of Shebat one coat of mail, which is to be made and which will protect.”

Taken from clay tablet

dated in the thirty-fourth year Darius I

(488 B.C.)

Then came Policy… OFPP Pamphlet (guide) 1980 OFPP Policy Letter 91-2 Government Performance Results Act 1993 Federal Acquisition Streamlining Act and National Performance Review of 1994 OFPP Pilot Project for PBSC 1994 OFPP Guide for Best Practices for Past Performance 1995 FAR Case 95-311, Final Rule 1995 Federal Acquisition Reform Act (Clinger-Cohen) 1996 OFPP A Guide to Best Practices for Performance-Based Service Contracting 1998 Guidebook for PBSA in the DoD 2000 USD AT&L (Gansler) Memo 2000 Seven Steps to Performance-Based Services Acquisition 2001 Defense Authorization Act 2001 User’s Guide to Performance-Based Payments 2001 USD AT&L (Aldridge) Memo 2002 USD AT&L (Wynne) Memo 2003 Dir, DPAP (Lee) Memo 2004 OMB (Burton) Memo 2004 Dir, DPAP (Cipicchio) Memo 2006 OMB Memo (Burton) 2006 Dir, DPAP (Assad) Memo 2006 USD AT&L (Krieg) Memo 2006 Dir, DPAP (Assad) Basic Tenets 2006

OFPP Pamphlet (guide) 1980

OFPP Policy Letter 91-2

Government Performance Results Act 1993

Federal Acquisition Streamlining Act and National Performance Review of 1994

OFPP Pilot Project for PBSC 1994

OFPP Guide for Best Practices for Past Performance 1995

FAR Case 95-311, Final Rule 1995

Federal Acquisition Reform Act (Clinger-Cohen) 1996

OFPP A Guide to Best Practices for Performance-Based Service Contracting 1998

Guidebook for PBSA in the DoD 2000

USD AT&L (Gansler) Memo 2000

Seven Steps to Performance-Based Services Acquisition 2001

Defense Authorization Act 2001

User’s Guide to Performance-Based Payments 2001

USD AT&L (Aldridge) Memo 2002

USD AT&L (Wynne) Memo 2003

Dir, DPAP (Lee) Memo 2004

OMB (Burton) Memo 2004

Dir, DPAP (Cipicchio) Memo 2006

OMB Memo (Burton) 2006

Dir, DPAP (Assad) Memo 2006

USD AT&L (Krieg) Memo 2006

Dir, DPAP (Assad) Basic Tenets 2006

Current Government PBA Policy FAR 37.102(a) states that PBA: Is the preferred method for acquiring services Must be used to “maximum extent practicable” except for: Architect-engineer services, Construction, Utility services, and services incidental to supply purchases

FAR 37.102(a) states that PBA:

Is the preferred method for acquiring services

Must be used to “maximum extent practicable” except for:

Architect-engineer services, Construction, Utility services, and services incidental to supply purchases

DoD’s latest perspective on Performance-Based Acquisition Focus on: Clear, performance-based requirements Identifiable and measurable cost, schedule and performance outcomes Properly planned and administered outcomes consistent with customer’s mission need(s) Business arrangements in the best interest of DoD and in compliance with statues, regs, policies, etc. Strategic, enterprise-wide approaches applied to planning and execution of the acquisition PBA training

Focus on:

Clear, performance-based requirements

Identifiable and measurable cost, schedule and performance outcomes

Properly planned and administered outcomes consistent with customer’s mission need(s)

Business arrangements in the best interest of DoD and in compliance with statues, regs, policies, etc.

Strategic, enterprise-wide approaches applied to planning and execution of the acquisition

PBA training

Enterprise or Strategic Sourcing Process Profile Commodity Conduct Supply Market Analysis Develop Commodity Strategy Issue RFx & Negotiate Implement & Manage Performance 1 2 3 4 5 Baseline Analysis Overview of Commodity (definition, usage, stakeholders, mission criticality, etc.) Spend Summary Existing Sourcing Strategy and Initiatives Existing Contracts Analysis Existing Sourcing Strategy & Initiatives Business Process and Policy Total Cost of Ownership Commodity Requirements Customer Needs Analysis/Requirements Socio-Economic Requirements Regulatory and Process Related Requirements Estimated Volume Requirements Market Analysis Findings and Opportunities Market overview (segments, size) Key trends Small Business Capabilities Comparison of market capabilities to requirements Potential Sourcing Levers SUMMARY OF ANALYSES PERFORMED Commodity Goals and Objectives (Includes scope, usage, mission criticality) Business Need/Case for Change Requirements “ As Is” Environment (sourcing strategy, process, technology) “ To Be” Environment (sourcing strategy, process, technology) Benefits Commodity Sourcing Strategy (strategy and tactics) Business Case Acquisition Strategy Implementation Plan COMMODITY STRATEGY

Baseline Analysis

Overview of Commodity (definition, usage, stakeholders, mission criticality, etc.)

Spend Summary Existing Sourcing Strategy and Initiatives

Existing Contracts Analysis

Existing Sourcing Strategy & Initiatives

Business Process and Policy

Total Cost of Ownership

Commodity Requirements

Customer Needs Analysis/Requirements

Socio-Economic Requirements

Regulatory and Process Related Requirements

Estimated Volume Requirements

Market Analysis Findings and Opportunities

Market overview (segments, size)

Key trends

Small Business Capabilities

Comparison of market capabilities to requirements

Potential Sourcing Levers

Commodity Goals and Objectives (Includes scope, usage, mission criticality)

Business Need/Case for Change

Requirements

“ As Is” Environment (sourcing strategy, process, technology)

“ To Be” Environment (sourcing strategy, process, technology)

Benefits

Commodity Sourcing Strategy (strategy and tactics)

Business Case

Acquisition Strategy

Implementation Plan

Focus on Mission Results in Performance-Based Acquisition Team Participants involved in the acquisition Must function as a single, integrated and mission focused unit M ission Knowledge Stable or Changing, Funding Criticality M arket Knowledge Best practices, leverage, competition, trends P rocess Knowledge Roles and Responsibilities, planning-execution-assessment-effectiveness P erformance Knowledge Ability to align Mission outcomes with performance requirements Mission Results = T ( M 2 + P 2 )

Team

Participants involved in the acquisition

Must function as a single, integrated and mission focused unit

M ission Knowledge

Stable or Changing, Funding Criticality

M arket Knowledge

Best practices, leverage, competition, trends

P rocess Knowledge

Roles and Responsibilities, planning-execution-assessment-effectiveness

P erformance Knowledge

Ability to align Mission outcomes with performance requirements

http://acquisition.gov/comp/seven_steps/index.html Seven Step PBA Process

Step 1 Establish an Integrated Solutions Team Ensure senior management involvement and support Tap multi-disciplinary experts Define roles and responsibilities Develop rules of conduct Empower team members Identify stakeholders and nurture consensus Develop and maintain the project knowledge base Incentivize the team – link program mission and team members’ performance

Establish an Integrated Solutions Team

Ensure senior management involvement and support

Tap multi-disciplinary experts

Define roles and responsibilities

Develop rules of conduct

Empower team members

Identify stakeholders and nurture consensus

Develop and maintain the project knowledge base

Incentivize the team – link program mission and team members’ performance

Step 2 Describe the problem that needs solving Link acquisition to mission and performance objectives Define (at a high level) desired results Decide what constitutes success Determine the current level of performance

Describe the problem that needs solving

Link acquisition to mission and performance objectives

Define (at a high level) desired results

Decide what constitutes success

Determine the current level of performance

Step 3 Examine private-sector and public-sector solutions Take a team approach to market research Spend time learning from public-sector counterparts Talk to private-sector companies before structuring the acquisition Consider one-on-one meetings with industry

Examine private-sector and public-sector solutions

Take a team approach to market research

Spend time learning from public-sector counterparts

Talk to private-sector companies before structuring the acquisition

Consider one-on-one meetings with industry

Step 4 Performance Work Statement (PWS) Conduct an analysis. Apply the "so what?" test. Capture the results of the analysis in a matrix. Write the performance work statement. Let the contractor solve the problem, including the labor mix. Statement of Objectives (SOO) Begin with the acquisition's "elevator message." Describe the scope. Write the performance objectives into the SOO. Make sure the government and the contractor share objectives. Identify the constraints. Develop the background. Make the final checks and maintain perspective. Develop the PWS or SOO

Step 5 Decide how to measure and manage performance Review the success determinants Where do I want to go and how do I know when I’m there? Rely on commercial quality standards Have contractor propose metrics and quality assurance plan Select only a few meaningful measures to judge success And…

Decide how to measure and manage performance

Review the success determinants

Where do I want to go and how do I know when I’m there?

Rely on commercial quality standards

Have contractor propose metrics and quality assurance plan

Select only a few meaningful measures to judge success

And…

Step 5 (cont’d) Include contractual language for negotiated changes to metrics and measures Use contracting approach that promotes effective partnership Use incentive-type contracts Consider other incentive tools Recognize the power of profit as a motivator Consider the relationship Create and maintain mutual benefit and value

Include contractual language for negotiated changes to metrics and measures

Use contracting approach that promotes effective partnership

Use incentive-type contracts

Consider other incentive tools

Recognize the power of profit as a motivator

Consider the relationship

Create and maintain mutual benefit and value

Step 6 Select the right contractor Compete the solution Let the contractors solve the problem Use downselection and “due diligence” Use oral presentations and other opportunities to communicate Emphasize past performance in evaluation Use best-value evaluation and source selection Assess solutions for issues of conflict of interest

Select the right contractor

Compete the solution

Let the contractors solve the problem

Use downselection and “due diligence”

Use oral presentations and other opportunities to communicate

Emphasize past performance in evaluation

Use best-value evaluation and source selection

Assess solutions for issues of conflict of interest

Step 7 Manage Performance Keep the team together Adjust roles and responsibilities Assign accountability for managing contract performance Include the contractor in a post-award meeting Regularly review performance Ask the right questions Report on the contractor’s “past performance”

Manage Performance

Keep the team together

Adjust roles and responsibilities

Assign accountability for managing contract performance

Include the contractor in a post-award meeting

Regularly review performance

Ask the right questions

Report on the contractor’s “past performance”

Focus on Mission Results in Performance-Based Acquisition Team Participants involved in the acquisition Must function as a single, integrated and mission focused unit M ission Knowledge Stable or Changing, Funding Criticality M arket Knowledge Best practices, leverage, competition, trends P rocess Knowledge Roles and Responsibilities, planning-execution-assessment-effectiveness P erformance Knowledge Ability to align Mission outcomes with performance requirements Mission Results = T ( M 2 + P 2 )

Team

Participants involved in the acquisition

Must function as a single, integrated and mission focused unit

M ission Knowledge

Stable or Changing, Funding Criticality

M arket Knowledge

Best practices, leverage, competition, trends

P rocess Knowledge

Roles and Responsibilities, planning-execution-assessment-effectiveness

P erformance Knowledge

Ability to align Mission outcomes with performance requirements

PBA Elements This is a concurrent, iterative process Identify Desired Results Data Assembly Requirements Analysis Performance Analysis Performance Standards Acceptable Quality Level Measurement Methodolgy Surveillance Schedule Surveillance Analysis Incentive Analysis Positive Negative

Requirements Analysis

Performance Analysis

Surveillance Analysis

Incentive Analysis

What keeps your customer up at night? Mission Success depends on Mission Knowledge Are the stakeholders actively involved? Have all risks been addressed? Is there stability in the mission? Is there flexibility in the plan? The elements of the PRS are tools used to ensure that the stakeholder needs are identified and met

Mission Success depends on Mission Knowledge

Are the stakeholders actively involved?

Have all risks been addressed?

Is there stability in the mission?

Is there flexibility in the plan?

What about Professional Services? Repetition and Context distinguish Professional Services from “commodity services” Repetition Commodity services have high levels of repetitive tasks Professional services vary with specific nature of the task Context Commodity services tend to be more repetitive, similar outcomes, and independent of context Professional service outcomes vary with tasking and are highly dependent on the context of task

Repetition and Context distinguish Professional Services from “commodity services”

Repetition

Commodity services have high levels of repetitive tasks

Professional services vary with specific nature of the task

Context

Commodity services tend to be more repetitive, similar outcomes, and independent of context

Professional service outcomes vary with tasking and are highly dependent on the context of task

How do we approach PBA Recognize that Professional Services are different, but a Performance Based Approach can be used Focus on Performance Results to be achieved Set the right performance standards “What problem are we trying to solve?” Define results that will meet our performance needs “How will I know if we’ve solved the problem?” Properties of the solution produce the needed results

Recognize that Professional Services are different, but a Performance Based Approach can be used

Focus on Performance Results to be achieved

Set the right performance standards

“What problem are we trying to solve?”

Define results that will meet our performance needs

“How will I know if we’ve solved the problem?”

Properties of the solution produce the needed results

Assessing Professional Services Requires a combination of objective and subjective performance factors Objective Measures Timeliness Cost Subjective Measures Quality Effectiveness Unbounded vs Bounded subjectivity Must create balanced set of performance expectations Promotes effective partnership

Requires a combination of objective and subjective performance factors

Objective Measures

Timeliness

Cost

Subjective Measures

Quality

Effectiveness

Unbounded vs Bounded subjectivity

Must create balanced set of performance expectations

Promotes effective partnership

Maintain line of sight Linkage between Mission Outcomes & Results during Planning Mission Outcomes Performance Requirements Performance Standards Performance Measures Acquisition Strategy Performance Assessment Strategy Mission Results Mission outcomes that rely on an outside service provider to accomplish that enable successful execution of the primary mission Develop measurable Performance Requirements must be accomplished to achieve necessary mission outcomes. What are the critical few rather than the insignificant many Define the performance standards or levels that must be achieved to support mission outcomes. Standards drive cost, choose wisely Describe performance measures and methods to assess supplier performance in meeting mission outcomes Integrate business strategy, contract type and incentive structures to deliver innovation and best value mission support Implement team based, integrated, performance focused assessment strategy Assess and measure results, make honest, fact base decisions, include service provider in decisions. Surveillance is the Government’s main job MISSION SUPPORT PLANNING MISSION PLANNING EXECUTION MISSION PERFORMANCE ASSESSMENT

Be careful with infusing, overpowering, or defeating the project with some traditional elements that may contradict a PB approach----- Many specific, required labor categories Overly detailed personnel qualifications Contract management at the labor category level Source selection plans that do not reward innovation and creativity (Government risk aversion)

Be careful with infusing, overpowering, or defeating the project with some traditional elements that may contradict a PB approach-----

Many specific, required labor categories

Overly detailed personnel qualifications

Contract management at the labor category level

Source selection plans that do not reward innovation and creativity (Government risk aversion)

PBA Bottom Line “ In this business, I do not buy a service , I buy…. -”Miami Vice” Dec 2006 RESULTS”