No performance without partnership

Performance-based acquisition guidelines

The Performance Institute, an Arlington, Va., think tank dedicated to government performance, has established these guidelines for government agencies that are designing performance-based acquisition contracts:

  • Have clear, strategic and program logic that translates into a clear performance plan.

  • Determine the scope of work and what performance measures will be used.

  • Canvass providers and contractors, asking them what measures they propose, what incentives they want and how they want to report performance data.

  • Define the baseline and what level of performance is expected.

  • Include provisions for flexibility and incentives, and ensure they can be afforded.

  • Craft a performance-based statement of work and begin contractor selection.

  • Include mechanisms for measurement, reporting, monitoring and contractor feedback.

  • Define a system for revisions and reconciling deviations in expected performance.

U.S. Strategic Command, CSC join forces on $525M performance-based IT services contract

The U.S. military has a reputation for opposing change and espousing a "my way or the highway" attitude. But when it comes to using performance-based contracting, the U.S. Strategic Command, known as Stratcom, is a harbinger of change.

In July, the command and control center for U.S. strategic forces at Offutt Air Force Base in Nebraska issued its largest performance-based acquisition to date: a 10-year, $525 million contract to Computer Sciences Corp. for IT infrastructure support services.

"Contractors are critical members of the team, and government is using their expertise and knowledge to the maximum extent practicable," said Debra Simons of the 55th Wing Contracting Squadron at Offutt, which manages CSC's contract.

That outlook is a change in the way many government agencies are used to dealing with contractors when it comes to setting the rules and calling the shots.

"It's a new way of doing business and requires a new way of thinking about doing business, said Donald Taylor, vice president for sourcing solutions of CSC's federal sector.

The El Segundo, Calif., systems integrator has been working with contracting officials at Offutt during the last two months to convert a fixed-price contract for IT support services to a performance-based acquisition. The command decided to make the switch as the original contract held by Northrop Grumman Corp. neared its end.

To change the bureaucratic mind-set, CSC uses a partnership governance model to establish its relationship with a government client, Taylor said. It allows the agency to maintain control of the products and services being delivered, while the contractor controls the processes to deliver them. It sets forth how the company's performance will be measured, how often and by whom. It also establishes how problems will be solved, he said.

Performance-based acquisition has been around for nearly two decades, but has generated increased interest in the last few years, largely due to government mandates to meet standards set by the President's Management Agenda.

For fiscal 2005, the Office of Management and Budget's Office of Federal Procurement Policy is asking agencies to use performance-based acquisition techniques on 40 percent of their contracts worth more than $25,000.

"The Defense Department's policy is to use performance-based contracts whenever possible, since they maximize performance, innovation and competition, while receiving a savings to the government," Simons said. She was unable to estimate the amount of savings on the CSC contract.

Stratcom has issued some smaller performance-based acquisitions, Simons said. The command will continue to award them whenever procurement requirements lend themselves to performance-based methods, she said.

In performance-based acquisitions, payments and other incentives are tied to contractor performance, usually based on service-level agreements and other objectives. These can include measurable performance criteria such as customer-service agents answering phones within three rings or technicians fixing problems within 30 minutes.

Contractors that hit their service-level agreements are paid a specified amount of money. Those who don't meet their agreements are docked. Simons said that contracting officials would set CSC's service-level agreements within the first few years of the contract and establish incentives after the performance measurements had been determined.

Unlike conventional contracting for goods and services, performance-based acquisitions depend heavily on client-contractor partnerships.

Both parties agree on performance measurements and goals, then the contractor decides how to complete the project and is responsible for meeting established objectives.

"The government tells us what it wants to accomplish," Taylor said. "This is a different approach. We can deliver anyway we want to, and we are rewarded or penalized based on results."

CSC and Stratcom have been solidifying their partnership during the two-month contract transition period. One of the benefits of the switch to the performance-based acquisition is that it has CSC working closely with users and function team members at Offutt, including financial managers, legal advisors, program managers and contracting officers, Simons said.

Staff Writer Roseanne Gerin can be reached at

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