Put Me In Coach...I'm Ready to Play

Past performance in procurement may be one way small companies can play with the big boys -- or it may be another bureaucratic headache

"There is nothing more

difficult to plan, more

uncertain of success, or more dangerous to manage than the establishment of a new order of government; for he who introduces it makes

enemies of all those who

derived advantage from the old order and finds but lukewarm defenders among those who stand to gain from the new one."

--Niccolo Machiavelli, The Prince

Behind all the reinvention and re-engineering rhetoric swirling around Washington is the promise of a revolution -- a new order replacing an old one. In 1993 Vice President Gore said his administration was determined to "move from an industrial-age government to information-age government," including, in the procurement arena, a shift toward using past performance data when choosing federal vendors. After all, it's logical -- would you buy another car from a dealer who neglected to tell you the engine had fallen out?

That begs the question, of course: How revolutionary is the idea of using past performance? And can it be applied in practice, particularly on large, multi-year programs where the government has already spent billions of dollars developing systems that refuse to work?

The Federal Aviation Administration's contract with Loral Federal Systems, formerly IBM, is one example. Despite huge cost overruns and crippling software glitches, the FAA continues to stick by its original contractor -- and, in fact, starting over from scratch may not be an option.

In that sense, talk of using past performance may miss the real problem: How does government terminate a project once it goes awry, regardless of how well a contractor may have performed in the past? With the application of new technology -- in ways never conceived of before -- this may be the real issue.

That's not all. Past performance measures also focus extensively on how a vendor performed on a contract, but overlook any guilt the customer may have shared in past failures. If a government agency helps to mess up a program, either through incompetent management or faulty design, shouldn't the agency's past performance also be considered as a mitigating factor in a contractor's blemished record?

Still, just injecting past performance into procurement policy can be considered a step in the right direction. And the man responsible for taking that step is Steven Kelman, administrator of federal procurement policy.

Long before arriving in Washington in 1993 to take the post of administrator for federal procurement policy, Kelman believed federal contracting officers ought to rely more on good judgment and vendor performance and less on rules and price when making awards.

Now Kelman is backing up his convictions with new federal procurement policies, the time is ripe to see how well his message is being received in and around the Capitol.

A lot of vendors aren't receiving them too well, fearing Kelman's past performance initiatives may become too mechanical, rigid and eventually look a lot like the bureaucratic regulations they are meant to replace.

Robert Guerra, vice chairman of the Industry Advisory Council, an arm of the Federation of Government Information Processing Councils, argues that "About 75 percent of our members prefer to bid on best-value contracts where non-price/performance factors count." Many vendors will simply not waste their time on price-only contracts these days.

While the future of vendor past performance still is unclear, one thing is certain--the increased use of past performance in Washington is best viewed as the latest evolutionary step designed to bring the federal business rules into line with its own (and its vendors') rhetoric.

The success or failure of past performance to measure up to its advanced billing will rest, in large part, on Kelman's ability to strike a fine balance. On one hand, he needs the cooperation of government contracting officers to launch the change process. On the other hand, he must guard against these officials loving past performance to death by turning it into just one more mind-numbing check-off list.

Vendor Reaction

Large and small vendors have been quick to agree with Kelman's approach, if for different reasons. Large contractors in particular are taking the new initiative in stride. Peter Dube, vice president for systems integration at Boeing Information Systems Inc. of Vienna, Va., for example, says, "I can't remember a single large contract award in which past performance was not a factor. For us, past performance has always been important." Officials at Loral Federal in Bethesda, Md., say the same thing. Said group Vice President Arthur Johnson, "Successful companies already use past performance to build good will with clients. We didn't wait for the government to tell us that performance counts."

What these executives seem to be saying is that past performance is simply the flip side of their current practice of putting customer satisfaction first. Leaders of smaller firms, on the other hand, approach increased use of past performance with greater caution.Ralph Cruikshank, president of the Presidio Corp. of Lanham, Md., likes what Kelman is up to but recognizes the risks involved. Recalling his own past, Cruikshank warns, "I can still remember my start-up days, and these new past performance policies could very well make it harder in the future for new and small companies to break into federal contracting."

What The Feds Think

Federal executives, not surprisingly, also support Kelman's efforts, but not because he is the procurement policy boss. Most federal managers think a focus on vendor past performance makes sense as government buyers look for quality and "best value" goods and services from suppliers. "Best value" buying requires that contracting officers make awards based on factors other than price.

Managers at the Defense Logistics Agency claim to have been applying best-value purchasing techniques to both large and small buys since the late 1980s, long before Kelman arrived. Tom Neufer, DLA's chief of contract policy, said, "Flexible data management technologies, combined with just-in-time inventories, encouraged DLA to come up with a small vendor performance system that is both reliable and fast."

But not everyone is happy with the accent on vendors. Jim Glymph, the Army's data administrator, said too much emphasis on firms can be misleading. The key to vendor performance, he believes, is people. "I want to look behind the vendor's name to see which individuals, by name, will actually be doing the work," he said. "Favorable past performance is a useful indicator for the future only if the vendor is willing to assign people I know and trust."

Better Communication

Two reasons might account for Kelman's past performance policies enjoying a generally warm welcome both inside and outside government.

First, thanks to the Japanese-inspired quality movement during the 1980s, both federal and private executives are singing from the same TQM sheet music.The natural next step, it seems, is to give government contracting officers more latitude in judging a vendor's performance.

Second, on a more personal level, vendors and government officials are talking with one another more than they have in the past. They have learned, first-hand, that it pays to develop effective communications channels to solve problems as they arise. These confidence-building experiences have taken a lot of the anxiety out of the birth of new federal policies.

Boeing's Dube, for example, cites the Trail Boss program as a possible public-private communications model for the future. Sponsored by the General Services Administration, this face-to-face program provides a constructive forum in which players from both sides can exchange frank views on a wide variety of contracting-related topics on a regular basis.

In addition, Loral's Johnson has nothing but praise for the Air Force's Contractor Performance Assessment Report, a 12-point evaluation system that encourages open communication and allows vendors to officially rebut performance evaluations by government personnel. "What we don't need," notes Johnson, "is a mechanical performance rating system. Judgment calls are a crucial part of the process, but they must be done well and offered in a two-way communications process."

Warns Guerra: "Unless past performance is implemented in a best value context, the mixture of metrics and bureaucracy may very well turn a good idea into a useless numbers game."

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