Performance-based Contracting

"Performance-based contracting" means structuring all aspects of an acquisition around the purpose of the work to be performed, with the contract requirements set forth in clear, specific, and objective terms with measurable outcomes (as opposed to either the manner by which the work is to be performed, or broad and imprecise statements of work). [Source: FAR 2.101]

Specifically in the area of acquisition, law and regulation establish a preference for a performance-based contracting approach. In fact, the current administration has set a goal for agencies to apply performance-based acquisition methods on 40 percent (as measured in dollars) of eligible service actions (including contracts, task orders, modifications, and options) over $25,000 in Fiscal Year 2005.

To assist members of the greater federal acquisition community -- and especially program offices -- in using performance-based contracting, representatives from the Departments of Commerce, Defense, Agriculture, and Treasury, as well as the General Services Administration and contractors developed Seven Steps to Performance-Based Services Acquisition.

This guide outlines the following seven simple steps:

1. Establish the team
2. Describe the problem
3. Examine private-sector and public-sector solutions
4. Develop a performance work statement (PWS) or statement of objectives (SOO)
5. Decide how to measure and manage performance
6. Select the right contractor
7. Manage performance

APCG recognizes the challenges that federal managers face in establishing effective performance-based contracting procedures, and we apply our unique performance management expertise specifically to Steps 4, 5 and 7 above.

Much in the way that pay-for-performance efforts are typically focused on pay, rather than the elements that will lead to successful long-term individual performance (management competencies, clear individual goals, etc.), performance-based contracting is often focused on complex front-end contracting issues rather than the factors that will make the acquisition and execution truly performance-based and successful. APCG works as an agent of the government and/or as a partner with the private sector to ensure that both the acquisition and the execution will be governed by performance, provide truly value-added services, and improve the dynamic relationship between the government and industry.  Our performance management subject matter experts work with clients to apply solid, proven performance methodologies that:

• Pinpoint roles and responsibilities to ensure that the Request For Proposals (RFP) clearly conveys the differentiated functions of the contractor vs. the government during contract execution
• Clearly define and identify the relationships between outcomes, outputs, processes, inputs, and governance processes that will lead to successful performance on the contract
• Develop critical performance measures
• Design effective incentives systems
• Effectively communicate through RFP documents including the SOO, PWS, and Sections M & L
• Support evaluation of performance-based features of the proposals
• Establish post-award governance models
• Assist with contract surveillance, reporting, and ongoing measurement, which are used to inform incentive decisions
• Train teams on performance-based contracting to promote a performance culture