Performance-based contracting rules debut

The Federal Acquisition Councils today published a new proposed rule that tells industry and agencies how to do performance-based contracting for services.

The Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council said in the Federal Register that the rule is necessary because agencies have experienced difficulties in applying performance-based acquisition methods effectively.

The changes brought about by the rule will make performance-based acquisition more flexible, and result in increased use of performance-based acquisition methods on services contracts and orders, the councils wrote in the proposed rule, which was published in the Federal Register.

"The principal objective of [performance-based services acquisition] is to obtain optimal performance by expressing government needs in terms of required performance objectives and/or desired outcomes, rather than the method of performance, to encourage industry-driven, competitive solutions," the councils wrote.

Comments on the proposed rule are due by Sept. 20. Comments may be filed online, or e-mailed to FAR case 2003-018 should be cited in all comments.

The rule said acquisition plans for service contracts or orders must describe how performance-based service acquisition methods are used or explain why those methods are not being used. In addition, if a firm, fixed-price contract is not being used, the acquisition plan must explain why.

"Fixed-price contracts or orders are generally appropriate for services that can be defined objectively and for which the risk of performance is manageable," the rule said.

In addition, the rule said performance work statements must be used to the maximum extent practical, if the contracts or orders are for services. A performance work statement identifies the agency's requirements in specific, objective terms that describe technical, functional and performance characteristics.

The contracts or orders must also include measurable performance standards, the rule said.

In addition, the contracts or orders may include performance incentives for the contractor that correspond to the performance standards, the rule said. Those incentives can be positive, negative, monetary or non-monetary.

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