Acquisition Reform: An Overview of Performance Measures

FEDERAL SECTOR REPORT

January 2000
(c) P2C2 Group, Inc.

ACQUISITION REFORM: AN OVERVIEW OF PERFORMANCE MEASURES

This is second topic in a series based on my 1999 work in developing IT requirements, contract performance standards, and procurement documents for the White House and other agencies of the Executive Office of the President. Part I was about Statements of Objectives, and Part II (this newsletter) covers Contract Performance Measures.

Contract Performance Measures

Federal acquisition reform is reshaping contract competitions, and one of the emerging trends is a government emphasis on contract performance measures--sometimes termed metrics. Increasingly, the government wants to buy clearly defined results. The prospective contractor has more flexibility in developing its own approach, work procedures, staffing plan, and tasking. However, the contractor also absorbs greater risk for contract performance.

Here is a simplified comparison of the old and new approaches: Formerly, a landscaping Statement of Work might have directed that "the Contractor shall provide a Pesticide Application Technician once a month to spray an estimated 260 trees and 1,500 shrubs." Today, however, a procurement Solicitation might that "99 percent of trees and shrubs shall be free from the presence of pests. The Contractor shall replace all trees and shrubs that have greater than 25% foliage loss caused by pests" This would mean that fewer than 3 trees and 15 shrubs could evidence pests. Even if this performance measure can be achieved with less spraying or no spraying, the contractor would be in compliance with the contract--and might have a very profitable year. On the other hand,

Greater Contractor Flexibility and Risk

While SOWs often focus on contract process, SOOs emphasize the government’s bottom-line: What are the performance results (achieved objectives) that the federal customer expects from the contractor?

The contractor has greater flexibility in deciding how to achieve the objectives, because the "how to do it" directions of Statements of Work have been eliminated. The contractor must propose the SOW. When competing for a contract based on a SOO, a prospective contractor is responsible for determining the best solution for achieving the government’s objectives, developing a Technical Approach, and proposing a Statement of Work that describes in detail the tasks, procedures, management plan, and deliverables.

In responding to SOWs of past years, prospective contractors tended to salute the Request for Proposals, say "Aye, Aye Sir," and demonstrate compliance. But SOOs change the rules and the old approach no longer is a successful formula for winning contracts.

In many ways, SOOs remind me of federal grants, where the agency announcement simply states priorities and evaluation criteria. When I write a proposal for a grant competition, it is my responsibility to devise a better needs analysis, technical solution, and management plan. Then I must work with my client’s experts to back up the strategy with facts, task processes, schedules, key personnel, budget, and a past performance history to demonstrate that the solution will be credible, reliable, and successful.

Successful proposals in response to SOOs require a higher level of talent, in many cases. Your technical people must define the requirements, best practices, and work processes … as well as propose to do it. Your management team may be required to define project positions and labor categories … and possibly propose a fixed-price level of effort.

Related Issues

A Statement of Objectives is driven by the objectives and performance measures (metrics). Therefore, Part II, Contract Performance Measures, will focus on metrics and performance standards. Examples of performance measures are:

99% of project status reports are delivered on schedule. 100% are delivered within a negotiated schedule.
99.9% of database records are completely accurate.
95% of emergency services are completed within 2 hours of contractor notification. 100% are delivered within a negotiated schedule.

Part III, Increases in Contractor Responsibility and Commercial Practices, discusses the risks and responsibilities of implementing contractor-defined solutions. In a SOO, the buck stops with the contractor, who is responsible for achieving the SOO’s objectives and performance measures … and possibly complying with commercial best practices. Within the limits of reason (and the Federal Acquisition Regulation), the successful contractor must deliver effective results and quality, not just effort. Failure to deliver may be grounds for the government’s terminating the contract for nonperformance.

SOOs are often linked to newer procurement methods that reflect current trends in acquisition reform. For example, the government may issue the requirement initially as a Request for Comment, inviting industry to comment on how to make the procurement document more practical, effective, and cost-efficient. In addition to the written proposal (including the contractor’s proposed Statement of Work in response to the SOO), the government may request oral presentations, where offerors compete orally for the contract. Part IV of the series features Bidder Conferences and Oral Presentations.

Part V looks at Past Performance. In today’s world, an outstanding proposal cannot win the competition unless you can back it up with a reputation for delivering reliability, quality, price realism, and results.