OMB to require performance-based contracting on 40 percent of contracts

Federal agencies beginning next month will be required to use performance-based contracting on 40 percent of eligible jobs worth more than $25,000, according to a Sept. 7 memo from the Office of Federal Procurement Policy.

The memo, sent to agency chief acquisition officers and senior procurement executives by OFPP Associate Administrator Robert Burton, said performance-based service acquisition methods should be applied to contracts, task orders, modifications and options awarded in fiscal 2005. OFPP will re-evaluate the 40 percent target after reviewing agencies' fiscal 2005 performance, the memo said.

Under such acquisitions, agencies describe their needs in terms of performance objectives ? desired results ? rather than explaining how they want contractors to perform the work. Performance-based contracts include measurable performance standards such as response time or customer satisfaction. The contracts may include monetary and nonmonetary incentives to the vendors.

Contract actions that are ineligible for performance-based service acquisition methods include some architect-engineer services, construction services, utility services and services that are incidental to supply purchases, according to the memo.

If more than half of the contract is performance-based, it may be considered a performance-based service acquisition, the memo said.

Agencies will identify their performance-based contracts through the governmentwide-contracting database, the Federal Procurement Data System, and to OFPP directly if they are not required to use FPDS exclusively.