A Culture Change

PAST PERFORMANCE

Companies angling for federal information technology dollars in an environment where wins and losses hinge on past performance must take new steps to ensure customer satisfaction or pay the penalty, industry and government officials say.

By Nick Wakeman

With added pressure to establish a solid record of delivering projects on time and within budget, companies are paying closer attention to their customers and bending over backwards to meet their expectations. Companies are also keeping closer tabs on their partners and moving quickly to resolve any contractual disputes.

"We always had past performance requirements, but because of procurement reform, we could put more teeth into it," says Skip Kemener, head of NASA's Center for Automated Data Processing Procurement, which oversees the agency's recent Outsourcing Desktop Initiative and Scientific and Engineering Workstation Procurement III.

Contractors are better at addressing problems than in the past. "They know if they screw up, it is going to hurt them," Kemener says.

Phil Odeen, executive vice president and general manager of TRW Inc.'s systems integration group, says past performance reinforces that companies must pay attention to their customers. "If you don't, it'll come back to haunt you," he says.

Using past performance as a contracting criteria began in earnest about three years ago when Congress passed sweeping procurement reforms. Under the revised rules, the same or more weight can be given to past performance as the price quoted in a proposal, officials say.

And that means the government can act more like a commercial buyer, says Kevin Carroll, assistant deputy chief of staff for research, development and acquisition at the Army Materiel Command.

"When we awarded just by lowest price, we experienced difficulties getting things on time and good quality," he says.

At the General Services Administration, past performance has become the single most important criteria in awarding large IT contracts, says Mary Whitley, deputy assistant commissioner in the Office of IT Integration. Her office oversees the Federal Systems Integration Management Center 9600 and the Seat Management contracts.

"Past performance is a predictor of future success. So we go through a lot of time and trouble calling references and talking to them," she says.

Whitley credits past performance with helping her office weed through 35 proposals for the 9600 contract, a five-year, $1.6 billion contract won by eight companies.

Walking the Walk

Companies such as Bell Atlantic Federal of Washington, DynCorp of Reston, Va., and Cisco Systems Inc. of San Jose, Calf., monitor past performance by keeping close contact with their customers through surveys and questionnaires.

Bell Atlantic hires an outside company to interview major accounts every year, company officials say. But just getting feedback isn't enough, says Barbara Connor, president of Bell Atlantic Federal. "Things need to be followed up on and acted on," she says.

If a company is doing its job properly, she says, the government's emphasis on past performance shouldn't be a problem. "We believe it is one of our strengths."

Connor says high past performance ratings helped her company clinch two big-ticket telecom support services contracts in the past year: a $12 million contract from the Federal Emergency Management Agency, and a $10 million Metropolitan Washington Airport Authority contract.

Cisco takes a similar approach to measuring past performance. The company surveys customer satisfaction, says Jim Massa, director of federal operations. That annual survey of major customers looks at factors such as ease of doing business and handling of complaints, as well as product effectiveness.

The company not only surveys end users of its products, but its partners as well. The relationship between $7.8 billion a year Cisco and its systems integrators is "very symbiotic," Massa says. If one is performing poorly, it can make the other look bad, he says.

About half the contracts on which Massa's unit bids have some past performance element. In those efforts, anywhere from 10 percent to 30 percent of the decision is based on past performance, he says.

Great Expectations

For Paul Lombardi, president and chief executive of $1.2 billion a year DynCorp, managing expectations is a key factor in keeping a good past performance record.

"If you don't manage expectations, you get into trouble," he says.

As a result, at the start of big projects the systems integrator brings in a facilitator, who questions both the customer and company program officials about what they think the project will accomplish and what is expected of the other.

"You really have to establish upfront the expectations of the customer and the contractor," says Lombardi, whose company's contract backlog has risen from $3 billion to $3.6 billion during the past three years. "We win 45 percent of what we bid on." He attributes part of that increase to greater government reliance on past performance.


Jim Massa
Past performance can even help a midsize company such as AverStar Inc. compete against larger companies, says Bruce Burton, executive vice president of the Burlington, Mass.-based software developer and systems engineering firm. The company was formed six months ago by the merger of Intermetrics Inc. and Pacer Infotec.

"Sometimes you have that fear of getting blown out by the 800-pound gorilla, but past performance can be an equalizer," he says.

Knowing past performance is being verified also serves as a reminder to be truthful in proposals, industry officials say.

"You have to be more realistic about what you bid on and what you say about yourself," says AverStar's Burton. "It makes people think twice, and that's healthy."

While all the agencies are looking for similar information about potential contractors, ranging from how well companies meet schedules and budgets to how quickly they resolve problems, there is a variety of ways in which past performance data is collected, industry officials say.

"Some agencies want a lot of references, others don't," says Burton, who wonders about added burdens on customers that must fill out multiple forms for the same contractor.

And that paper burden is a double-edged sword.

"It is quite a process," Connor says. "Each solicitation is a new day."



Just getting feedback from customers
isn't enough. "Things need to be followed

up on and acted on."

Barbara Connor -Bell Atlantic Federal


"You really have to establish upfront the expectations of the customer and the contractor. We win 45 percent of what we bid on."

Paul Lombardi -DynCorp


Past performance reinforces that companies must pay attention to their customers. "If you don't, it'll come back to haunt you."

Phil Odeen -TRW



A Culture Change

It may seem hard to believe, but past performance was a critical factor in Phil Odeen's decision to put up his old company, BDM International Inc., for sale.

Odeen, now executive vice president and general manager of TRW Inc.'s systems integration group, says he got a wake-up call in spring 1997 when the former McLean, Va.-based integrator lost a contract he thought it should have won easily.

Instead of walking away with the prize, which Odeen declined to name, the spoils went to a larger competitor with a broader base of past performance references to give the agency.

"It was a shock to the system that maybe [at $1 billion a year] we weren't big enough," says Odeen.

The agency's request for proposals had asked potential contractors for 50 references, which the larger company easily supplied. "We were smaller and we had to really stretch," says Odeen.

The loss triggered much soul searching at BDM about where the government market was headed and what it would take to compete.

And though past performance wasn't the only reason for BDM to link up last December with TRW of Cleveland in a $1 billion deal, it was a major factor, says Odeen.

The combined company created a $3 billion a year systems integration unit.


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