How to Make Your Service Contract Performance-Based

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2 How to Make Your Service Contract Performance-Based Breakout Session #: A12 Lyle Eesley, Phil Salmeri, Matt Wilson Date: Monday, July 25 Time: 11:15am 12:30pm

3 Performance Principles Not New Shift your focus from the Contract to the Acquisition A contract is the summation of many decisions These decisions are what make an acquisition performance based or not Examine the key decision points that contribute to making an acquisition performance based. 2

4 Performance Based Acquisition Performance-Based Acquisition (PBA) means an acquisition structured around the results to be achieved as opposed to the manner by which the work is to be performed FAR FAR (a) Performance-based acquisition (see subpart 37.6) is the preferred method for acquiring services (Public Law , section 821). When acquiring services, including those acquired under supply contracts or orders, agencies must (1) Use performance-based acquisition methods to the maximum extent practicable, except for (i) Architect-engineer services acquired in accordance with 40 U.S.C et seq.; (ii) Construction (see Part 36); (iii) Utility services (see Part 41); or (iv) Services that are incidental to supply purchases; and (2) Use the following order of precedence (Public Law , section 821(a)); (i) A firm-fixed price performance-based contract or task order. (ii) A performance-based contract or task order that is not firm-fixed price. (iii) A contract or task order that is not performance-based. 3

5 Requires cross functional teams FAR Part One It s a team sport Key Principle in DOD s Better Buy Buying Power initiatives FAR 102 (d) is Your licenses/mandate to THINK Break down the walls of us and them to be effective and efficient Develop a common vision for what the team s objective is Open to new information and approaches, not just business as usual 4

6 Starts with Leadership Support An organization s Leadership must develop and deploy skilled cross functional acquisition teams based on the nature of the project

7 Starts with Leadership Support An organization s Leadership must develop and deploy skilled cross functional acquisition teams based on the nature of the project Is your Leadership up to the Challenge?

8 Every team needs a Captain Someone must be in charge Program, Project Manager or Functional Service Manager (FSM) DODI requirement Skilled in executing the service acquisition process Objective, critical thinker Focused delivering customer value Complete tailored PM training for Service Acquisitions Effective team builder and communicator 7

9 Characteristics of Effective Teams Develop a team charter that captures Vision: so all team members understand the teams purpose and objective Sets Clear Goals, Defined Roles.... Open and Clear Communication.... Effective Decision Making.... Balanced Participation.... Valued Diversity.... Managed Conflict.... Developing Performance Based Acquisitions is a voyage of Discovery, Analysis, and Decisions 8

10 Discovery Discover and Document Customer Objectives Value, timing, budget, risks, metrics and change Must align acquisition with customer needs Identify and collect Scoping data Baseline current cost and performance 9

11 Discovery (cont.) Discover and Document Examine current contract and requirement Is it performance based or prescriptive Is current contract type best suited for requirement Effectiveness of current performance assessment process 10

12 Discovery (cont.) Discover and Document Current market practices How competitive is the market Small Business opportunities Who else is buying the service Benchmark your cost and performance data with other consumers 11

13 Discovery (cont.) Benchmarking cost and performance can identify opportunities for improvement Best Performers Are Circled Maintenance Service Quality 1.0 A6 A2 A8 A26 A NB A7 A48 A10 A5 A30 A12 A A13 A22 A25 A A28 A45 A A44 A A1 0.4 A19 A23 A15 A A29 A32 A9 A20 A A3 A24 A46 A43 A18 A27 A39 A16 A33 A40 A31 A A4 A42 A $ 3.5 $ 3.0 $ 2.5 $ 2.0 $ 1.5 $ 1.0 $ 0.5 Maintenance Costs A35 A38 Unit Cost Current Potential Practices Focus Organization Processes Svc Level Standards Technology Customer Relationship Management Culture Skills/Experience Contract Management 12

14 Analysis Team Reviews Discovery data Relevant - Precise Accurate - Supportable Clear Are your Assumptions identified Are they valid? 13

15 Analysis (cont.) Key Development Strategies Requirement How does customer define value Consider requesting assistance of a Service Acquisition Workshop (SAW) Key High Level Objectives, Performance Tasks and Performance Standards Risks and mitigation strategy Requirement stability over time Transition Planning Budget Performance Validation metrics Timeliness Performance start date Standards in requirement 14

16 Analysis (cont.) Key Development Strategies Business Strategy Early industry engagement Contract Type Incentives, if applicable, tied to how customer defines value Selection Methodology Performance Assessment Sufficient resources Training Clear requirements (PWS) results and standards makes performance tracking more effective Post Award Communication 15

17 Decisions: Service Acquisition Workshop Required for Service Acquisitions over $1 Billion in DOD, $250 Million Army What is a SAW Facilitated workshop focused on specific acquisition team and their requirement Flexible structure based on team needs Focus is to jump start teams knowledge of the process and how to develop key acquisition documents Output is significant progress in developing PWS and QASP Available from DAU and others 16

18 Decisions - Requirement The Requirement (PWS-SOO) is the beating heart of any contract Must be aligned and tailored to meet customer expectations and needs Focused on performance results and standards, not body count Customer involvement is vital in defining results and standards Alignment with Performance Assessment Use ARRT to Draft PWS and QASP (DFARS ) 17

19 Decisions - Requirement Outline the structure for the Requirement PWS Work Breakdown Structure WBS Level 1: Vision PWS WBS Level 2: High Level Objectives HLO 1 HLO 2 HLO 3 HLO 4 WBS Level 3: Performance Tasks Task Task Task Task WBS Level 4: Performance Sub Tasks Task Task Task Task Task Task Task Task WBS Level 5: Performance Sub Tasks Elements Task Task Task 18

20 Decisions - Requirement Roadmap process assists in defining task and provides alignment with assessment Vision: Performance High Level Objective A: Result B: Context C: Action Standard D: Cost, Quality, Timeliness D: AQL E: What will be Inspected Assessment/Inspection F: How will it be Assessed/ Inspected G: Who is responsible H: Incentive or Remedy Tasks Alignment 19

21 ARRT Critical Thinking Process in developing a Requirement 1. Start with Result or Outcome polio vaccine A) Start with the results. Outcomes or Results What result do you want? for world wide distribution. B) Next identify the context of those results. Context What is it for? What mission? What program? Research and design C) Then determine what you want the contractor to do in order to achieve those results. Actions or Activities What you want the them to do? 2. ARRT creates a proper Task statement and adds The Contractor shall: Research and design polio vaccine for world wide distribution. 20

22 ARRT Critical Thinking Process in developing a Requirement The Task statement: Research and design polio vaccine for world wide distribution. Define what level of performance is required to successfully accomplish the task Performance Standards: Vaccine is inactive and is activated by application of saliva. Does not require refrigeration support for shipping and storage Cost is low enough to enable distribution to all populations in third world countries 21

23 Decisions - Business Strategy Who will write the contract In house or outside (GSA or other) Tailor Contract Type that best fits customer requirement Single award or IDIQ Fixed Price or Cost Incentive or Not Incentivize performance that is of value to the customer Is the customer willing to pay for higher performance level Do you have the resources to administer? 22

24 Decisions - Business Strategy Source Selection Method Customer concerns/input Complexity/clarity of the requirement Link high risk areas to evaluation factors Is the customer willing to pay more for a better technical solution? Resources LPTA or Trade Off 23

25 Decisions - Business Strategy Early industry involvement Draft PWS and/or Draft Solicitation Myth busters memos Performance Management Metrics to be used to assess performance and customer reporting Resources Documentation and communication 24

26 Discovery, Analysis, Decisions Creating Performance Based Acquisitions requires a broader focus than just the contract Requires a skilled team with a performance and customer focus Is there a document or source that can guide a team through this process Yes 25

27 Seven Step Service Acquisition Process Customer Requirement 1. Form the Team Leadership Support Build the Team 2. Review Current Strategy Conduct Historical Analysis Define Stakeholder & Customer needs Plan Customer Result 7. Performance Management Build & Manage Relationship Assess Performance Execute QA Reps Buyers PCO & Resource Mgt Stakeholders Proj. Mgr Legal CORs 6. Execute Strategy Select Right Contractor Award Contract Roll out strategy Users Small Business Tech HQ 3. Market Research Analyze Market Identify suppliers 4. Requirements Definition Develop Requirements Roadmap Draft PWS and QASP 5. Acquisition Strategy Business Strategy Source Selection Strategy Develop cquisition_of_services_24march2012.pdf 26

28 Sources for Assistance Guidebook for the Acquisition of Services DFARS/PGI Review criteria for the Acquisition of services DFARS/PGI Automated Requirements Roadmap Tool (ARRT) DFARS/PGI Market research report guide for improving the tradecraft in services acquisition DFARS PGI Service Acquisition Mall 27

29 Project Success or Failure Factors Successful Project Factors User Involvement Executive Mgt Support Proper Planning Realistic Expectations Competent Staff Ownership Clear Vision and Objectives Hardworking and Focused Staff Source: CHAOS Report 2016, Standish Group Challenged Project Factors Lack of user input Incomplete Requirements Changing Requirements Lack of Executive Support Technology Incompetence Lack of Resources Unrealistic Expectations Unclear Objectives Unrealistic Time Frames Impaired Project Factors Incomplete Requirements Lack of user Involvement Lack of Resources Unrealistic Expectations Changing Requirements Lack of Planning Didn t need it any longer 28

30 Summary Get a skilled leader, build the cross functional team Follow the 7 Step process Understand the Customer and their requirement Focus on driving performance value to the Customer 29

31 Contact Information Lyle Eesley Subject Matter Expert (757) Phil Salmeri Subject Matter Expert (540) Matt Wilson SimVentions (540) Follow-up discussion here at World Congress at SimVentions Booth