Management/Administration of a Performance Based Contract
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1 Management/Administration of a Performance Based Contract
2 Management/Administration of a Performance Based Contract Susan Thibodeaux Asst General Manager/Contract Administration Manager IAP Worldwide Services Session #1, 12:05pm-12:35pm ET NCMA s 1 st Performance-Based Service Acquisition Community of Practice - Virtual Conference Wednesday, March 31, :00pm - 4:00pm ET 2
3 Brief Refresher Performance Based Contracting What a method of contracting where the results are defined rather than the process. Includes measurements Incentives Why FAR Policy. (a) Performance-based acquisition (see Subpart 37.6) is the preferred method for acquiring services (Public Law , section 821). 3
4 PBC Refresher cont. Benefits Better performance Results oriented Better price Best and commercial practices and less mandated how to s reduces costs Contractor has flexibility and incentive to be innovative Contractor motivated to save money 4
5 FAR FAR and Ensure that performance-based contracting used to the maximum extent practicable. Use contract types that best fits the work and likely to motivate contractors. Use positive or negative performance incentives to the maximum extent practicable. Quality assurance surveillance plan shall contain measurable inspection and acceptance criteria corresponding to the performance standards of the SOW. 5
6 Refresher cont. Key Elements PWS or SOO What, where, when, how many Not HOW! Performance Standards Quality Assurance Plan Metrics Incentives/penalties 6
7 Key Elements of a PWS A statement of the required services in terms of outcome A measurable performance standard for each outcome An Acceptable Quality Level (AQL) for each outcome. The PWS draws its information from the Work Breakdown Structure (WBS) PWS is written concurrently with the Quality Assurance Surveillance Plan (QASP) 7
8 Results orientation The standards of measurement are resultsoriented: quality of work or product quantity of work or product accessibility timeliness accuracy customer satisfaction not unduly burdensome. 8
9 Example Provide taxi service Old type SOW: drive to passenger pickup, pull over to curb, put vehicle in park, wait for passenger, open door, drive to destination. New PWS: pickup passengers on time better > pickup passengers within five minutes of an agreed upon time Standard could be 95% on time (within the five minutes) Metrics would be percentage of pickups that comply with the standard (or the percent that don t) Failure to perform within the standard would result in a contract price reduction. 9
10 Performance Standards According to the GAO, its important that standards are not set so high that they could drive up the cost of service or too low that they may act as a disincentive to good contract performance. 10
11 Metrics more later Performance indicators and standards Collect, track, and share data Conduct surveillance systemically Document results Review periodically and jointly with the contractor Are we measuring the right things? 11
12 Plans used in PBSC Mgt Quality assurance surveillance plans (QASP) Details how and when the Government will survey, observe, test, sample, evaluate, and document contractor performance according to the Performance Work Statement (PWS). Performance requirements summaries (PRS) Reflect the relationship of the PWS and QASP Details each critical task, the performance standard, the Acceptable Quality Level (AQL), the surveillance method, and the incentives/disincentives in an easy to use matrix format. Acceptable quality levels (AQL) A quality standard that allows a prespecified number of defects Worst case quality level 12
13 QASP Quality Assurance and Surveillance Plan Government's QASP and the contractor's Quality Control Plan work together to ensure project performance standards are met. Is the primary contract administration tool directly corresponds to a contract s specified performance standards, is used to measure contractor performance ensures that the Government receives the quality of services called for under the contract and pays only for the acceptable level of services received. Living document 13
14 QASP A good QASP includes: measurable inspections acceptance criteria Surveillance schedule Surveillance method corresponds to the performance standards of the SOW Documentation and records requirements 14
15 QASP cont. A NASA study found that many service contracts were missing QASPs. QASPs apply even if it s a(n): Award fee contract Research & Development (R&D) contracts Contract where the services are performed off-site Small dollar value contract Contract with a small business contractor Contract where the contractor has an established internal quality control plan 15
16 Quality Assurance Surveillance Plans According to the GAO: The plan should focus on the quality, quantity, and timeliness of the performance outputs to be delivered by the contractor, among other things, and not on the steps required or methods used to produce the service. 16
17 Using the QASP Meet with all concerned parties on a regular basis to address issues Track performance and assess progress against the QASP Address performance risks or deficiencies early Update the CMP as necessary Update the QASP as substantive changes to the contract requirements, performance, or contract surveillance approaches occur. 17
18 Surveillance Methods Measure the outputs not the method 100 % inspection Only when risk to life, safety or health Periodic inspection Requires planning Random sampling Used for production or recurring requirements Customer feedback Random Surveys Contractor self-reporting 18
19 Incentives Use to force compliance with standard or encourage better performance Can be positive or negative (or both) Use incentives for priority/important tasks Should be challenging but achievable 19
20 Incentives cont. Must be defined in solicitation/contract Incentives can be monetary or nonmonetary Deducts should be somewhat equivalent to value of task or value of the output There must be specific formulas for calculating payment due for deductions 20
21 Contract Management Starts early Begins during the acquisition planning phase Recognizes the performance-based elements of the contract The Contract Management Plan is in place before or shortly after the time of award Takes a team Contract Specialist Program Manager/technical representative Representative from the customer Contractor 21
22 Contracting Officer s Role Ensures performance of all necessary actions for effective contracting (FAR Part 42), Ensures compliance with contract terms Safeguards the interests of the contractual relationships Govt customer Contractor Accepts deliverables Monitors performance Enforces the Government s rights when necessary 22
23 Contracting Officer s role cont. Modify contracts. Assist in monitoring contractor performance. Claims and REAs Disputes and litigation, Partnering agreements and MOUs Records management Process invoices provide funding as required Process deductions Terminate contract if necessary 23
24 Contracting s role KO is responsible for receiving the contract performance reports, approving changes to the contract, and generally ensuring that the contract requirements are being met The KO relies on subject matter experts for advice Technical, legal, financial, etc The KO is responsible for enforcing the terms of the contract and requesting corrective action as necessary Manage the contract not the people or the process 24
25 Contracting Officer s Technical Representative (COTR) Must be competent and familiar with technical requirements Monitor contractor performance Must be detailed Record keeping Complete and accurate Use the contract as the base Track deliverables Professional working relationship with the contractor KNOW the contract! Build checklist for monitoring performance Per inspection and acceptance guidelines in contract 25
26 After contract award Post Award Meeting Meet with the contractor Stakeholders Review Requirements Communications Deliverables Performance monitoring/qasp Partnering Incentives/penalties 26
27 Contractor s role Adhere to contract's terms and conditions Establish Quality Plan Measurements and metrics Monitor and measure performance Documentation Process improvements Communications with team members Open and honest Suggestions "to deliver on a timely basis the best value product or service to the customer 27
28 Documentation Inspection/surveillance results Detailed notes and records Minutes of meetings Formal working agreements Joint processes Informal agreements capture in writing 28
29 The New Paradigm FAR 1.102(c) provides: The Acquisition Team consists of all participants in Government acquisition including not only representatives of the technical, supply, and procurement communities but also the customers they serve, and the contractors who provide the products and services. 29
30 PBSC Leads to Partnering Seven Steps To Performance Based Acquisition states The integrated project team should plan to rely less on management by contract and more on management by relationship. At its most fundamental level, a contract is much like a marriage. It takes work by both parties throughout the life of the relationship to make it successful. Common characteristics of successful partnering Trust and open communication Strong leadership on both sides Ongoing, honest self-assessment Ongoing interaction Creating and maintaining mutual benefit or value throughout the relationship 30
31 Partnering Meet with the contractor to identify ways to improve efficiency and reduce the effect of the "cost drivers." The contractor and government work together to identify more effective and efficient ways to measure and manage the program. Establish a Customer Process Improvement Working Group that includes contractor, program, and contracting representatives. 31
32 Performance reviews Performance reviews should take place regularly ALL performance should be documented, whether it is acceptable or unacceptable Contract management performance reviews, Assessment - not for formal reporting and rebutting, Review performance levels and metrics Monthly or bi-monthly performance reviews Contracts, technical, customers and contractor Require improvement plan if downward trend Joint actions Meet more often if necessary 32
33 Contract Management is Vital Poor performance monitoring, sporadic quality assurance, and little effort expended into managing changes or settling disputes results in damages to both government and contractor. 33
34 Re-Cap Culture change Start early with planning Manage performance not process Manage the contract not the people Use the QASP Partner 34
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