GSA ups pressure for performance-based deals

The Defense Department has a goal to base 50 percent of eligible services contracts on performance by the end of next year, said procurement chief Deidre Lee.

Olivier Douliery

Before signing to use the General Services Administration's procurement services, agencies will need to answer a simple question: Why can't this buy be performance-based?

If an agency fails to justify to GSA contracting officers why a deal should not use this methodology, then the deal will be written with a statement of objectives, performance measures and contractor incentives, said Robert Suda, assistant commissioner for GSA's Federal Technology Service.

GSA's wants 50 percent of all the contracts it sets in fiscal 2005 to be performance-based. The requirement will help agencies maximize the value of their procurements, Suda said.

"We will have some aggressive goals in the IT Solution Center and FTS business units to do performance-based contracting," he said at a recent panel discussion sponsored by the Industry Advisory Council. "We are going back to the agencies and focusing on performance-based contracting first. The Defense Department also is pushing this type of contracting."

The Defense Department has a goal to base 50 percent of eligible services contracts on performance by the end of next year, said Deidre Lee, director of Defense Procurement and Acquisition Policy.

GSA's decision to advocate performance-based contracting follows a September Office of Federal Procurement Policy memorandum requiring agencies to use this type of contracting on at least 40 percent of all contracts worth $25,000 or more.

OFPP also established a new definition of what constitutes a performance-based services contract:

"If more than 50 percent of the requirement is performance-based, as measured in dollars, the services action may be coded as a performance-based services acquisition."

The biggest challenge agencies will face in meeting these goals is moving from a traditional contracting environment to one that puts more risks on contractors while offering more rewards, said David Drabkin, GSA's deputy associate administrator for acquisition policy.

"We have to learn to manage risk by using a cost vehicle that includes an award fee," he said. "After we have some experience, we will move toward a fixed-price performance-based environment because we will be better at accounting for the risk in the project."

In the short term, the cost on performance-based contracts for the government could increase, Drabkin said, because agencies must demonstrate to vendors that the government can determine accurately the price of a service, he said.

"OMB recognized this difficulty, and that is why it has revised the test for what is a performance-based contract is," Drabkin said.

The potential for increased profits should provide incentive for vendors to support the use of the contracts, he said. Drabkin suggested tying all profit to meeting performance goals.

"The difficult job is sitting down at the table and making sure the only way you get profit is by performing at least well," he said. "I've said this to a number of companies, and they agreed."

The Federal Supply Service schedules, as well as the governmentwide acquisition contracts, can be written to include performance-based concepts.

"You can use any incentive and any contract type except cost to engage someone in a performance-based contract," Drabkin said. "GSA works with agencies through our customer support center to ensure that all eligible contracts are considered for award as performance-based. GSA also provides information to our customers when they use the schedules directly about how to purchase services as performance based."

Jason Miller, a staff writer for Government Computer News, can be reached at

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