NCMA Performance-Based Acquisition Overview

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

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

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

Performance Based Examples

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

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.)

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

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

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

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

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 )

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

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

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

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…

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

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

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”

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 )

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

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

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

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

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

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