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Performance-Based Acquisition Evolves – and Transforms
The Performance-Based Services Acquisition (PBSA) model is the method by which many IT services are now obtained by DOD. But it isn’t easy. Just ask government and contractors.
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The procurement reform effort inside DOD has been significant since it was launched in the 1990s and
further advanced this decade.
The movement away from T&M contracting to firm-fixed and Performance-Based Services Acquisition (PBSA) models is a result of changing strategies in a changing procurement world said Martin Gross, DISA Vice Component Acquisition Executive in a recent interview with 1105 Custom Media.
PBSA is a services acquisition model where outcomes are requested without detailed SOWs rather through Statements of Objectives (SOO). As is sometimes noted, PBSA means asking for a “good cookie” rather than issuing a detailed recipe for how to make chocolate chips. Mandated for about half of all acquisitions since 2005, DOD has had PBSA in play across its branches and agencies long enough now to report some meaningful results, but issues still remain.
A New Mindset
The dilemma we face in the movement to performance based contracting and managed services is first it’s a different mindset; and second it requires a different set of skills and experience to make them effective, noted DISA CIO John Garing in a recent interview with 1105 Custom Media.
The PBSA process also facilitates better problem-solving and creativity, and
streamlining and innovation that legacy
services contracting cannot.
“And our experience has been that not only we the government and DISA have a challenge with this, but also our suppliers have a challenge with this.”
For Garing it means more work has to be done in the area of performance metrics, SLAs and finding a different way to be able to think together.
“Together’ is a key word,” said Garing. “My thinking in the last few months has been on the DISA supply chain. We tended to keep the vendors at arm’s length, sometimes our customers too, but that’s no longer the case. We have one ecosystem here, the supply chain. We are in the middle of it and we have our customers on one side and our suppliers on the other.
Garing says DISA’s job is to connect them to the services we offer and the capabilities we offer and add value in the process.
“You’ve got to understand both ends of that supply chain well to make it work. So the word ‘together’ with our vendors and our suppliers is a key word and some of them are very candid with us and have helped us in understanding the pitfalls of a service based contracting from their point of view. It’s a challenge from both ways. But we are going to work on that.”
A Sea Change
According to the Naval Sea Systems Command’s SeaPort- e program, a performance-based Statement of Work by itself results in a “15 percent reduction in contract price when compared to traditional statements of work;” and an “18 percent improvement in customer satisfaction with the contractors’ work – in both technical and non-technical areas.”
 Using an e-portal system, SeaPort-e provides a standardized means of issuing competitive solicitations amongst a large and diverse community of approved contractors, as well as a platform for awarding and managing performance-based task orders, according to Captain K.R. Wheelock, NAVEA's deputy commander for contracts.
As reported by the INPUT Federal Task Order database, as of August 2008 there were 1,203 task orders and follow-ons awarded under the SeaPort-e program for a combined total of over $16.2 billion.
In many cases, DOD procurement officials have added the Statement of Objectives (SOO) to their performance-based acquisition process. The SOO gives the agency or uniformed service a way to “ask the contractors to give us comments” and thus opens up “an opportunity for vendors to tell us of better ways of doing things and what is available,” noted Gross.
NAVSEA reports that the PBSA process also facilitates better problem-solving and creativity, and streamlining and innovation that legacy services contracting cannot – though the current system incorporates some of the past conventions, or something of a hybrid process.
Under the SeaPort-e umbrella of task orders, NAVSEA relies on “a mechanism to provide for conversion from level of effort to performance based service contracts after an initial period of performance.”
At first, "contractors propose firm fixed price options for performance-based efforts in the outyears. These prices are incorporated into the resulting task order. Ninety days before the end of the initial period of performance, the contractor submits a performance based statement of work for the future option periods.”
The bottom line is lowering contracting costs is not automatic and the focus needs to be on results rather than savings.
Dynamic After Award
PBSA's most dramatic impact might be in post-award operations, DOD acquisition specialists have said. For contracting offices, the shift in emphasis is from administering contracts to managing performance, which can mean transitioning from a passive to a dynamic process.
“The success of a PBSA is highly dependent on the effort and resources invested in monitoring performance by using many sophisticated tools and metrics including performance indicators and standards, quality assurance surveillance plans (QASP), performance requirements summaries (PRS), acceptable quality levels (AQL), and...incentives” and disincentives, noted John Cavadias, USMC Regional Director of Contracting who has specialized in PBSA at Camp Pendleton, CA, for most of this decade. Cavadias made his comments in a contribution to the Defense Acquisition University in 2004.
In a recent interview with 1105 Custom Media, Cavadias noted that the “greatest challenges” with PBSAs “are with accepting that long-term services contracts can conflict with supply-type contracts.”
He further explained: “Services are often multifaceted and require continual adjustments to changing government performance requirements. So, service quality specifications, which are just as subjective as they are technical, cannot remain fixed throughout the life of the PBSA.”
In two of their largest PBSAs to date, the Marines have “significantly overcome this hurdle” by adopting what Cavadias called a "relationship contracting approach”– initiating frequent partnership meetings for enhancing trust between the Corps and its contractors, and sustaining “continuous process improvement” as contracts are administered.
In one case, 33 PRS's were negotiated down to “an essential nine PRSs,” he said. “This modification resulted in the government moving away from many of the process-related requirements to the outcome-related ones.”
In all cases, though, the success the Corps has had with PBSAs to date follows a unique investment in "specialized manpower resources working these contracts from the outset, which is not typical in today's federal acquisition culture," Cavadias said.
“So long as the acquisition workforce remains insufficiently staffed, emphasis will always focus on awarding contracts, not on performance metrics after the award," he cautioned.
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