Acquisition Planning

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Hilda Waters
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1 Acquisition Planning

2 Take your hands off the keyboard. Before you start any writing, ask yourself the following question..? DOES YOUR ENTIRE TEAM KNOW AND CLEARLY HAVE A VISION OF WHAT IT IS YOU ARE BUYING AND WHY?

3 The Importance of Vision Focus the team s energies Establishes a sense of orientation, being and purpose Prevents team from being sidetracked and distracted Team resources are smartly applied against the highest Return on Investment activities

Covey Would you tell me please, which way I

4 Vision -- the FIRST order of business! Where there is no vision, the people perish... Proverbs 29:18 Begin with the end in mind. Stephen R. Covey Would you tell me please, which way I ought to go from here? That depends a good deal on where you want to get to. Lewis Carrol, Alice in Wonderland

5 Communications, Research and Planning Objective: Understand the critical importance of: Communicating with industry Researching the marketplace Developing effective acquisition plans

6 Communicating With Industry Why should we communicate with industry? Advertise our needs and prepare the marketplace Do our homework before defining requirements Increase quality, innovation and competition Save money Decrease dependency on incumbent suppliers and traditional technologies When is the best time to talk with industry? NOW...BEFORE THE RFP IS RELEASED!

7 Effective Methods for Communicating One-on-One Interviews Industry Conferences Electronic Bulletin Boards Advisory Multi-Step Process

8 Researching the Marketplace Market research is an interactive process for gathering data on product characteristics, suppliers capabilities and market business practices... plus the analysis of that data to make smart acquisition decisions.

9 Why do Research? Good market research can help: develop innovative acquisition strategies leverage commercial solutions define best O&M approach determine the relevant terms and conditions needed for the contract discover discriminating evaluation criteria for the source selection

10 Surveillance and Investigation Market Surveillance (staying abreast of general industry practices and trends) Market Investigation (investigates against a defined requirement -- narrow focus and specified time frame)

Market Surveillance Example techniques for staying current on marketplace practices/trends contact industry and government experts review the

11 Market Surveillance Example techniques for staying current on marketplace practices/trends contact industry and government experts review the market surveillance results of others publish requests for information access Internet databases review catalogs and trade journals FAR (b)(2)

12 Market Investigation 1 Summarize Market Surveillance The Six Parts of a Market Investigation 6 Document Results Identify Sources Survey Manufacturers Check References Evaluate Candidates

13 Acquisition Planning The process by which the efforts of all personnel responsible for an acquisition are coordinated and integrated through a comprehensive plan for fulfilling the agency need in a timely manner at a reasonable cost. It includes developing the overall strategy for managing the acquisition. FAR 7.101

14 Acquisition Planning Agencies shall perform acquisition planning for all acquisitions in order to promote and provide for: Acquisition of commercial/ nondevelopmental items Full and open competition FAR 7.102

15 Acquisition Plans Should Ensure: Government will get what it needs, when it is needed Sufficient/appropriate funds are available Sound business arrangement is planned Risks are identified and managed A healthy competition is promoted

Possible Subjects for an Acquisition Planning Unique Circumstances Performance Goals and Objectives Period of Performance Key Tradeoffs Budget & Funding Source Selection Streamlining Techniques

16 Possible Subjects for an Acquisition Planning Unique Circumstances Performance Goals and Objectives Period of Performance Key Tradeoffs Budget & Funding Source Selection Streamlining Techniques Potential Sources Competition Issues Source Selection Strategies Contracting Strategies Key Acquisition Risks Security Concerns Data Rights GFP/GFI Approach Ops and Maintenance Milestone Schedule

17 Best Value Source Selection Strategies the expected outcome of an acquisition that, in the Government s estimation, provides the greatest overall benefit in response to the requirement FAR 2.101

development work More performance risk Non-Cost More Important More

18 Source Selection Strategies TRADEOFF PROCESS The Best Value Continuum LOW PRICE TECHNICALLY ACCEPTABLE Less definite requirements More development work More performance risk Non-Cost More Important More definite requirements Less development work Less performance risk Cost More Important

19 Tradeoff Process Used when it is in Government s best interest to consider award to other than the lowest priced offeror or other than the highest technically rated offeror Permits tradeoffs among cost or price and non-cost factors (technical, past performance, etc.) Government must justify why additional technical merit is worth a higher price to the buying activity FAR

20 A Process Of Elimination High Non-Cost Low Non-Cost High? Cost Low? Cost

21 Lowest Price/Technically Acceptable (LPTA) Evaluation factors used to establish requirements for technical acceptability Exchanges (discussions) are permitted Tradeoffs (cost-technical) are NOT permitted Award to lowest price/technically acceptable offeror LPTA effective for commodity procurements with established production histories

22 Requirements Definition Methods PROCESS Define requirements by stating how things must be done to obtain the required end state. EFFORT Define requirements by stating how many people, positions and skill sets are needed to obtain the required end state. PERFORMANCE Define requirements by stating what results and performance are needed to obtain the end state.

Performance-Based Acquisition What is it? (PBA) PBA is an approach to acquisition that focuses on measurable contractor performance and results, not process and effort.

23 Performance-Based Acquisition What is it? (PBA) PBA is an approach to acquisition that focuses on measurable contractor performance and results, not process and effort. PBA requires seamless integration and consistency between the work statement, selection criteria and contract incentive structure. All must work in harmony to establish a business relationship where the contractor is highly motivated and fully accountable to deliver results-oriented, best value products and services.

24 PBA Characteristics and Benefits Performance and results can be measured Focuses on the purpose of the work Work statement, selection criteria, and incentive structures are integrated and consistent Contractor motivated to achieve customer objectives Contractor fully accountable for performance Leverages competition and fuels innovation Increases customer satisfaction at a lower price

25 Requirement Descriptions Performance- Based Acquisition Key Elements Evaluation Criteria Incentive Structures

26 Requirement Descriptions Performance- Based Acquisition Key Elements Evaluation Criteria Incentive Structures

27 Performance-Oriented Requirement Descriptions OFPP Letter 91-2 (41 U.S.C. section 405) It is the policy of the Federal Government that agencies use performance-based contracting methods to the maximum extent practicable when acquiring services....agencies shall justify the use of other than performance-based contracting methods when acquiring services, and document affected contract files

28 Describing Agency Needs State requirements in terms of. Functions to be performed Performance required Essential physical characteristics THEN NOW FAR

29 Describing Requirements Need: Move 20,000 lbs of cargo across the river Functional: Provide a method for transporting 20,000 lbs of cargo across the river Performance: Provide a method for transporting 20,000 lbs of cargo across the river in all-weather and within a 30 minute threshold from transport start to finish Essential Physical: Construct a bridge that draws upwards in the center for moving 20,000 lbs of cargo across the river Design/detail: Build a bridge based on the following detailed engineering drawings

30 Statement of Objectives (SOO) SOOs: Provides offerors the government s top-level objectives of the acquisition Used in lieu of government-written SOW Gives offerors flexibility to propose solutions which meet requirements but are tailored to their optimal technical/business approach Promotes what we need instead of do it this way mentality

31 SOOs v. SOWs Statement of Objectives Summarizes overall purpose of the acquisition Outlines top-level performance goals and objectives Establishes a relationship between requirements, evaluation criteria and contract incentives Helps define programmatic risks and concerns Statement of Work Directly responds to the SOO Establishes a contractorspecific approach to SOO performance requirements Used during source selection to evaluate offeror s understanding of customer requirements Serves as the basis for contract performance

32 Example SOO Approach Government RFP Proposal Offeror SOO Sec M SOW WBS Model Contract CWBS Sec L Contract

33 Requirement Descriptions Performance- Based Acquisition Key Elements Evaluation Criteria Incentive Structures

34 Selecting The Right Contract Type Objective Negotiate a contract type and price that results in reasonable contractor risk and provides incentive for efficient and economical performance The optimum balance between risk and reward

35 Contract Type Risk Relationship High Risk Low Risk Government Risk Time & Materials (can t predict extent or duration) CPFF (preliminary study) CPAF (hard to objectively evaluate) CPIF (prototyping, initial production Cost and Cost Sharing (commercial opportunities) FPIF (initial production) FFP w/epa (cost variations expected) FFP (commercial items, low performance risk) High Risk Low Risk Contractor Risk FFP (commercial items, low performance risk) FFP w/epa (cost variations expected) FPIF (initial production) Cost and Cost Sharing (commercial opportunities CPIF (prototyping, initial production) CPAF (hard to objectively evaluate) CPFF (preliminary study) Time & Materials (can t predict extent or duration)

36 Factors in Selecting Contract Type Overall mission objectives Type and complexity of requirements Schedule urgency Period of Performance Inherent risks of performance Adequacy of accounting systems Past performance Adequacy of price/cost analysis Contractor s technical capability and financial responsibility Price competition

37 Incentive Contracts Appropriate when supplies/services can be bought at lower costs and, in certain instances, with improved delivery of technical performance, by linking profit or fee to contractor performance

38 Incentive Contracts FAR : Incentive contracts are designed to obtain specific acquisition objectives by -- (1) Establishing reasonable and attainable targets that are clearly communicated to the contractor; and (2) Including appropriate incentive arrangements designed to -- (i) motivate contractor efforts that might not otherwise be emphasized and (ii) discourage contractor inefficiency and waste

39 What Can Be Incentivized? Cost All incentive contracts must include a cost incentive feature Profit or fee adjustment formula Intended to motivate cost management Normally includes target cost, target profit or fee, and a profit or fee adjustment formula AC = TC Target Fee AC >TC Downward Target Fee AC <TC Upward Target Fee

40 What Can Be Incentivized? Performance Designed to relate profit/fee to results achieved by contractor compared with goals Useful on service contracts when sustained, high quality performance is mission critical Clear, objective measurements important Test and acceptance criteria must be explicit in contract Technical/performance incentives must be balanced

41 What Can Be Incentivized? Delivery/Schedule Use when strict schedule adherence is mission critical Contract should specify application of reward/penalty mechanism in the event Government caused delays or other delays beyond contractor control (i.e., no-fault provisions)

42 What Can Be Incentivized? Multiple-incentive approaches Motivates contractor to strive for success in all areas of cost, schedule and performance Compels smart trade-off decisions consistent with key objectives of the acquisition Because of interdependent nature of cost, schedule and performance, multiple-incentive structures help mitigate risk of overemphasizing one area at the expense of another

43 Incentive Contracts Incentive Contracts Fixed-Price Incentive Cost- Reimbursement Incentive Firm Target Fixed-Price Award Fee Successive Targets Cost-Plus Incentive Fee Cost-Plus Award Fee

44 When to Use Cost Reimbursement When costs of performance can not be estimated with reasonable certainty or accuracy May only be used when: Contractor s accounting system is adequate Government surveillance during performance will provides assurances that efficient methods and effective cost controls are used

45 Cost-Plus-Award-Fee (CPAF) CPAF is a cost-reimbursement contract that provides for a fee consisting of: a base amount (which may be zero) fixed at inception of the contract and an award amount, based upon a judgmental evaluation by the Government, sufficient to provide motivation for excellence in contract performance FAR

46 Cost-Plus-Award-Fee (CPAF) Suitable when Neither feasible nor effective to devise predetermined objective incentive targets applicable to cost, technical performance, or schedule Contractor performance evaluation is more subjective in nature (i.e. situational analysis) Additional cost of administration is justified by the expected benefits FAR

NEW HORIZONS ONLINE LIVE. Certified Associate of Project Management (CAPM ) PMBOK Guide, 5th Edition DAY 3

NEW HORIZONS ONLINE LIVE. Certified Associate of Project Management (CAPM ) PMBOK Guide, 5th Edition DAY 3 NEW HORIZONS ONLINE LIVE Certified Associate of Project Management (CAPM ) PMBOK Guide, 5th Edition DAY 3 Plan Quality Management 1. Project mgt. 2. Stakeholder register 3. Risk register 4. Requirements